Employment Adjustment Subsidy: Government Support for Employee Wages During Business Suspension

Administered by Japan's Ministry of Health, Labour and Welfare, this policy has a core purpose: when a company faces business difficulties and needs to temporarily suspend operations or scale back, the government subsidizes the bulk of employee wages, helping the company retain talent and stabilize employment. For Chinese small and medium-sized enterprises (SMEs) under financial pressure, this can be the key to getting through hard times.

This article breaks down the subsidy system from a practical standpoint, so you truly understand how to use it to ease your company's burden.

What Is the Employment Adjustment Subsidy? Understanding the Core Mechanism

The Employment Adjustment Subsidy, sometimes called the "employment adjustment fund" or "leave-of-absence subsidy," is a policy-based grant provided by the Japanese government to companies facing business difficulties due to economic factors such as cyclical fluctuations or structural changes in industry.

The Essence and Logic of the Subsidy

When your company needs to temporarily suspend operations or scale back for reasons such as:

• A sharp drop in sales (typically a decline of 15% or more compared to the same period the previous year)
• Difficulty procuring raw materials
• A significant decline in orders
• A sudden change in market conditions (e.g., a pandemic or natural disaster)

The government's approach is not to have you lay off staff directly, but to subsidize your continued payment of employee wages. The benefit is clear: employees keep their jobs, the company retains talent, and once business improves, operations can quickly return to normal.

Specific Subsidy Rates

Under the latest Employment Adjustment Subsidy system:

• SMEs: Subsidizes 80% of employees' leave-of-absence compensation (up to 100% in certain cases)
• Large enterprises: Subsidizes 60% (up to 80% in certain cases)

Here, an "SME" is defined as:

• Capital of 300 million yen or less, and
• 300 or fewer regular employees

Key figure: The daily subsidy cap per employee is 11,500 yen (this amount is adjusted each year based on average wages).

Subsidy Period

• A single application can provide a subsidy for up to 1 year
• For the same cause, the subsidy can last up to 1.5 years
• Special circumstances (such as the COVID-19 pandemic) have provisions for extended periods

Why Chinese Business Owners in Japan Should Pay Attention to This Subsidy

Many Chinese business owners in Japan know little about this subsidy's existence, or mistakenly assume the application process is too complex and give up. In reality, it is a severely underrated financial lifeline.

Let the Real Numbers Speak

Take, for example, a Chinese-owned manufacturing company with 10 employees:

Scenario: In 2024, a decline in orders requires a 3-month suspension of operations

Average monthly wage per employee: 250,000 yen

Without the subsidy:

• 3 months of wage expenses: 250,000 × 10 employees × 3 months = 7.5 million yen
• The company bears all costs itself

With the Employment Adjustment Subsidy (80% subsidy for SMEs):

• Government subsidy: 7.5 million × 80% = 6 million yen
• Company's own share: 7.5 million × 20% = 1.5 million yen

Cash flow the company can save: 6 million yen

For an SME, this can often mean the difference between survival and failure.

Eligibility Conditions and Basic Requirements

Mandatory Application Conditions

To apply for the Employment Adjustment Subsidy, your company must meet the following conditions:

1. Employment Insurance-covered enterprise

• Employment insurance has been arranged for employees
• This is a baseline condition, which almost all legitimate companies meet

2. Proof of business difficulty

You need to provide data proving that your business is in difficulty. The most common criteria are:

| Indicator | Criteria | |------|---------| | Sales decline | A decline of 15% or more compared to the same period the previous year | | Production decline | A decline of 15% or more compared to the same period the previous year | | Increased shipping costs | Procurement costs for major raw materials increased by 20% or more |

3. Employment maintenance plan

• You need to draw up an "employment maintenance plan" explaining what measures (suspension, scaled-back operations, rotating leave, etc.) you will take to get through the difficult period
• This plan must be submitted to the Labour Bureau with jurisdiction before implementation

4. Implementation of leave-of-absence and other measures

• Suspension of operations, rotating leave, or reduced business hours
• These measures must be communicated to employees in writing
• During the leave period, corresponding leave compensation must be paid (typically 60% or more of average wages, paid by the company first, then subsidized by the government)

Common Situations That Do Not Meet the Conditions

Note that the subsidy cannot be applied for in the following situations:

• A company deliberately suspends operations to evade debt
• The subsidy cannot be applied for during large-scale layoffs
• Bankruptcy or restructuring proceedings are underway
• Companies engaged in corruption or illegal activity

The Application Process: The Actual Steps from Preparation to Approval

Step 1: Prepare Documents (1-2 weeks)

Before applying, you need to prepare the following documents:

Required document checklist:

1. Employment Maintenance Plan

   • Format: a form uniformly provided by the Labour Bureau
   • Contents include: reason for suspension, suspension period, measures to be implemented, recovery plan
   • Common issue for Chinese business owners: if Japanese-language expression is difficult, you can enlist a Sharoshi (labor and social security attorney) or Gyoseishoshi (administrative scrivener) to assist, typically costing 30,000-100,000 yen

2. Materials proving business difficulty

   • Sales performance sheets or production statistics for the past 3 months
   • Comparative data against the same period the previous year
   • Invoices, order confirmations, etc.

