Publications

INTRODUCTION

Due to the collapse of major financial institutions, the Asian currency crisis and decreased consumer demand, Japans economy has struggled since the early 1990s. However, Japan experienced a mild recovery period in 2003 with a 2.7% GDP, and the average annual GDP for 2004 is expected to be around 2.2%. Nevertheless several economic reports released at the end of 2004 show that the countrys economy is once again on the decline with a decrease in industrial output, increase in the unemployment rate, and decline in household spending. In particular, Japans electronics industry has experienced some difficult times. Electronic companies with good sales at the beginning of 2004 are now finding themselves curbing production of some products due to a decrease in demand. The struggling industrial sector has led to an increase in the countrys unemployment rate. The average unemployment rate for 2004 is expected to be about 5.3%.

One of the reasons for the relatively high unemployment rate is the discrepancy between available jobs and unemployed workers. With a large number of older workers preparing to retire in the near future, many higher level jobs will become available and companies will look to hire mid-career employees, who can often offer good experience and skills. Younger people currently have the highest rate of unemployment. There is a growing trend among youths in Japan to avoid working altogether, called NEET youths, or youths Not in Education, Employment or Training.

The uneven labor force, high unemployment and declining population have put a strain on Japans economy, causing many companies to turn to non-regular workers, such as part-time or temporary workers. In 2003, Japans Ministry of Health, Labor and Welfare (MHLW) estimated that non-regular employees made up over one-third of the workforce in Japan. Additionally, the wage restraints for these non-regular workers add to the strain on the countrys pension system. Many of these workers do not contribute to the pension system at all due to their limited wages. In June 2004, the Japanese government passed legislation to change the pension system and payment schemes in order to save the system from a potential collapse.

CHANGES IN THE PENSION SYSTEM

Reasons for the Change

Japan faces decreasing pension finances due to numerous non-complying citizens, or those who avoid paying their pension contributions, an aging population and a declining birth rate. The countrys aging population is a major concern for the government, as the number of retires increases and the working population decreases. Last year, the number of citizens age 65 or older comprised nearly 20% of the total population, or approximately 24 million, an increase of over 180,000 from the previous year. Conversely, the working-age population (ages 15-64) in Japan is declining, and fell 300,000 in 2003, to about 85 million.

The decreasing total fertility rate (TFR) in Japan is also putting a strain on the pension system, as it has been declining for almost thirty years. In 2003, Japans TFR hit a record low of 1.29, decreasing from the previous years rate of 1.32. Tokyo had the lowest rate last year, a TFR of only 1.0. The TFR is predicted to rise slightly, but nevertheless, the pension system will not be able to withstand the pressure and strain of these declining rates.

New Pension Legislation

Hoping to save the current system from collapsing, the Japanese government passed legislation to reform the pension system in June 2004. According to the new legislation, beginning in fiscal year 2005, employees will be faced with increased pension premiums and a reduction in retirement benefits. This new pension system will be in effect between 2005 and 2023.

The new legislation proposes several changes in Japans current pension system. First, committees will be set up by the Japanese government to review the social security system in Japan. These committees will also look into the possibility of merging the National Pension System, Employees Pension System and Mutual Aid Pension System into a single system. Currently, all Japanese nationals pay into the National Pension System. In addition, citizens employed in the private sector pay into the Employees Pension System, while public servants pay into the Mutual Aid Pension System. By merging the three pension systems, the pension payment scheme will become more straightforward for employees and should help reduce the number of non-complying citizens, which is currently about 40% of eligible pension contributors.

Pension Payments

According to the MHLW, the actual value of pension payments will be reduced by about 13% over the 20 year course of the new plan. For example, an average 65 year old retiree who paid into the pension plan for 40 years would receive a pension of 233,000 yen (US $2,250) per month in 2004. By the year 2024, the pension payout would equal 246,000 yen (US $2,400) per month. But in terms of 2004 values, this 2024 payout is equivalent to 202,000 yen (US $1,900), which is a drop of 31,000 yen per month (US $300).

