A housing allowance is one of the classic Japanese allowances, rooted in the idea that pay should cover a household's needs. Rules vary widely: some employers pay a flat amount, some a percentage of rent up to a cap, some only to household heads, renters or employees who can be transferred. In the Ministry of Health, Labour and Welfare's 2020 survey, covering pay for November 2019, 47.2% of companies paid one. The share rose with company size, from 43.0% at firms with 30 to 99 staff to 61.7% at those with 1,000 or more, and the average was 17,800 yen a month.
The tax treatment is plain. Cash paid as a housing allowance is salary, subject to income tax and inhabitant tax and included in social insurance contributions. Company housing that the employer leases and sublets is treated much more favourably, which is why larger employers often prefer it.
For overtime, a housing allowance can be left out of the calculation base only if it varies with the employee's actual housing cost. A flat amount paid to everyone must be included. For equal treatment, the Supreme Court held in the Hamakyorex case (2018) that paying a housing allowance to regular staff liable to transfer, but not to contract drivers who could not be transferred, was not an unreasonable difference.
What it means for a foreign employer
- Count it in total fixed cash. A candidate from a large Japanese employer may receive a housing allowance worth several hundred thousand yen a year. If your offer is base salary only, check that the total is not a cut.
- Company housing may beat a cash allowance. For senior hires and relocations, a leased flat with the employee paying part of the rent is usually worth more after tax than the same money in cash.
- Tie it to a reason if you pay it. An allowance linked to transfers or relocation is easier to defend under equal pay rules than one paid only to permanent staff.
- Watch the overtime base. A flat housing allowance raises the overtime rate for non-exempt staff.
Sources
- Ministry of Health, Labour and Welfare, General Survey on Working Conditions 2020 (pay for November 2019).
- Labour Standards Act, Article 37(5), and Enforcement Regulations, Article 21; Ministry of Labour notice on housing allowances excluded from the overtime base (1999).
- National Tax Agency, Tax Answer No. 2597 (company housing for employees).
- Supreme Court, Hamakyorex case, 1 June 2018.