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Can I sue a former employer for not paying toward my pension?

by Yuichi Kawamoto

John has a question about the Japanese pension system. He writes: “I am a permanent, legal Japan resident, and worked full time for a foreign company in Tokyo for six years. I am now retired and the Japan pension office advised that this company did not enroll me in any government pension plan during those six years. Do I have a legal basis for suing this company, which still operates in Japan, for lost pension income?”

Regardless of nationality, anybody working full-time for a corporation has to join the employees’ pension insurance (kōsei nenkin) system in principle. To be more exact, all corporations of any size, as well as companies (and other bodies, or even individuals) employing five or more people (with the exception of certain industries) have an obligation to register their workers at a local pension office so that they all join the insurance program. The employees’ health insurance (kenkō hoken) program works in a similar way, but let’s concentrate on the pension system in this column.

Eligibility for kōsei nenkin is not affected by the form of your employment contract (whether it is for a definite or indefinite term, etc.), and if you regularly work more than 30 hours a week for more than two months in a corporation (although the exact criteria for eligibility are complicated), it is very likely that you can — and must — join the insurance scheme.

As mentioned above, it is the responsibility of the company to register its employees, although employees can opt to register themselves if they prefer. Joining the insurance program is a requirement stipulated in the Employees’ Pension Insurance Act, and failure to do so could result in the employer facing criminal charges. Very often, however, you come across companies in Japan that seem to have no pension plan. We’ll touch on the possible reasons for this later.

Once a worker joins the pension system, the employer and the employee each has to pay half the monthly insurance fee required by law (16.412 percent of your salary at the time of writing). From an employee’s point of view, the incentive to pay this substantial fee each month is that they are likely to receive more than what they are paying in total when they retire, and at least the company shoulders half the cost.

However, the employees’ pension insurance plan requires that the employee has paid the fee for at least 25 years by the time they become eligible to receive the pension, from the age of 65. Of course, many foreigners leave Japan before they turn 65, and many who stay won’t have paid into the system for 25 years when they do hit their mid-60s. What can they receive in return for their payments? In many cases, not much.

When you leave Japan, you can file an application to receive a lump-sum withdrawal payment if you have been covered by the insurance for more than six months. You need to file this application within two years of your departure. The amount you can receive will depend on the fee you had been paying each month and how long you had been part of the scheme, but the cutoff point for the size of the lump-sum payment is 36 months. What this means is you can only be compensated for a maximum of three years of paying into the system — even if you had contributed for far longer.

Some countries, such as the U.K., U.S., Canada and Australia, among others, have signed bilateral social security agreements with Japan that allow the pension enrollment period in one country to be considered when deciding pension conditions in the other. In other words, the obligatory “paying-in” period, required monthly payments and eventual payouts in one country may change depending on payments made in the other country, meaning you would not necessarily be penalized and have to start from square one after leaving Japan for another country (see last year’s April 19, May 10, May 24, June 21 and Oct. 18 columns for much more on this). Details of the agreements vary from country to country, so you should check the contents of the deal specific to your home/resident country if you plan to make use of such an agreement.

So, if you live in Japan for more than three years but not long enough to begin receiving a pension — even taking into account the conditions of any bilateral social security agreement — it is conceivable that you may not get back what you are currently paying. As a result, the interests of the employer and employees converge in many cases, hence the fact that some companies employing foreign workers do not enroll them in the kōsei nenkin system. You may be feeling that the company is not giving you the benefits you deserve (and you would be right), but at the same time, it may actually be saving you money in the long run.

As for penalties for nonenrollment, these are hardly enforced in practice, whether or not the company has any foreign employees. You can report the offense by your employer to the pension office if you want your company to abide by the law, and the pension office may then advise the company to enroll you in the system.

Going back to John’s question, if he meets the criteria for the Japanese pension and is receiving regular payments, he is losing out financially because neither he nor the company paid into the scheme for six years. John can sue the company for the difference between what he is getting and what he should be receiving. On the other hand, if he has not been enrolled long enough to meet the criteria to trigger pension payouts — even with the addition of the “missing” six years — the company has actually saved him money.

Yuichi Kawamoto is a lawyer at the Section of Legal Assistance for Foreigners at Tokyo Public Law Office, which handles a wide range of cases involving foreigners in the Tokyo area. TPLO lawyers address readers’ legal concerns on the second Tuesday of the month. Web: www.t-pblo.jp/slaf. Phone: (03) 5979-2880. Send all your questions to lifelines@japantimes.co.jp