Low-income employees will also be affected by the new scheme. Currently, there are two types of exemptions for low-income employees: a full exemption, and a 50% reduction in pension payments. For instance, an individual who earns less than 350,000 yen (US $3,200) annually receives a full exemption, while a person who makes between 350,000 yen (US $3,200) and 850,000 yen (US $7,800) per year receives a half-exemption. With the new system, two more categories of exemptions will be introduced: 75% reductions and 25% reductions in pension payments. However, the maximum income level for these reductions will be raised. Therefore, employees who would have previously qualified for a 50% reduction may now find themselves only qualifying for a 25% reduction, forcing low-income employees to also pay higher premiums.

Compliance

Recently, the Social Insurance Agency launched a nationwide investigation into possible cases of corporations illegally withdrawing from the Employee Pension System, thus avoiding pension payments. According to the current pension scheme, all corporations with five or more employees should be enrolled in the Employee Pension System. However, some of these companies have been submitting paperwork with false information, stating that the company has either closed or suspended their operations. If this paperwork is approved, the company is able to avoid paying pension premiums but may still run their business without any problems or concerns. During the investigation, the Agency will re-examine any withdrawal forms, and if the information is questionable, will contact the company by phone or letter or, in some cases, even visit the company in person.

As a way to encourage employees to enroll in the pension scheme, the grace period for employees joining for the first time will be extended. Presently, those who register with the system receive credit for only one month prior to joining. Under the new system, an employee will receive credit for the period extending back to the previous July (the beginning of the pension programs fiscal year). 
In hopes of increasing the number of complying citizens, Japans Social Insurance Agency will begin mailing out pension payment records to all citizens covered by a publicly-managed pension program next year (those eligible for either the National Pension System or the Employees Pension System). Previously, the Agency only mailed records upon request. The Agency has two reasons for implementing this new policy: (1) Many workers have requested to receive payment records in order for them to verify that they have kept up with their payments. (2) The Agency expects that mailing the records to all eligible workers, regardless of whether they are currently complying or not, will increase public awareness of the pension system and the need for workers to participate. Additionally, any worker who drops out of the Employee Pension System, whether due to a loss of job or change in a job, will receive a reminder and a payment-status notification.

Moreover, workers who contribute to a pension fund may now be informed of the amount they are eligible to receive at the age of 55. This change went into effect in January 2004 in response to frustrated workers who accused the System of withholding information as to the exact pension payment amount a worker would receive. Previously, only those 58 and older could receive this information from their Social Insurance Agency.

EMPLOYMENT TRENDS

Moving Away from Lifetime Employment

Traditionally in Japan, employees began working at a company immediately after graduating from university, and stayed with that company for the entire course of their career until retirement. This long-term employment trend is referred to as lifetime employment. Under this system, employees are trained throughout their career and often rotated or transferred within their company. However, with Japans struggling economy and increasing cost of labor, some companies are beginning to move away from lifetime employment practices. In particular, the concept of lifetime employment is becoming less prevalent in Tokyo and Osaka. Instead, companies are reducing the number of regular employees in exchange for more non-regular employees, such as part-time workers. The hiring of non-regular employees provides added flexibility and easier adjustments in the number of workers a company employs. The company can also save money by reducing the overall number of hours worked by employees. Moreover, companies are not required to provide the full set of benefits to irregular workers.

Non-regular Workers

As mentioned above, the decline of the lifetime employment system has led to an increase in non-regular workers. By the end of 2003, the percentage of non-regular workforce made up over 30% of the total workers in Japan, an increase of nearly 4% since the beginning of 2002. Non-regular staff, who are often younger workers or mothers, also benefit from their part-time status, as they can choose schedules that fit their needs while still earning money to contribute towards their education or household expenses. However, as the trend towards non-regular staff continues, companies may have to offer benefits, such as education, training opportunities or social security. Additionally, companies may also need to provide more specific information on working conditions and job requirements as more and more non-regular staff enter the workforce in Japan.

Job-hoppers

In response to the changes in employment norms and the fading of lifetime employment, a new group of workers known as job-hoppers, has evolved. Opposed to seeking out a reliable company after graduating from university and staying with that company for 20 or 30 years until retirement, some Japanese are choosing to change jobs every few years.

