Fringe Benefits of Japanese Companies

Companies bear not only salaries but also the social insurance premiums and housing-related expenses at the time of hiring employees. In Japanese companies, salaries in cash account for approximately eighty percent among total labor costs while the costs other than salaries in cash account for the remaining twenty percent. The costs other than salaries in cash are divided broadly into legal welfare expenses (approximately sixty percent), non-legal welfare expenses (approximately ten percent), and the costs such as retirement benefits (approximately thirty percent).

Legal welfare expenses are the costs inevitably accrued by hiring employees, which are determined by law that companies must bear. Specifically, they include welfare pension insurance premiums, health insurance premiums, long-term care insurance premiums, employment insurance premiums, occupational accident premiums, child allowance contribution, and other matters. The largest amount among them is welfare pension insurance premiums, which accounts for 55% of the legal welfare expenses, being followed by health insurance premiums and insurance premiums of the elderly care, which accounts for 37% of the legal welfare expenses. In other words, these two premiums account for 92% of the legal welfare expenses. These premiums are in the upward trend along with the aging of the population structure, which is a non-negligible issue of management as a factor to raise labor costs.

Although the non-legal welfare expenses are expended individually by companies for the employees’ life support, they are initiatively utilized mainly by large companies as they can be calculated as costs in the business accounting. The largest expenditure among the non-legal welfare expenses is the housing-related expenses, accounting for approximately half of the non-legal welfare expenses. This stems from the fact that companies prepare company houses in order to respond to the relocation accompanied by reshuffling of the personnel. While companies previously used to own the houses individually in general, many companies recently take the form in which companies pay the rent of the houses found by employees.

Following the housing-related expenses, life support accounts for the second largest percentage (24%). This is for the food service during working hours, uniform supply, elderyly care and childrearing expenses support, and other matters, which are the costs used in order for employees to concentrate on work at ease. Besides them, the non-legal welfare expenses include the costs to hold athletic meetings, subsidies for a company trip, congratulatory and/or condolence money, and other matters.

Compared the structure of labor costs of Japanese companies to that of other countries, it can be pointed out that (i) the percentage of salaries in cash is high, (ii) the percentage of non-legal welfare expenses is low, and (iii) the percentage of retirement benefits is high. However, in reality, the structure of fringe benefits expenses largely differ depending on countries. For example, the percentage of non-legal welfare expenses is high in the U.S. while the percentage of legal welfare expenses is high in France. As the structure of labor costs is influenced by the history of labor movements in each country, it needs to be considered individually.