3. Employee wage ledger

   • Wage payment records for the past 6 months
   • Proof of employment insurance enrollment

4. Notice of suspension

   • A suspension announcement addressed to employees
   • Contents must include: suspension dates, reason, compensation amount, expected return-to-work date

5. Company certification documents

   • A copy of the business license
   • Certificate of the corporate seal

Step 2: Submit to the Labour Bureau (Advance Application)

Timing of submission: Submission is required before the suspension. This is a critical point—if you apply after suspending operations, it cannot be approved.

Where to submit: The Employment Adjustment Section of the Labour Bureau in the company's location, or the branch office with jurisdiction

Tip for Chinese business owners:

• We recommend calling in advance to confirm the required documents
• Labour Bureau staff are generally very patient; if language is a difficulty, you can bring along an employee with good Japanese
• When submitting, request a "receipt of acceptance" as proof

Step 3: Implement the Suspension and Keep Records (During Suspension)

Once you obtain approval from the Labour Bureau, you need to:

1. Implement the suspension as planned

   • Ensure the suspension dates match the application plan
   • Employees must sign an acknowledgment of the suspension notice

2. Pay leave-of-absence compensation

   • Pay at least 60% of average wages (we recommend 80%-100% to maintain employee morale)
   • Pay monthly or per instance
   • Retain proof of payment (pay slips, bank transfer records)

3. Record attendance status

   • Which days were suspended and which days were worked
   • Which employees participated in the suspension
   • This data will be needed later when filing the claim

Step 4: File the Claim and Receive the Subsidy (After Suspension)

Filing time: You can begin filing from the month following the end of the suspension month

Filing materials:

• The "Employment Adjustment Subsidy Payment Application Form" provided by the Labour Bureau
• A copy of the employee attendance record
• Pay slips (for the suspension months)
• Bank transfer receipts

Review time: Typically 1-2 months

Subsidy disbursement: Once the review passes, the subsidy amount is transferred directly to the company bank account you provide

Common Mistakes Made by Chinese Business Owners

Mistake 1: Applying Only After Business Difficulties Set In

Wrong approach: Applying for the subsidy only after the suspension has already begun

Correct approach: As soon as you foresee signs of difficulty, consult the Labour Bureau in advance and prepare your application. Approval must be obtained before the suspension.

Mistake 2: Applying Only for Some Employees

Many business owners think they can suspend only certain employees while others work normally. Doing so may affect the subsidy amount. We recommend:

• Clearly distinguishing between "suspended departments" and "continuing-operation departments"
• Explaining this in the application to obtain a more reasonable subsidy

Mistake 3: Concealing Actual Wage Levels

Serious consequences:

• Reporting low wages at application while actually paying high wages → if discovered during review, you will be required to repay and may be penalized
• The subsidy is calculated based on the wages you report, so falsifying is not worth it

Correct approach: Report truthfully, based on the company's wage ledger

Mistake 4: Failing to Retain Evidence

Some business owners think that once the application is approved, it's all over. In reality:

• The Labour Bureau may conduct a spot audit within 3-5 years
• If falsified data or incomplete materials are discovered, you will be required to repay and may even face legal liability
• All suspension notices, employee signatures, and pay slips must be properly kept

Frequently Asked Questions (FAQ)

Q1: My company is very small, with only 3 employees. Can I apply?

A: Absolutely. In fact, many Chinese business owners assume they are ineligible simply because their company is small—this is a common misconception. As long as the company has arranged employment insurance for its employees, any company, regardless of size, can apply. In reality, the smaller the company, the more crucial this subsidy is: for a company with 3 employees, one month of suspension could be a burden of 700,000-800,000 yen, and an 80% government subsidy could reduce that to just over 100,000 yen—lifesaving money for a small company with tight cash flow. The key is having sales data to prove business difficulty (a decline of 15% or more compared to the same period the previous year).

Q2: What are the criteria for determining a sales decline? Which period should I compare against?