Most job hoppers are younger workers, often people who have graduated from university within the past several years. However, job-hopping also exists among older workers, often those who have lost their job due to corporate restructuring, as companies lay off managers and high-salaried workers to save costs. Many job-hoppers justify their frequent shifting of jobs by offering a variety of skills, experiences and knowledge, as opposed to a single focus. However, according to a survey conducted by the MHLW earlier in 2004, about 30% of companies would not look favorably upon a job-hopper. These companies view job-hoppers as workers who have no sense of responsibility, no specific or developed skills, and could quit their job at any time.

Rehiring Retirees

According to the Elderly Persons Employment Security Law, employers may not set a mandatory retirement age of below 60; accordingly, nearly 90% of companies have set a retirement age of 60 years old. However, as the number of retiring employees continues to rise, companies struggle with a shortage of experienced workers and an overall lack of manpower.

In June 2004, the Japanese government made revisions to the Law Concerning Stabilization of Employment of Older Persons. Under this new revision, companies will be obliged to employ workers for an additional five years (until the age of 65), if an employee requests to work additional years. Even though this revision does not go into effect in Japan until fiscal year 2006, approximately 65% of companies have already extended their employment period for workers, though most set specific conditions. These conditions include requirements such as the employee must have met or exceeded certain company standards.

For example, Asahi Kasei Corporation introduced a system for rehiring retirees in 2001. The company cannot afford to rehire all its workers, but if an employees department has a continuing need for them, the employee may be re-employed in their former department. During the past three years, about 570 employees retired; approximately 190 requested to be rehired. Asahi Kasei was only able to rehire 71 of these former employees. The new revision will provide a company with flexibility, as a company will not be required to rehire all employees that request to continue working, but may choose only a select number for rehiring.

Toyota Motor Corporation also plans to expand their current rehiring program in the next year. Presently, Toyota rehires about 100 of its employees each year, for up to three years. However, Toyota will re-evaluate its retirement age (currently 60 years old) and pension system. Another major company in Japan, Kawasaki Heavy Industries, is planning to increase its retirement age for non-managerial workers from age 60 to 63 beginning in 2005.

Once this revision is implemented, employees should have less anxiety about their future financial situation, since they will have the option of earning a salary for an additional five years. However, the salary for a full-time job during the re-employed period may drop, even as much as 50%, in comparison to an employees pre-retirement salary.

WOMEN IN THE WORKPLACE

Overview

The number of women in the workforce is increasing in Japan, with nearly 60% of all women employed in full-time or part-time jobs. In addition, government agencies and ministries hired a record number of women last year, totalling almost 17% of all new hires. However, women in the Japanese workforce still find it difficult to achieve professional growth and promotion in a traditionally male-dominated culture. In a survey on womens participation in political and economic decision-making, Japan ranked 38th, a very low ranking for a modern and industrialized country. Moreover, in 2002, only about 50% of women were full-time employees, versus 85% of men, making it difficult for women to advance in the workplace.

Women in Management Positions

In Japan, females constitute only 9% of managerial positions, a strikingly low figure compared with 58% in the Philippines and 46% in the United States. Although the current employment system does not violate the existing Equal Employment Opportunity Law, a glass ceiling obviously exists for Japanese women in the workplace. So, to get ahead, women must think creatively and apply their entrepreneurial skills.

One way for women to advance is to offer specialized talents that companies lack. For example, those who have studied abroad and come back with foreign language skills can land prominent positions at multinational or internationally oriented firms. Their ability to effectively communicate with foreign employees and overseas partners makes them a valuable resource.

Earning an MBA is another route to advancement. Start-up firms and companies entering new markets or attempting to rebuild their business need management expertise. They hire based on talent, rather than age or gender. Additionally, some established companies have implemented programs to promote female employees after they have received an MBA.

That model has worked well for Benesse, a publisher of educational materials that leads Japan with a 30% female supervisory staff. In the 1970s, the company was based in rural Okayama prefecture and struggled to recruit qualified personnel. The decision was made to hire and promote the best talent available, and word spread among female university students. Firms marketing their products and services primarily to female customers have also realized the benefits of a female perspective. Cosmetics manufacturer Shiseido, toy maker Bandai Entertainment, and supermarket chain Ito-Yokado all employ a respectable percentage of females in their management departments.

