90% of Large Companies Have Retirement Benefit Plans: Two Systems Chosen by Small and Medium-Sized Enterprises

Retirement benefit plans are included in 90% of large companies. According to a survey by the Ministry of Health, Labour and Welfare, 90.1% of companies with 1,000 or more employees have them.

On the other hand, many small companies do not have retirement benefits. This is my personal observation. Since this survey only covers companies with 30 or more employees, figures for those with fewer than 30 are not published.

If a small company wants to compete with a large one, it needs to stand at the same starting line. That is why more companies are introducing retirement benefits.

My office also handles the work of creating retirement benefit plans.

When it comes to retirement benefits, the first thing that comes to mind is Chutaikyo.

This is the Small and Medium Enterprise Retirement Allowance Mutual Aid. It is a government-established system where companies can contribute from 5,000 yen per month. For part-time workers, it can be set from 2,000 yen.

This is generally the first thing companies without retirement benefits consider.

However, there are two things you should know.

One is the yield. Since it accumulates at a fixed interest rate, the growth is limited.

The other is what happens if an employee is dismissed for disciplinary reasons.

With Chutaikyo, payments are made directly to the individual’s account without going through the company. Even in the case of disciplinary dismissal, it does not stop automatically.

To reduce the amount, approval from the Minister of Health, Labour and Welfare is required.

The criteria are strict. It is limited to cases such as when an employee has caused significant damage to the company through acts that violate criminal laws, such as theft or embezzlement.

And the deadline for the application is within 20 days from the day following the date of retirement.

There are companies that let this 20-day period pass without knowing about it.

What I recommend is a corporate-type defined contribution pension plan.

There are various forms, such as a type where the company contributes, a type where the employee contributes, or a combination of both. When the company contributes, it can be set from around 3,000 yen.

This system has a mechanism that Chutaikyo does not have.

If an employee resigns with less than three years of service, the company can request a refund of the contributions it made, provided it is stipulated in the bylaws.

People who stay for three years are highly likely to continue working afterward. Therefore, drawing the line at three years works as a mechanism for employee retention.

Furthermore, it can be invested. As long as employees are enrolled, contributions are made monthly, and they can manage these funds themselves. They can increase their retirement savings while working.

However, since it is an investment, the value may fall below the principal. We always explain this point.

There is one more thing I will write honestly.

Even with a corporate-type defined contribution pension plan, the amount cannot be reduced after three years of service. This applies even in cases of disciplinary dismissal.

In other words, it is not a matter of which of these two is superior. If you want to prepare for those who leave after a short period, there is the corporate-type defined contribution pension plan; if you want to prepare for disciplinary dismissal, there is the path of certification through the Small and Medium Enterprise Retirement Allowance Mutual Aid (Chutaikyo).

You need to decide what you want to prepare for before choosing a system.

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