A: The comparison benchmark is typically the same period the previous year (the same month last year), and a decline of 15% or more is required. To determine this specifically: if sales in March 2024 were 2 million yen and March 2023 was 2.35 million yen, the decline is (235-200)÷235 = 14.9%—close but not meeting the threshold. If March 2023 was 2.4 million yen, the decline is (240-200)÷240 = 16.7%, meeting the threshold. Note that if your company is newly established (in operation for less than 1 year), you can compare the "average of the first 3 months" against the most recent 3 months. We recommend preparing a detailed sales data sheet before applying—ideally with 6 consecutive months of data, which lends greater credibility.

Q3: How much compensation should I pay employees during the suspension?

A: The legal minimum requirement is to pay 60% of average wages, but this is only the floor. In practice, most companies pay 80%-100% to maintain employee morale and the company's image. Importantly, you can explain to employees that the government will subsidize a portion of the amount you pay. For example: if an employee's average monthly wage is 250,000 yen and they are on leave for 1 day (Japan typically calculates by the month), the legal minimum compensation is 250,000 ÷ 21.75 × 1 day × 60% ≈ 6,900 yen, but you may choose to pay 8,000-10,000 yen. The government's 80% subsidy is calculated based on the amount you actually pay. The higher the payment, the higher employee satisfaction, and the more stable the company's labor-management relations. Remember, this compensation must be communicated to employees in writing, and proof of payment must be kept.

Q4: I once had a labor dispute (employees demanding overtime pay). Can I still apply for the subsidy now?

A: This depends on the nature of the dispute and its current status. If the dispute has been resolved (through settlement or arbitration), it generally does not affect the subsidy application. However, if the dispute is still ongoing, or if your company has been investigated for a serious violation of labor law, it may affect the application. The key is to explain the situation honestly to the Labour Bureau. We recommend consulting the Labour Bureau with jurisdiction in advance of the formal application to explain your specific situation—they will make a judgment based on the nature of the case. Many Chinese business owners are afraid to apply for fear that past problems will be discovered, but not applying only allows problems to accumulate. Proactively resolving labor issues can, on the contrary, pave the way for the subsidy application. In such cases, we recommend consulting a professional Sharoshi.

Q5: How long does it take from application to receiving the subsidy money? What about the company's cash flow in the meantime?

A: The entire process typically takes 3-4 months. A specific timeline: 1-2 weeks to prepare documents, 1-2 weeks for the Labour Bureau review, implementing the suspension (which can be 1-3 months), 1-2 months of review after filing the claim, and 1-2 weeks to receive funds after the review passes. Overall, from deciding to apply to receiving the money, it takes 3 months at the fastest and possibly 5 months at the slowest. During this time, the company must first pay employee compensation itself, creating significant cash pressure. To ease this issue, we recommend: first, before applying, assess whether the company has sufficient cash reserves; second, if funds are especially tight, apply to a bank for a "working capital loan," using the expected subsidy as a basis for the application; third, communicate well with employees, explaining that they will be paid in full once the subsidy is received. Some companies also choose to pay compensation in installments, but this must be agreed upon with employees in advance.

Further Professional Support Resources

When You Need a Professional

Although the application process is not complex, we recommend seeking professional help in the following situations:

1. The company has weak Japanese-language ability → enlist a Gyoseishoshi to help prepare documents
2. Financial data is not clear enough → enlist a Zeirishi to organize sales data
3. There has been a labor dispute → consult a Sharoshi to assess the impact
4. The application was rejected → consult a professional about application strategy

Relevant Consultation Windows

• Labour Bureau Employment Adjustment Section: handles applications and reviews
• Hello Work (Public Employment Security Office): provides free consultation
• Chamber of Commerce and Industry: many branches have subsidy consultation windows (some free)

Summary and Recommended Actions

For Chinese business owners in Japan, the Employment Adjustment Subsidy is an often-overlooked but extremely important policy tool. It is not "relief," but a system established by the government to stabilize the employment market and help companies get through difficulties.

What you should do now:

1. Take stock of company data: organize sales data for the past 6-12 months so you have a clear picture
2. Understand your employee situation: tally the number of employees, average wages, and employment insurance status
3. Consult in advance: if you foresee business difficulty, proactively contact the Labour Bureau for consultation
4. Preserve evidence: starting now, properly keep all pay slips, attendance records, and financial data

Even if your company is currently operating normally, we recommend understanding this system. Because market changes often come suddenly, knowing in advance that such a relief measure exists allows you to make decisions with greater composure.

If you have questions about whether your company's specific circumstances meet the application conditions, or need concrete application guidance, we welcome you to contact our Japan subsidy consulting team for a free preliminary assessment. We have professional Chinese-speaking consultants and a long-standing cooperative relationship with the Labour Bureau, and can help you quickly determine the feasibility of your application and plan the optimal approach.