According to a survey conducted by the MHLW in 2003, nearly 10% of the companies surveyed had management track systems for women, versus the 7% of companies in 2000. But despite the growing opportunities for women in Japan, the MHLW has recorded approximately 25 cases of violations of the Equal Opportunity Law, due to unfair treatment of women workers. Over a dozen of these cases resulted in the issuance of warnings to the violating companies, which were often accused of establishing separate career tracks for men and women. In about 200 other companies, the MHLW recommended that the employment and personnel systems be revamped, as they frequently engaged in discriminatory acts towards women, even though these acts did not violate the Equal Opportunity Law.

Childcare for Working Mothers

Faced with a rapidly declining birthrate and a new class of professional women, the Japanese government has taken steps to encourage new mothers to stay in the workforce. Modern Japanese women only have 1.29 children because the demands of raising a family and building a career are difficult to manage. One-third of Japanese women resign their positions following the birth of their first child.

To ease the burden, the government has instituted some programs of its own and is also encouraging companies to follow suit. The Law for Measures to Support the Development of the Next Generation requires companies and local governments with more than 300 employees to adopt rules to make the workplace more family-friendly.

Cash payouts are one method the government has instituted to promote starting families. For couples earning less than 7.8 million yen (US $75,000), the state will pay monthly allowances of 5,000 yen (US $50) for the first two children and 10,000 yen (US $100) for the third child through the childs third year of elementary school. Previously, the Law only covered children in preschool. Local authorities are considering offering additional incentives. Tokyos Kita Ward, for example, has extended free medical treatment to children up to 15 years old.

As part of the legislation, companies have been asked to change their attitudes towards issues such as maternity and paternity leave and childcare. The government wants fathers to be allowed five days of paternity leave. Mothers should receive extended maternity leave and be able work fewer hours if necessary. More importantly, companies have been told that women taking childcare leave should not have to worry about their job security.

Johnson & Johnson K.K., the Japanese branch of the American company, is a model company that the government would like others to emulate. A childcare allowance of 300,000 yen (US $2,900) can be used for various expenses, such as baby-sitting or daycare fees. Parents can pick up their children from daycare at reasonable hours, and mothers on maternity leave are loaned laptop computers in order to stay in touch with their office. Other Japanese companies have established onsite childcare facilities.

Recently, there have been an increased number of women taking legal action over unfair treatment at the workplace after becoming pregnant or giving birth. Presently, there is no law preventing pregnant employees from undergoing a job change or other types of unfair treatment. Additionally, the Law for Measures to Support the Development of the Next Generation does not have any provisions for violations of the Law, despite the new childcare options and benefits it provides.

As a result of the lack of protection for working mothers and pregnant women, a large number of women still continue to leave their jobs in order to give birth or raise their children. Women between the ages of 30 and 34 comprise the largest group of unemployed women. If these women did not leave their jobs to raise their children, the MHLW estimates that an additional 1 million women could join the workforce.

UNEMPLOYED YOUTH

Overview

Currently in Japan, young people between the ages of 15 and 25 have the highest unemployment rate equaling about 10%. Some of these young people simply lack skills and experience and therefore have trouble getting a job. Others, called NEET youths, or youths Not in Education, Employment or Training, do not even seek jobs, but rather choose to be unemployed. To combat these unemployment trends, the MHLW and several other companies and non-profit organizations have begun establishing programs to encourage, train and assist youths in entering the workforce.

Job Training Certification

To make youths more appealing to employers, the MHLW has created a certification program to improve the business skills of young people in Japan. The Certificate on Basic Business Skills for the Younger Generation will certify that a person has the skills necessary to perform clerical and sales work in a professional environment. The Certificate will be awarded on one of two levels: (1) on a basic level, equivalent to a high school graduate, or (2) on a practical level, equivalent to a college graduate. Courses for the Certification may be taken at designated vocational schools or job training facilities.

The Certification program will focus on five main areas: (1) communication and interpersonal skills, (2) professionalism and sense of responsibility, (3) academic abilities such as literacy and mathematics, (4) business etiquette and manners, and (5) certification in a specific area, such as accounting or a foreign language. In order to be rewarded Certification, participants must pass the required courses and competency exams. Certificate holders should have an easier time securing a new job, as the Certificate clearly defines the skills, abilities and job training experience of the applicant.

