Rends in Human Resources Practices in Japan

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rends in Human Resources Practices in

Japan

Trends in Human Resources Practices in JapanBy Ames GrossFall 1998Published in SHRM International Focus, a publication of the Society for Human ResourcesManagement Global Forum

Executive Summary

Japan 's stagnant economy has greatly affected its labor market -- in June 1998, shrinking GDPgrowth and low business confidence led unemployment to a new high of 4.1%. As a result, some

major Japanese companies are turning away from well-established traditions such as lifetimeemployment and seniority, choosing instead to downsize and embrace merit-based systems tocompete in an increasingly global business environment. Employee expectations of the idealworking environment are changing, and recent deregulation initiatives have led to importantchanges in working-hour flexibility and equal employment opportunity. This report covers majorissues in Japan's changing labor market, and gives guidance to foreign companies looking tosuccessfully recruit and hire staff for their Japanese operations.

Update on the Japanese Economy

Although Japan's economy boomed in the 1980s, the country has found itself in deep recessionsince the early 1990s. Centralized control of industry, excessive bank credit during the late 1980sand the government's fiscal contraction (particularly in social spending) to cover the resultingexcesses of the stock and real estate markets caused Japan's financial bubble to burst in 1989 and1990. In late 1998, Japan still suffers from an inefficient financial sector and an entrenchedbureaucracy; consumer demand is low, banks are burdened with over $500 billion in bad loans,and business confidence is eroding. Japans GDP shrank 5.3% during the first quarter of 1998

and unemployment reached a new high of 4.1% in April 1998.

Despite Japans current economic difficulties, many believe that Japan has reached a turning

point in its economic policy. Efforts to reform the sickly banking system are underway, and acomprehensive deregulation program has been introduced over the past year. Japan hasembarked on a far-reaching deregulation program that covers energy, telecommunications,housing, finance, and medical devices and pharmaceuticals. For example, under the newderegulation initiative, Japan is speeding up customs clearance processing by introducing newpre-arrival and clearance-upon-arrival procedures, and installing a new computerized system thatlinks the Customs Agency with other agencies. In addition, the Japanese government passed anumber of expansionary policies, including $43 billion in tax cuts in April 1998, to jump-start


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the economy. Japan has further made some changes in its banking structure; many banks areexpanding into areas like asset management in order to recoup from unprofitable lending, andseveral regional banks have merged to cut the scale of Japan's banking problems.

Despite its current problems, Japan's economic future will improve. Japan still possesses

the fundamentals for strong economic recovery and growth in strong manufacturingcapacity, Human resource management trends in the USA -

Challenges in the midst of prosperity

Document Information:

Title: Human resource management trends in the USA - Challenges in the midst of prosperity

Author(s): Alison M. Konrad, (Fox School of Business and Management, Temple University,Philadelphia, Pennsylvania, USA),John Deckop, (Fox School of Business and Management,

Temple University, Philadelphia, Pennsylvania, USA)

Citation: Alison M. Konrad, John Deckop, (2001) "Human resource management trends in the USA -

Challenges in the midst of prosperity", International Journal of Manpower, Vol. 22 Iss: 3,

pp.269 278

Keywords:Human resource management,Trends,USA

Article

type: Case study

DOI: 10.1108/01437720110398374(Permanent URL)

Publisher: MCB UP Ltd

Abstract: Productivity gains powered by technological innovation have fueled expansion of the US

economy during the 1990s. US economic prosperity has led to labor shortages, which are

pushing organizations to engage in creative recruitment and retention practices and to

employ workers from non-traditional sources, leading to a more diverse workforce. HR

professionals are realizing that they need to update their technological skills and developsystems for managing more virtual organizations. Human resource (HR) is also trying to

become more of a strategic partner in firms. HR has the potential to create competitive

advantage for firms by successfully combining a reputation as being an employer of choice

with a high performance work system and an effective set of incentives.
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advanced technology, heavy investments in education and a disciplined workforce. Savings ratesremain high (the Japanese save on average approximately 30% of their after-tax income) andJapan still maintains $207 billion in foreign exchange reserves, equal to approximately 60% of

all savings held worldwide. While unemployment and slow growth will continue in the short run,continued reforms, especially in deregulation, will stimulate growth and import demand in Japan.

Seniority System

The emphasis placed on seniority in the workplace is one unique characteristic of the Japaneselabor market. Japan's strong belief in authority and the chain of command has led to a well-established hierarchy in Japanese companies, where senior staff members are accorded thegreatest respect and deference. In general, competition for promotions and greater responsibility

is intense among employees, but such competitiveness rarely oversteps the traditional rules ofrespect for more senior employees governing the workplace. For example, the Japanese are veryuncomfortable when a younger or junior employee is promoted over someone older, even if theyounger person has greater knowledge or experience in a specific area. In most cases in which ayounger person of unusual ability is "promoted" over the heads of more senior employees,employers often refrain from increasing the individual's title or salary until he or she has gainedmore seniority and age.

