An increasing number of companies are withdrawing from the Employees Pension under the guise of bankruptcy, an indication the safety net for employees is increasingly coming under threat.

“It was the last resort to carry on our business,” the owner of a Tokyo-based printing company said.

Faced with financial difficulty, “I had no choice but to dissolve the company” in September 2001 to avoid paying premiums to the Employees Pension, he said.

The burden of premium payments is split equally between employer and employee, with the amount of the premiums varying based on the salary level.

Money-losing corporations can be exempted from taxes, but they still have to pay premiums to the pension plan regardless of their business performance.

For the 10-employee printing company, the annual premiums amounted to 3 million yen, accounting for nearly half of its current profits.

After the dissolution, the owner concluded service contracts with his former employees so he could stay in business.

The employees joined the National Pension under self-employed status.

All corporations are required by law to join the Employees Pension.

Withdrawal is allowed only in the case where the corporation has become unable to continue its business due to serious problems, such as bankruptcy.

According to the Social Insurance Agency, 87,199 businesses withdrew from the Employees Pension in fiscal 2001, an increase of 14 percent from the previous fiscal year.

This apparently reflects an increase in the number of corporations in serious financial trouble.

But the agency says that some of them, like the printing company, withdrew from the scheme as part of desperate efforts to overcome a financial crisis and stay in business.

Social insurance offices, out of a desire to lower the rate of contributions in arrears, are also prodding corporations that are behind with payments to withdraw from the program.

To prevent such dubious measures, the Social Insurance Agency in November instructed social insurance offices across the country to require withdrawing corporations to submit a written application for discontinuing being a member of the Employees Pension or a certified copy of a company liquidation.

Withdrawal from the Employees Pension affects the employees who had been contributing to the safety net.

For one thing, they have to shift to the National Pension, whose insurance benefits are much smaller than the Employees Pension benefits.

For another, the shift from the status of regular employees to that of contract workers may worsen working conditions.

Meanwhile, the government and ruling coalition agreed late last year to raise premiums in step until the rate reaches 18.35 percent of salaries from 13.58 percent now.

It appears that both small and large enterprises will continue to face a tough time due to the heavier social insurance burdens.

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