How Much of Your Social Insurance Administration Can You Outsource? A Practical Guide for Japanese Subsidiaries of Foreign Companies

Hiring employees in Japan triggers a wide range of filings for health insurance, employees’ pension insurance, employment insurance and workers’ accident compensation insurance. Japanese subsidiaries of foreign companies often handle this with a small back-office team, which leads to common pain points such as "checking the procedures every time someone joins or leaves is a burden" and "it is hard to explain Japan-specific rules to HR at headquarters."

These procedures can be outsourced on an ongoing basis to external professionals such as licensed labor and social security attorneys (sharoshi). However, simply outsourcing the filings does not solve everything. This article, written for HR Managers and administrative heads of Japanese subsidiaries, explains which tasks can be outsourced, the benefits of doing so, how to choose a provider, and how to think about outsourcing payroll at the same time.

1. What Is Social Insurance Outsourcing?

Social insurance outsourcing means entrusting external professionals with the social and labor insurance paperwork that arises when employees join or leave, change dependents, or take maternity or childcare leave. Sharoshi are nationally licensed professionals legally authorized to prepare and submit these filings on behalf of employers as a business.

In Japan, corporate business offices are in principle required to enroll in health insurance and employees’ pension insurance, and various filings are needed each time an employee is hired or leaves. Deadlines differ by program.

Even at a Japanese entity with only a few employees, the person in charge must understand the requirements and deadlines of each program.

2. How Much Can Be Outsourced?

A broad range of social and labor insurance procedures can be outsourced to a sharoshi. Typical tasks include the following.

The Japan Federation of Labor and Social Security Attorney’s Associations also lists these as areas where sharoshi can provide support, including procedures related to joining and leaving, dependents, childbirth, family care, and illness or injury, as well as the annual remuneration report and the annual labor insurance declaration.

3. The Checks Before Filing Matter as Much as the Filing

In practice, the work is not just preparing and submitting forms. Before filing, decisions must be made, such as whether a new hire is eligible for social insurance at all, which payments to include when calculating standard monthly remuneration, and what needs to be confirmed about dependents.

When evaluating a provider, therefore, it is important to check not only whether they handle electronic filing, but also how far they will go in confirming the information needed for filings and answering practical questions.

4. Benefits of Outsourcing for Japanese Subsidiaries

(1) Reduces the workload on HR and administration

At Japanese subsidiaries, one person often covers HR, payroll and general affairs. Each social insurance filing may be small on its own, but requirements and documents must be checked every time someone joins or leaves, changes dependents or takes childcare leave. Outsourcing these tasks on an ongoing basis frees in-house HR staff to focus on work that should stay in-house, such as recruitment, HR policy and employee relations.

(2) Eases the burden of Japan-specific rules

Parts of Japan’s social insurance system can be hard for headquarters HR to understand. For example, health insurance and employees’ pension premiums are calculated based on "standard monthly remuneration." In addition to the annual remuneration report filed in principle every year, a notification of change in monthly remuneration is required under certain conditions when pay changes significantly. Payroll data in headquarters’ HR system alone may not be enough to determine mechanically which filings are needed. Working with professionals who know the Japanese system helps ensure these local rules are handled consistently.

(3) Avoids dependence on a single person

Having "only one person who understands Japanese social insurance" is a major risk for a Japanese subsidiary. If that person leaves or goes on leave, no one may know the past filings or the annual schedule, and work can stall. Using an external professional on an ongoing basis and documenting workflows and required information reduces the concentration of know-how in one individual.

5. Procedures Foreign-Affiliated Companies Should Watch Closely

(1) Foreign national employees are also covered by Japanese rules

Being a foreign national does not by itself exempt an employee from Japanese health insurance or employees’ pension insurance; eligibility is determined by employment type and working conditions. When hiring foreign nationals, employers are in principle required to submit a Report on the Employment Status of Foreign Workers. In certain cases, a "Notification of Name in Roman Letters" must also be submitted together with the health insurance and employees’ pension eligibility acquisition notification. Companies with many foreign employees should build these Japan-specific procedures into their onboarding workflow.

(2) Information from headquarters may not arrive in time

An often overlooked issue is not "who files" but "who collects the information needed for filing, and when." Even if headquarters decides an employee’s start date and salary, the Japanese side cannot begin the procedures if it is informed late. Some filings, such as eligibility acquisition, must be submitted within a short period, so clear rules are needed for passing information from headquarters to the Japanese entity and then to the provider. When introducing outsourcing, it helps to decide at least the following.

• Who confirms joining and leaving information
• Who the contact person on the Japanese side is
• When the provider should be notified
• How changes in pay, address, dependents, etc. are shared
• Who handles questions from employees

Designing this information flow, not just choosing a provider, is the key to stable outsourcing.

6. Outsource Social Insurance Only, or Payroll as Well?

Payroll is worth considering at the same time. The two can be outsourced separately, but in practice they are closely linked. Salary information at hiring affects standard monthly remuneration at enrollment; when fixed wages change, payroll data must be reviewed to determine whether a notification of change in monthly remuneration is required; and bonus payments require processing in both payroll and social insurance.

If payroll and social insurance are handled by different providers, the company may have to sit in the middle and pass data between them. Using the same provider makes it easier to integrate the two.

For foreign-affiliated companies with few HR staff in Japan, it is important to compare not only the cost of the filings themselves but also the coordination work that would remain in-house.

7. How to Choose an Outsourcing Provider

Because social insurance procedures arise continuously, we recommend not choosing a provider on price alone.

(1) Scope of services

Even services labeled "social insurance filing agency" differ in scope. Check whether they cover only joining and leaving procedures, or also the annual remuneration report, the annual labor insurance declaration and maternity and childcare leave. Whether you can consult them on irregular cases is also important.

(2) Experience with foreign-affiliated companies

At Japanese subsidiaries, the division of roles and approval processes between headquarters and the local entity may differ from those of Japanese companies, and communication in English may be required. Check whether the provider understands how foreign-affiliated companies operate, including support for foreign national employees and coordination with headquarters.

(3) Integration with payroll

Even if social insurance is outsourced, a heavy administrative burden may remain on the Japanese entity if it is not well coordinated with payroll. If you also plan to outsource payroll, confirm how the two can be linked, including the point of contact and how data is exchanged.

8. Summary: Design the Whole Operation, Not Just the Filings

Outsourcing social insurance procedures lets you entrust a wide range of tasks to external professionals, including those related to joining and leaving, the annual remuneration report, the annual labor insurance declaration, and maternity and childcare leave. Japanese subsidiaries of foreign companies also need to consider information flow with headquarters, support for foreign national employees and data integration with payroll, on top of Japan-specific rules. When considering outsourcing, look beyond which filings a provider can handle and consider how your HR and labor operations in Japan, including payroll, should be structured as a whole.

RSM Shiodome Partners supports Japanese subsidiaries of foreign companies with HR and labor operations, including social and labor insurance procedures and payroll. Whether you have just entered Japan and your back office is not yet in place, or you want to outsource existing social insurance and payroll work to reduce the burden on HR, we propose support tailored to your situation. If you are considering outsourcing social insurance procedures and payroll, please contact RSM Shiodome Partners.

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