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Payroll in Japan

Payroll in Japan can get quite complicated with basic wages, overtime and bonuses less deductions for income tax, residents tax, health insurance, over 40 health insurance, pension and labour insurance, not forgetting the employer’s contribution to employees’ health insurance, pension and labour insurance.  Then of course you not only do you have to pay employees their net wages, you also have to pay the income tax withheld to the tax office, the residents tax to the local tax office, the health insurance and pension to the health insurance and pension office and labour insurance to the labour office all by the due dates having filled out the correct forms.  Finally, at the end of the year you must prepare the end of year tax adjustment and withholding tax certificate.  So why would you want to make it harder?

Many employers in Japan outsource the whole payroll function to an external accountant and there are even licenced social insurance consultants (sharoushi) who specialise in this work and are well worth considering if you don’t have the time or inclination.

Certainly when it comes to preparing the annual tax return, nearly all businesses hire a tax accountant to get the job done but surely a business should be able to calculate its employees wages without also having to hire outside help if it so wishes.  So here are my tips to help you manage your own payroll:

1. Keep it simple.  Do not load other factors into payroll if you can possibly help it, such as deductions for rent, company purchases, loan repayments.  If you do, you should have a very clear system for doing so and understand how to account for it.
2. Prepare written contracts for all staff before employment commences so that both parties know what to expect.
3. Use a payroll system, not Excel.  Xero has a simple payroll module which can be used in Japan.  It comes free as an integrated part of  Xero which makes it attractive.  If you don’t have too many employees, it can do the job.  Of course, it does not have tax and health insurance tables built in so you have to look those up in the printed tables and the payslips are in English.  It does get a bit tricky when it comes to the end of year tax adjustment because you cannot enter a tax refund in wages but this can be worked around.  If you have a Japanese bookkeeper, an alternative would be to use Freeway which is a dedicated Japanese payroll system.
4. Excel is far too prone to error to be used for wages, cannot be locked down month by month and can be easily changed at any later date.  It’s also very easy to end up with various versions of the spreadsheet so you don’t know which is the correct version.
5. Pay all employees on the same pay day in the same pay run.  I have seen employers have one fortnightly pay run and one monthly pay run, or one pay run for directors and one pay run for other staff.  I would try to avoid this if at all possible.
6. Do not pay wages in advance as this invites confusion and can be easily forgotten about.  If you absolutely have to lend money to your staff, at least enter the advance as a loan to the employee in your accounting system so that it’s not forgotten about.
7. Pay wages by bank transfer rather than in cash.  Employees have the right to be paid in cash if they ask for it but it takes such a long time to withdraw cash from the bank, make sure you have the correct coins to pay everyone to the exact yen, count it out, prepare envelopes and then deliver the envelope to each employee all in a secure fashion.  If employees work irregular hours or at different places, just paying the wages can be very time consuming.  Paying by bank transfer avoids all of that and provides a written record.
8. Keep a record of holiday entitlement.  Xero will not do this for you and I don’t recommend Excel for the same reasons as above so I would recommend pen and paper so you have just one permanent record.  You need columns for Date, Description, Holidays taken, Holidays accrued and Balance in days or fractions of days.
If you need any help, please get in touch with J Amos Consultancy as we have bilingual staff who are experienced in payroll.  And if we can’t help, we can put you in touch with specialists who can.
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50% off Xero for six months – limited offer

50% off Xero for six months – limited offer

Xero accounting software is currently running a great offer:

  • Free until 31 March 2016
  • 50% off for six months after that

Available versions are:

  • Starter -               normally about 2,400 yen p/m, now about 1,200 yen for the first 6 months
  • Standard -           normally about 3,600 yen p/m, now about 1,800 yen for the first 6 months
  • Premier -             normally about 4,800 yen p/m, now about 2,400 yen for the first 6 months

See www.xero.com/pricing for more information or ask me.  To catch this offer, you must sign up with me by 31 March.

 

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Finding a Japanese Tax Agent

Most businesses need to engage a tax accountant to help them prepare and lodge a tax return at the end of each financial year.  I also recommend that businesses with employees should generally get a Japanese tax accountant to prepare the employee payroll, or at least have a Japanese tax accountant on call for questions and the end of year tax adjustment.