NEET Youths

According to the MHLW, the number of registered NEET youths has exceeded 500,000 in Japan. This is an increase of nearly 10% from 2003. NEET youths are generally classified into four categories, (1) youths who withdraw from society, (2) youths who spend time with friends after graduating or dropping out of school, (3) university graduates who cannot decide on a career path, and (4) youths who previously had a full-time job, but left their job due to a lack of confidence. Additionally, since Japanese parents tend to be very protective of their children, most NEET youths are financially supported by their parents, so the NEETs have little need to find a job or become independent.

A major concern of the government is the strain that these unemployed youths put on the countrys current and future economies, since NEET youths do not pay taxes, contribute to the national social security system, or have benefits or retirement plans. In order to address this problem, a number of Career Centers, in collaboration with non-profit organizations, have opened up in major cities in Japan. These Centers provide information about different types of jobs or simple part-time jobs at local businesses and encourage NEET youths to think about their career paths. For example, Sodateage Net, a non-profit organization based in Tokyo, established a program in June 2004 to train and encourage employment among NEETs. In another case, Young Job Spot Yokohama opened in July 2003 and had over 7,000 visitors in its first year.

Job Training Camps

In a proposed plan issued in September 2004, the MHLW will set up around 40 camps to provide job training for youths. Within the first five years of the program, the MHLW intends to train around 20,000 candidates, as well as provide training for many businesses and organizations. Participants of the program will spend three weeks training with about 20 other candidates and will be taught ethics, self-discipline and work etiquette. The program will also provide support for finding a job.

SALARIES

Update: Merit vs. Seniority Pay

In Japan, the typical wage system, which bases remuneration on the number of years worked, is the seniority-based wage system. This system first appeared in the 1920s and was created to raise wages along with age and years of service (and the cost of living). However, in response to the slow economy and pressure to reduce company spending, some companies in Japan have adopted a performance-based pay system over the past several years. A performance- or merit-based system allows companies to pay wages based on productivity and quality of work, rather than age and seniority.

Despite this trend towards merit-based pay, some companies are reverting back to the seniority-based system, as companies struggle to effectively assess an employees work progress and level of productivity. Among the Japanese companies that introduced performance-based pay systems, over 75% experienced difficulties managing them. At Tokai Rubber in Komaki, Japan, the performance-based system was introduced in 1999. But, as its employees struggled to perform using the plants old machinery, the company decided to revert back to the seniority-based wage system.

Companies that had trouble assessing workers performance often lacked a performance rating system; at other companies, managers lacked the training necessary to evaluate an employees performance. Thus, management teams had difficulty determining the appropriate wages for an employee. Moreover, Japanese companies were concerned about employee morale, employees feeling a lack of job security, and company loyalty. According to a survey conducted by the Japan Institute for Labor Policy and Training in January 2004, about 60% of companies surveyed had switched over to a merit-based pay system. However, over 30% of the employees at these companies reported that the atmosphere in their workplace had become less favorable. Some employees also displayed unhappiness about the negative changes in their pay after the implementation of the merit-based system.

Wages and Bonuses

In Japan, companies pay employees a wage composition, which includes an employees base pay, plus additional compensation such as a housing or commuting allowance. Many companies also pay a bonus twice a year in addition to the wage composition. Typically, employees receive one bonus in the summer and the second bonus in December. Almost all companies provide a bonus to employees even though it is not required by law.

OVERTIME

According to the Labor Standards Law, the standard workweek in Japan is 40 hours long. Any workers who put in overtime may work an additional 360 hours per year, though there are specific weekly and monthly limitations. Employees may only work an extra 15 hours per week, 45 hours per month, or 120 hours per three-month period. The overtime pay varies depending on when the work is performed; a 35% premium is paid for overtime during holidays, otherwise the premium is 25%. However, night-shift workers receive a 60% premium on holidays, a 50% premium all other days.

