Why Your Take-Home Drops in October in Japan

Last updated: 6 October 2026 · figures for the 2026 tax year (令和8年分)

Take-home in Japan often drops in October because health insurance and the pension are charged on a grade — standard monthly remuneration (標準報酬月額) — reset once a year from your April, May and June pay, and the new grade first reaches the October payslip. It hits employees whose spring pay was higher than usual: on a ¥300,000 base salary in Tokyo, ¥40,000 of overtime in each of those three months costs ¥5,466 on every ordinary payslip from October. The new grade applies from September, and premiums are usually taken a month behind, which is why October is the month you see it.

The annual reset (定時決定)

The Japan Pension Service describes it: every year the employer reports the pay of everybody insured on 1 July for April, May and June; the average of those three months decides the new grade, and that grade is applied to each month from September to the following August. The report is the 算定基礎届, sent by 10 July. The pay that counts is everything paid as remuneration, not only the base salary — overtime (残業手当), commuting and housing allowances are all in it. A month with fewer than 17 paid days is left out of the average.

Premiums for a month are normally deducted from the following month’s pay — the agency’s own English guide gives the example of April’s contribution coming out of May’s salary. So September’s premium, the first on the new grade, is in the October payslip.

What two grades cost

Take a base salary of ¥300,000 a month in Tokyo. In a normal year the grade is ¥300,000. Now add ¥40,000 of overtime in each of April, May and June: the average is ¥340,000, which is two grades higher. From October the overtime is gone but the grade stays until the next reset.

That is ¥5,466 less on an ordinary payslip, or ¥65,592 if you multiply it by the twelve months the grade applies. The year comes out a little better than that: the extra premiums are deductible, so the December year-end adjustment and the next year’s resident tax both come out slightly lower, and insurance rates themselves are reset each spring. Employment insurance does not move — it is charged on actual pay, not on the grade — and the monthly income tax falls slightly, because it is read after the larger insurance. The figures are for somebody single, under 40, with no resident tax yet; in October itself the resident tax is the same in both columns.

Grades are bands, not exact amounts. The ¥300,000 grade covers an average from ¥290,000 up to ¥310,000, and the ¥340,000 grade from ¥330,000 up to ¥350,000. So ¥20,000 of spring overtime a month, an average of ¥320,000, moves one grade and costs ¥2,738 on an ordinary payslip, ¥32,856 over twelve of them before the same small tax offset; ¥40,000 moves two. What counts is the pay you receive in April, May and June — overtime worked in March and paid in April is in it, and overtime worked in June but paid in July is not.

Bonuses are not part of it. A bonus paid three times a year or less is insured separately, on its own amount (標準賞与額), in the month it is paid, so a large June bonus does not raise the grade. A payment made four or more times a year is treated as ordinary remuneration instead and is counted.

When the grade changes sooner

The grade can also change in the middle of the year (随時改定). That needs three things: a change in fixed pay — a raise or a cut in base salary or a fixed allowance, not a swing in overtime; over the three months that follow it, an average two grades or more away from the current grade, and in the same direction as the change — a raise offset by less overtime does not lower it; and at least 17 paid days in each of those three months. Then the new grade applies from the fourth month. So a raise can move your grade before September, and the end of a busy spring cannot.

An April raise: August or October

A raise in April is where the two rules part. Take the same ¥300,000 base salary, raised in April and first paid at the new rate in April. What happens next depends on how far the raise moves you.

A raise of ¥40,000, to ¥340,000. That is a change in fixed pay, and April, May and June average ¥340,000, two grades above ¥300,000 — a mid-year change. The new grade applies from July, the fourth month counting April, and July’s premium comes out of the August pay. From April to July the payslip is ¥288,010; from August it is ¥282,444. Because the grade changed in July, there is no September reset that year: the Japan Pension Service leaves anybody changed in July out of the July report, and a grade changed from July onwards runs to August of the following year.

A raise of ¥20,000, to ¥320,000. One grade is not enough for a mid-year change, so nothing moves until the annual reset. April to June average ¥320,000, the grade becomes ¥320,000 from September, and the October payslip is the first to show it: ¥268,750 from April to September, ¥266,032 from October.

Neither case takes the raise back: the higher grade costs a few thousand yen a month out of a raise of twenty or forty thousand. What catches people out is the timing, a step down in August or October, months after the raise itself. Overtime in April, May and June comes on top: it is part of the April-to-June average for the September reset, so a small raise and a busy spring together can move you further than the raise alone. The figures use the same assumptions as the table above.

Checking it with the calculator

1. Enter your salary before the change in the calculator, with your prefecture and age, and note the monthly take-home and the health insurance and pension lines.
2. Enter the salary after it — the raised salary, or for a spring of overtime the base salary plus the average overtime of April to June. Its health insurance and pension lines are what the new grade costs.
3. The payslips once the grade has caught up — from August after a mid-year change, from October after the annual reset — are the raised salary’s take-home. The months before that are the raised salary with the old health insurance and pension lines, so add back the difference between the two results’ lines; income tax in those months is a little higher, because it is read after the smaller insurance.

What you can and cannot do

• Know that spring overtime is expensive. The overtime itself is paid as usual, but it also lifts a year of premiums. If you have a choice of when to do extra hours, that is worth knowing.
• A larger grade is not all loss. The pension is calculated on your grades, so the extra pension premium also counts towards a larger employees’ pension later.
• Joining mid-year: the grade set when you join runs until the next reset. Join between 1 June and 31 December and it runs until August of the following year.

The calculator on this site uses the grade your salary falls into and does not model a spring of overtime, so its figures are the first column’s kind. Why your first paycheck has no health insurance covers the other month the payslip jumps.

Questions people ask

Does overtime in April to June really raise my insurance for a year?

Yes. Overtime pay counts as remuneration, and the average of the pay you receive in April, May and June sets the grade used from September to the following August.

Can I ask for the grade to be lowered when the overtime stops?

Not because overtime stops. A mid-year change needs a change in fixed pay, such as a raise or a cut in base salary, an average over the next three months two grades or more away in the same direction as that change, and at least 17 paid days in each of those months.

Is a higher grade all loss?

No. The employees’ pension is calculated on your grades, so a higher grade also counts towards a larger pension later.

I got a raise in April. When do my deductions go up?

If the raise is two grades or more and is in fixed pay, the grade changes from July and the August payslip shows it. A smaller raise waits for the annual reset: the grade changes from September and the October payslip shows it.

This is a general explanation. Company health societies (健康保険組合) set their own rates, and there are special rules for part-time workers and for pay that swings every year at the same season.

Sources

• Japan Pension Service — 定時決定（算定基礎届） (April to June, the report by 10 July, the grade from September to the following August, 17 paid days). Japanese.
• Japan Pension Service — 厚生年金保険の保険料 (what counts as remuneration, including overtime; the grade on joining; the mid-year change after a change in fixed pay of two grades or more; grades used for the pension amount). Japanese.
• Japan Pension Service — 随時改定（月額変更届） (a change in fixed pay, two grades or more over three months, the new grade from the fourth month). Japanese.
• Japan Pension Service — Practical Guide to Pay Employees’ Pension Insurance and Other Contributions (the previous month’s contribution deducted from the current month’s salary). English.
• Japan Health Insurance Association — 令和8年度 保険料額表 (Tokyo, the grades and premiums in the table).

See your own payslip