Background and Overview
Based on amendments to the Health Insurance Act and the Employees' Pension Insurance Act (Act No. 52 of 2024), social insurance coverage will be significantly expanded from October 1, 2026. The income threshold commonly known as the "¥1.06 million wall" for social insurance enrollment is being revised, providing more comprehensive social security for short-hour workers (part-time and casual employees).
This reform represents the third stage of phased expansion, following the extension to companies with 501+ employees in 2016 and 101+ employees in 2022.
Specifics of the Coverage Expansion
New Eligibility Criteria
From October 2026, short-hour workers who meet all of the following requirements will become insured persons under the Employees' Pension Insurance and Health Insurance systems:
| Requirement | Details |
|---|---|
| Company size | 51 or more employees (Employees' Pension insured persons) |
| Weekly working hours | 20 hours or more |
| Monthly wages | ¥88,000 or more (equivalent to approximately ¥1.06 million annually) |
| Employment duration | Expected to exceed 2 months |
| Student exclusion | Not a full-time daytime student |
The previous threshold of 101+ employees has been lowered to 51+, bringing approximately 650,000 additional short-hour workers into the social insurance system.
What Was the "¥1.06 Million Wall"?
The "¥1.06 million wall" refers to the phenomenon where annual income exceeding approximately ¥1.06 million (¥88,000 × 12 months) triggers social insurance premium obligations, reducing take-home pay. Due to this wall, many part-time workers engaged in work adjustment — deliberately limiting their hours to stay below the threshold.
With this reform lowering the company size requirement, part-time workers at small and medium enterprises who previously did not need to consider the wall will now fall under coverage, effectively moving toward abolishing the wall.
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Try for free →Legal Basis
The principal statutory provisions underlying this reform are as follows:
| Statute | Article | Content |
|---|---|---|
| Employees' Pension Insurance Act | Article 12, Item 5 | Exclusion requirements for short-hour workers |
| Health Insurance Act | Article 3, Paragraph 1, Item 9 | Definition of insured short-hour workers |
| Employees' Pension Insurance Act Enforcement Order | Supplementary Provision Article 46 | Transitional measures for company size requirements |
| Act to Strengthen Pension System Functions | Act No. 40 of 2020 | Legal basis for phased expansion |
Impact on Employers
Increased Social Insurance Premium Burden
Social insurance premiums are shared equally between employer and employee. The approximate premium rates newly borne by employers are as follows:
| Insurance Type | Employer's Share (Approximate) |
|---|---|
| Employees' Pension | 9.15% (of Standard Monthly Remuneration) |
| Health Insurance | Approx. 5% (for Japan Health Insurance Association; varies by prefecture) |
| Long-term Care Insurance | Approx. 0.8% (for employees aged 40+) |
| Total | Approx. 15% |
For a part-time employee earning ¥88,000/month, the additional employer cost is approximately ¥13,200/month (about ¥158,000/year). For companies with 51-100 employees, the burden increases proportionally with the number of part-time staff.
Steps Employers Should Take
- Identify eligible workers: Create a list of part-time and casual employees working 20+ hours per week
- Estimate premium costs: Simulate the new financial burden
- Inform employees: Carefully explain changes in take-home pay and future pension increases
- File notifications: Submit qualification acquisition forms to the Japan Pension Service (within 5 days of the effective date)
- Review employment rules: Organize working conditions as necessary
Impact on Workers
Reduced Take-Home Pay vs. Higher Future Pensions
Enrolling in social insurance creates premium obligations for workers as well.
| Annual Income | Social Insurance Premiums (Employee Share, Annual Estimate) | Take-Home Pay Reduction | Future Pension Increase (Annual Estimate) |
|---|---|---|---|
| ¥1.06 million | Approx. ¥150,000 | Approx. ¥150,000 | +Approx. ¥58,000/year (from age 65, lifetime) |
| ¥1.20 million | Approx. ¥170,000 | Approx. ¥170,000 | +Approx. ¥65,000/year |
| ¥1.30 million | Approx. ¥185,000 | Approx. ¥185,000 | +Approx. ¥71,000/year |
While take-home pay decreases in the short term, gaining Employees' Pension entitlements significantly increases retirement pension amounts compared to the National Pension alone. Workers also become eligible for Health Insurance benefits such as Injury and Sickness Allowance and Maternity Allowance.
Impact of Leaving Spousal Dependent Status
Workers currently enrolled as Category 3 Insured Persons (dependents) under their spouse's social insurance -- paying no premiums themselves -- will leave dependent status upon enrolling in their own social insurance. This means:
- Health insurance premiums: New personal premium obligations arise
- Pension premiums: Status changes from Category 3 to Category 2 (premiums apply, but pension benefits increase)
- Spousal allowances: Some employers may discontinue dependent allowance payments
Future Outlook
The government is considering the complete elimination of the company size requirement. The phased expansion schedule is as follows:
| Effective Date | Company Size Requirement | Covered Workers (Cumulative) |
|---|---|---|
| October 2016 | 501+ employees | Approx. 250,000 |
| October 2022 | 101+ employees | Approx. 450,000 |
| October 2026 | 51+ employees | Approx. 650,000 (new) |
| Future (under review) | No size requirement | Several million more |
The ultimate goal is a system where all workers working 20+ hours per week enroll in social insurance regardless of employer size. This is a critical reform toward achieving a "working-style-neutral social security system."
Practical Considerations
- Individual notification and briefing sessions for eligible workers are recommended before the effective date (October 1, 2026)
- Accommodating employees who wish to adjust their working hours requires sufficient consultation between labor and management
- Failure to file qualification acquisition notifications carries penalties (imprisonment of up to 6 months or a fine of up to ¥500,000) under Article 102 of the Employees' Pension Insurance Act
- Companies already subject to the existing rules (101+ employees) are not affected by this reform
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*Houritsu no Mikata Editorial Team | Published April 26, 2026*