Full-time Workers

Issues for Full-time Workers

Even though the total number of monthly working hours has decreased over the past few years, more and more workers are complaining of working overtime without receiving compensation. Some companies simply fail to provide overtime pay to their workers, while others find ways to exempt themselves from paying the overtime wages. According to the Labor Standards Law, employees should only work 40 hours per week, unless an overtime agreement has been previously arranged. Any employees who put in overtime hours should receive a minimum of 25% in extra wages. Violators of the Law can be fined a maximum of 300,000 yen (US $2,900) or face up to six months in prison. However, according to inspections conducted by the MHLW last year, approximately 18,000 businesses, or about 15% of all businesses inspected, failed to pay workers for overtime. This figure is an increase of about 1,500 from 2002, and the highest rate in the past three decades.

For instance, in one smaller company in Japan, about a dozen union members were persuaded to become managers, even though the company only had about 100 employees. The reason for this move was to reduce the amount of overtime wages to be paid out, as management-level workers can only receive half the amount of overtime wages that a union member can receive. In addition, the Japan Association of Labor Lawyers has reported an increased number of calls concerning long working hours. The Association received over 700 calls just in the month of June 2004. In one case, a worker stated that his working hours are from 7:00AM to 11:00PM, but he only receives one hour of overtime per day; he is not able to take any paid holidays.

New Measures Taken by the MHLW

To combat the lack of overtime wages paid to employees, the MHLW is taking various measures. In addition to daytime inspections, the MHLW now conducts unannounced nighttime inspections of companies, in hopes of cracking down on excessive overtime. When the MHLW receives complaints from a particular company, it will map out a detailed inspection plan, including checking on claims for labor accident compensation. In the case where a claim has been filed for a death from overwork, the MHLW may take steps to improve the companys working conditions even before the claim is approved, in hopes of protecting other employees at the company from future incidents or problems.

The MHLW is considering a proposal to change the Industrial Safety and Health Law, which would place more responsibility on a company for overworked employees. Specifically, the revision calls for all employees who work more than 100 hours of overtime per month, or employees who work 80 hours of overtime a month for a two to six month period, to be interviewed and given a physical by a doctor. In addition to the employees overall health, the doctor will also check for depression. If a doctor determines that an employee is overworked or in declining health due to overwork, the doctor may recommend to the employer that the employee work less hours or take a paid holiday.

Actions Taken by Employees

Some employees have begun to take action against their current or former employer, requesting that they be paid the overtime wages their employer failed to provide. In the past, workers were reluctant to ask for their overtime wages, as they were worried they might lose their jobs. Now, some workers are making this request, but only after losing their job due to company restructuring or budget cuts. For instance, a driver for a delivery company who lost his job later demanded that the company pay him for his overtime hours he worked over the past two years. After consulting a lawyer, the driver was able to receive his lost overtime, totaling 800,000 yen (US $7,700).

In a second case, an employee died from excessive overwork, which had lasted several years. The few months prior to his death, he was working an excess of 200 hours of overtime per month. His wife applied for work-related accident compensation, and the local Labor Standards Inspection Office recognized the cause of death as overwork and subsequently granted the compensation.

Part-time Workers

New Laws for Overtime Benefits

In an effort to improve the balance between a part-time workers work life and personal life, the MHLW is gearing up to submit a bill to the Diet in 2005, calling for the revision the Labor Standards Law. In accordance with the current Labor Standards Law, employers must pay full-time employees an additional 25-50% in overtime pay to those who work more than 40 hours per week. However, the Law does not currently apply to part-time workers, and most companies only pay them overtime wages equivalent to their regular hourly wages. The proposed amendment requests that the current Law be applicable to part-time workers as well. Moreover, the MHLW hopes to expand the scope of the Law, so all hours worked exceeding the number specified in a part-time workers contract will be eligible for overtime pay. This is a key element to the revised changes, as most part-time workers do not work 40 hours or more per week.

Opposition to Overtime Benefits

The MHLW expects a number of protests in response to the proposed change of the Labor Standards Law. Businesses that employ a large number of part-time workers, such as retailers and restaurants, will most likely object to the Law, as it would result in an increase in the business expenses. However, the Law will also call for a number of measures to ensure clarity and compliance among both employers and part-time employees. For instance, the MHLW will call for a review of the current minimum wage levels, which vary by industry, and possibly lower the levels as a result of the proposed overtime wage increases. Second, during the hiring process, employers will be asked to state whether the new hire will be required to work overtime and if so, the number of hours that will be required. Employers will have to follow a specific process when requesting that a part-time employee put in overtime. In some cases where workers may prefer to put in long stretches of time, such as researchers, the MHLW has called for a special system to allow part-time employees to adjust their daily working hours accordingly, without worrying about a daily working hour limit. Finally, the Ministry will look for ways for businesses to end the differences in treatment between part-time employees and permanent employees.

