Covid-19 and Remedies For Your Business: Subsidies, Loans and Employee Dismissal

This article is intended Japanese companies whose business operations has been significantly disrupted or shut down by the ongoing Covid-19 pandemic crisis.

Remedies for Survival

The 2020 Coronavirus pandemic has paralyzed the world economy. Amidst the number of deaths rising in the hundred thousands and cases of positive infections still balooning, forcing governments to issue lockdowns and suspend routine work, it’s quite difficult to foresee what will happen in the next days or months.

The Japanese government has declared a state of emergency for its seven prefectures including Tokyo and Osaka effective April 7th and is estimated to last a full month. However, it is highly likely to be extended depending on its efficacy in halting the spread of infection.

During these challenging times, many Japanese companies have already run out of cash and had no choice but to consider laying off employees immediately.

If you are in a difficult situation of being barely able to maintain business and keep your employees, there are a couple of options Startuphive recommends you to consider.

Option 1: Apply for Employment Adjustment Subsidy

Japanese companies are qualified for Employment Adjustment Subsidy if the company satisfies the following conditions

  • The company asks employees to take a leave due to business suspension caused by the Covid-19 pandemic
  • The company pays at least 60% of gross salary to their employees during their absence as leave allowance.

Update as of March 28th

The Ministry of Health, Labour, and Welfare has announced new exceptions for the purpose of easing requirements to be qualified for Employment Adjustment Subsidy.

  • Companies where the sales volume of the latest month fell more than 50% of the sales volume of the same month last year
  • Employees not enrolled to employment insurance are now also eligible for receiving the subsidy, in addition to employees with employment insurance

The daily subsidy cap per employee is at 8, 330 yen.

Please note that the application process is quite complicated and a handful of paperwork will be involved in the process. Currently, it would take approximately two months from completing the application to receiving the subsidy.

If your Japanese company can afford to pay leave allowance for its employees, you should apply as soon as possible.

Please refer to the Employment Adjustment Subsidy for details (Japanese language only).

Link: https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/koyou_roudou/koyou/kyufukin/pageL07.html

Option 2 – Interest Free Loan

Japan Finance Corporation (JFC is fully owned by the Japanese government) has offered interest free loans to Japanese companies with relatively less strict requirements and the process of getting the loan from them is relatively quick.

For more details, please refer to this pdf on JFC interest-free loan (Japanese language only).

https://www.jfc.go.jp/n/finance/saftynet/pdf/covid_19_faq_jisshitsumurishika.pdf

Option 3 – Dismissal of Employees

Dismissal of employees is never an easy decision, but it is unavoidable for most startups facing circumstances of not being able to conduct business operations. Residents are advised to stay safe within their homes so there is no sense running a business without customers to serve.

According to the latest News, Tokyo-based taxi company Royal Limousine KK has dismissed all 600 employees (most of them employed as drivers) and an official from the company has mentioned all laid-off workers would be better off availing benefits from the government-sponsored employment insurance program instead of being handed leave allowances during this health crisis.

Discharging of employees may seem a hardhanded resolution on the part of the employer, but if it is a means to avail unemployment benefits as per mandate of the national government, then such compromise would be for the best, benefitting both the business and the respective dismissed employees.

The Covid-19 pandemic is unprecedented; the damage it’s caused to the global economy, to the lives it has taken, and the disruption to our accustomed ways of living is incomparable to the previous calamities the world has faced in the modern age.

Without the promise of a viable vaccine, this period of uncertainty will only continue to persist.

We hope that the recommendations this article has provided will help your business withstand this adversity and come out of it stronger and more resilient. We wish you best of luck.

Article photo credited to: Anastasiia Chepinska on Unsplash

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