Regular Determination (Calculation of Standard Remuneration)
1. Regular Determination
Monthly standard remuneration is the basis for calculating the premium amount of your health insurance, nursing-care insurance, and welfare pension insurance, all of which are deducted from your monthly salary. In principle, the standard remuneration figure is determined when an insured becomes eligible for insurance (i.e., when he/she joins the company). However, there are cases when the insured’s salary increases or its allowances change during the year.
Thus, the monthly standard remuneration is reviewed once a year and recalculated based on the remuneration the insured actually gets paid. This is called ‘Regular Determination (Calculation of Standard Remuneration)’. In the regular determination, the monthly standard remuneration is calculated based on the average amount of salary paid in April, May, and June, and in principle, applied as a new standard for the period between September (in case that the insurance premium is deducted from the salary of the next month, October) of the year and August of the following year.
2. Monthly Standard Remuneration and Insurance Premium
In calculating ‘monthly standard remuneration’, the ‘remuneration’ means all the payments from the company including base salary, housing allowance, commuting allowance, overtime allowance, and etc. The ‘monthly standard remuneration’ is classified into 47 grades ranging from the 1st grade (58,000 yen) to the 47th grade (1,210,000 yen) and used for calculating the premium amount of health insurance, nursing–care insurance, and welfare pension insurance. Please check the table of the website below for details.
Monthly Standard Remuneration and Insurance Premium (from Japan Health Insurance Association, Tokyo Branch, as of April, 2015)
3. Exceptions of Regular Determination
Regular determination should be applied to all insured who are eligible as of July 1. But the exceptions are as follows:
●Insured persons who become eligible on or after June 1
●Those who have resigned on or before June 30 ( those who have lost eligibility on or before July 1)
●Those who have filed the ‘application of change of standard remuneration’ in July, ‘application of change of standard remuneration at the end of maternity leave’, or ‘ application of change of standard remuneration at the end of child-care leave’;
●Those who are planning to file the ‘application of change of standard remuneration’ in August or September, ‘application of change of standard remuneration at the end of maternity leave’, or ‘ application of change of standard remuneration at the end of child-care leave’
4. The Base Number of Days for Payment
The base number of days for payment is the number of working days for salary calculation, and it should be noted for the procedure of regular determination. In case that the working days are less than 17 days a month, in which the income is far from that of regular working days, the salary of the month should be excluded from calculation in the regular determination. For daily-paid workers, the base number means actual working days. On the other hand, the number of calendar days including Sundays or holidays is used for monthly-paid workers. But the number of days of absence, which causes the reduction of salary, should be excluded, and the paid holidays should be included into the number of calendar days.
5. Adjusted Average Salaries
If the salary gets raised, and the increased portion before March is adjusted in April, May, or June, the adjusted amount should be excluded from calculation of the average amount of salary for the three months. In addition, if the low amount of leave allowance gets paid, or the salary gets reduced due to strikes in April, May, or June, it should also be excluded from calculation.
6. Example of Premium Calculation
① Calculate the average amount of remuneration actually paid in April, May, and June
The monthly standard remuneration for 631,666 yen fits into the grade of 620,000yen. (Please see the above URL.)
② Calculate the insurance premium for the monthly standard remuneration of 620,000 yen
In case of deduction of premium from the next month’s remuneration, the new insurance premium set by regular determination is applied from October of the year. If there is no occasional revision, it will continue through September of the following year.
7. Procedures for Regular Determination
The company is required to fill out the ‘notification of the insured’s base amount for calculating social insurance’, with remunerations paid in April, May, and June, and etc. and submit it to the pension office of the company’s jurisdiction or its health insurance union or welfare pension fund.
In this column, we have set out an overview of regular determination. If you have any questions, please feel free to contact us.