EMPLOYEE BENEFITS

Social Insurance Premium

In Japan, employees pay 22.16% towards social insurance premiums, similar to the rate paid by employees in the U.S. The breakdown of this premium is as follows: 7.3% for medical insurance, 13.58% for pension insurance, 1.15% for unemployment insurance.

Paid Vacation

Employees who have a 80% or higher attendance rate and have been with a company for a minimum of six months will receive ten days of leave per year. Once an employee has served with a company for six years and six months, the annual paid vacation increases to twenty days per year. However, most Japanese employees only use about 50% of their vacation days each year. There are many reasons for employees not using their paid vacation, though many claim it is due to their busy work schedule.

Flexible Work Schedules

In addition to the typical 40 hour work week and overtime hours, the Labor Standards Law also provides for several other work scheduling systems for employees. First, employees may use a weekly or monthly variation system in which the weekly working hours will be increased for a specified number of weeks or months. All the other weeks or months will require the employee to work fewer hours than usual. This system is common for workers in industries where the workload varies during different months or seasons of the year.

A second option for more flexibility in working hours is the Flextime system. This system runs on a one-month basis and allows employees to enter and leave the workplace as they choose, depending on the number of customers or workload. Flextime is most commonly used by employees who work in restaurants, retail stores or smaller hotels.

The defacto working hour system allows an employee to count their working hours from the time they enter the working field. This system applied to employees in industries such as mining, research and sales, where the employee does not necessarily have a traditional workplace or office.

Stock Options

Japanese companies are beginning to offer a more diverse selection of company benefits. In addition to better childcare options and services, and the stronger compliance with overtime payments, some companies (typically larger companies with over 1,000 employees) are also starting to offer stock options as an incentive. Usually, employees of these companies are allowed to purchase stock at a fixed price.

RECRUITING TRENDS

Overview

In Japan, recruitment strategies vary depending on the type and size of a company. Most large Japanese companies rely on university recruiting, which offer lifetime employment and on-the-job training. Smaller Japanese companies, which cannot always offer the high wages and stability of a large company, often hire more mid-career workers. Foreign companies tend to rely on recruiting methods such as newspaper advertisements in Japanese and English, word of mouth and employment agencies when seeking out new graduates, or may recruit more mid-career hires or temporary staff.

University Recruiting

Many new university graduates still look to large Japanese companies for a job. Larger companies offer stable management, higher wages and good working conditions. Additionally, it is very prestigious to work for a large company in Japan.

When applying to a large company, a soon-to-be graduate will request information and materials from a company during his/her junior or senior year at university. After attending information sessions, a student will take the companys written exam and then proceed on to an interview. A company will normally make a decision after two or three interviews.

Recently, with the increased popularity of the Internet in Japan, many students have been searching and applying for jobs online. Many companies now offer information online, and students can often register for company events and seminars by email. Now, over 50% of large companies use the Internet for recruiting, though many small and medium size companies have yet to move their recruiting services online.

Mid-Career Hiring

Recently, some companies have begun seeking mid-career hires in order to fill positions left by newly retired persons. Job experience, knowledge and skills are most important to employers when recruiting a mid-career hire. In addition, they also consider factors such as ambition, stamina and health. Mid-career hires are usually recruited by posting an advertisement in a newspaper or on a flier, through a public employment office or through personal connections. As more and more Japanese employees reach retirement age in the upcoming years, mid-career hiring will increase in order to replace the lost experience and skills of the retirees.

CONCLUSION

Japan continues to experience changing norms in human resources while in the midst of a struggling economy, with a discrepancy of jobs and available workers for those jobs, and a failing pension system. While some companies still use traditional employment practices such as lifetime employment and seniority pay, due to the sluggish economy, many companies are moving away from these practices in order to cut their number of employees and reduce expenses. Foreign companies currently in Japan or looking to expand their business into Japan should take these new developments into consideration in order to successfully recruit or retain staff.

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