I have come across a quite a few Japanese tax agents with a various skills, services and fees so it pays to find one which suits your requirements.  I recommend you consider the following when choosing a Japanese tax accountant:

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WorkflowMax project management software

WorkflowMax is an integrated, online all-in-one project management software program. It handles the whole process from lead to quotes, job management, time-recording, purchase orders, invoicing and reporting all in the cloud. It’s a Xero product and so integrates well with Xero accounting software. Find out more at www.workflowmax.com or ask me for a demonstration.

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Xero Accounting Software Free for 60 Days

Xero online accounting software is now being used by over 400,000 small businesses around the world. If you’re thinking of trying it or want to set up another business on Xero, now is the time to take advantage of a special 60 days free trial.

Just ask me to create a new Xero datafile for you before 31 December 2014 and the first 60 days will be free of all software charges. I can set the file up with my standard chart of accounts or you can go through the set up assistant and set it up yourself.

After that you can start to subscribe at US$12 per month for the Cashbook plan, US$20 per month for the Starter plan, US$30 per month for the Standard plan (most popular) or US$40 per month for the Premium plan.

Visit www.xero.com or ask me for more details.

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The KISS Principle – Keep it simple, stupid

Business owners like to get into some overly complicated or even dodgy deals from time to time, which may be OK if you’re on your own but may not, in my opinion, be such a good idea if you employ staff. “Tone at the top” is what auditors call it: owners should be leading by example to encourage staff to work hard and to help prevent their staff from committing fraud and other unethical practices.

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MYOB Premier v11 (Australian) for sale

Ex wholesale stock, new, never sold, never registered with MYOB, still sealed in original packaging with manual and CD.   Runs on Windows XP or Windows 7.   May be upgradable to latest version free of charge by MYOB upon registration (please check with MYOB).  3 user licence including multi-currency, payroll, inventory and time billing.

Free postage within Japan.  Outside Japan, postage & packing charge extra on application OR receive serial number and software download only (no box, manual or CD) to avoid all postage.

AU$1,400 each.  (1 in stock)

SPECIAL OPTION: Buy the software and get me to set up your data file for a 10% discount off the total package.  Offer ends 30 June 2014.

 

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MYOB or Xero?

A few years ago I took a quick look at Xero and felt its accounting features were not strong enough to justify changing from MYOB. It was totally online but I didn’t consider the benefits of an online accounting program at all. In October 2012, MYOB released its online version and I was keen to use it. I then began to realize how amazing an online accounting program could be: it offers all the business owners, all the staff, all the consultants, all the tax accountants and in fact anyone who is given permission to access the data file from any internet connected computer from any location at any time. It makes local area networking methods completely redundant.

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DD/MM/YY, MM/DD/YY, YY/MM/DD or HH/MM/DD

It amazes me that in this age where just about every piece of information on earth has been digitized on to computers that we have not standardized the date, which is absolutely critical to any accounting system, if not life in general. The British and the Australians say DD/MM/YY, the Yanks and Canadians say MM/DD/YY, the Japanese say YY/MM/DD. So if you are looking at a document with a date of 11/9/13, it could be the 11th day of September 2013, the 9th day of November 2013 or the 13th day of September 2011, depending who wrote it. But wait, in Japan it gets worse, they not only use YY/MM/DD but they also have their own calendar starting with the accession of each emperor. The Heisei period started in 1988 and so 11/9/13 could now be the 11th year of the Heisei period, the 9th month and the 13th day, which would be the 13th September 1999.

With a little bit of extra effort, all this confusion can be avoided by writing the year in full, e.g. 11/9/2013 or 2013/9/11 or H25/9/13. Unless you are a Yank or a Canadian as writing 9/11/2013 still means September 11th 2013 to them but 9th November 2013 to the British. To me, this seems to be deliberately confusing the issue, illogical and in the minority so please, Yanks and Canadians, I think it’s time to DD/MM/YY.

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The trouble with banking & bookkeeping in Japan

There once was a time and place when making payments from your bank account also produced almost automatically a nice little booklet containing all the necessary information about such payments: date, payee, description and amount.  This was called the cheque book system which, interestingly, has never existed in Japan as far as I know.  As part of writing out the cheque, you also wrote out a cheque stub with all these details and ended up with little booklets of 25 to 50 cheque stubs which were a vital part of your bookkeeping records.  At the end of each financial year, you could present all your cheque stub booklets to your accountant and off he’d go and happily prepare your accounts.

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