Implications of the Seniority System

The Japanese corporate hierarchy, along with a strong tradition of group consensus, has had asignificant impact on the skills that employees acquire. For example, mid-career managers (whoare usually between the ages of 40 and 50) are typically only allowed to make decisions onroutine matters, and often make these decisions as part of a large group. Mid-level managers alsoact as mediators between their subordinates and superiors. As a result, 40-year-old Japanesemanagers do not have as much decision-making experience as Western managers of similar age,and will often be uncomfortable making important decisions (especially in the course ofnegotiations) without the approval of their superiors. There are advantages and disadvantages tothis system of consensus-based decision making. It takes much longer for a decision to be madein Japanese companies -- one Japanese management association recently reported that Japanese

managers spend up to 40% of their time in conferences and meetings. However, by involvingemployees from all levels in the decision-making process, decisions often prove easier toimplement and Japanese companies build company loyalty and strong employee relationships inthe process.

Recent Changes


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As with lifetime employment, however, the emphasis on seniority is gradually decreasing.Japan's stagnant economy and new deregulation efforts are increasing demand for youngeremployees, who are typically more energetic, more in tune with modern communicationstechnology and current global business practices, and can shift functional areas with lessdifficulty. A number of mid-to-senior-level employees have already been released since the

recession first set in around the early 1990s, including a significant number of 50-plus-year-oldsenior managers, who were pushed towards an early retirement. This course of action hashelped Japanese companies become more competitive since these companies no longer need topay the higher salaries associated with older workers. Instead, these companies can channel thoseextra funds to pay younger, hopefully more productive and less costly employees. In addition,large Japanese companies like Fujitsu, Mitsubishi, Matsushita, and Toyota have recently begunpromoting ability and performance over age and title. Although it will probably take a long timeto displace Japan's well-established seniority system, Japan's increasingly competitive market isslowly forcing change among Japanese companies.

Unemployment Trends

Japan 's economic slowdown has had major effects on the country's labor market. Financiallystrapped companies are being pressured to cut or restructure personnel, causing unemploymentto reach a new high of 4.1%. In June 1998, approximately 1.05 million Japanese receivedunemployment benefits, the first time this monthly figure has topped 1 million in 22 years. Ifzero economic growth continues, some economists predict that the unemployment rate will reach5% by the year 2000.

Although a rising unemployment rate is problematic, the effects of rising unemployment may not

be entirely negative. To date, Japan has accumulated a large number of "surplus" workers whohave been able to keep their jobs through societal conventions such as lifetime employment (seesection IV). Thus, the current employment trend also reflects growing efforts by Japanesecompanies to raise productivity and regain earning power. Furthermore, the currentunemployment figures still appear quite low compared to those in the West. For example, theU.S., Germany and Canada maintain unemployment rates of approximately 5.4%, 10.8%, and9.7% respectively.

Figure 1. Unemployment Rates in Japan, 1988-1998


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Lifetime Employment

To date, the vast majority of Japanese companies have followed a lifetime employment systemwhere the company and its newly hired employees implicitly agree on a lifetime workingcontract. Although there is no legal statute enforcing this practice, courts generally consider thisconvention when deciding employment cases. Depending on the position, companies will recruittheir employees from high school or university. For example, companies will pursue universitygraduates for managerial and technical positions. Every three to five years, employees receivenew position assignments in order to familiarize the employee with the company's operations andexpand the employee's range of capabilities. Employees typically retire between the ages of 55

and 65, at which time they receive a lump-sum retirement payment from the company.Individuals on the company's board of directors are often allowed to serve until age 65.

Advantages to Lifetime Employment

Although lifetime employment had some negative effects, it has provided Japanese companieswith workforce security. Guaranteed employment and a secure salary served to promoteemployee loyalty, thus protecting the significant investment companies pour into employeetraining. Throughout the course of employment, employees were also able to establish strongrelationships with their colleagues and superiors, reinforcing a sense of good management and

harmony within the company. Lastly, workforce security and lack of employee turnover helpedto ensure the confidentiality of company information transmitted to an employee.

Figure 2. Composition of Employees by Duration of Work

for a Particular Firm


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Recent Changes in the Lifetime Employment System

Historically, if an employee's performance level was poor, that individual was shifted to an"easier" position at an affiliate, subsidiary, or related company. Although the employee's salarywould probably be lower, his or her title might be improved as a consolation since titles areconsidered important in Japan. As a result, employee loyalty would not be compromised, and the

original company could avoid having to pay the lump-sum retirement amount until the employeeretired. This process, known as shukko, was the most common way Japanese conglomeratesrelieved themselves of surplus or inefficient employees. Until recently, outplacement andoutright firing of employees was virtually unknown.

With the current recession, however, some companies have gone out of business and others,particularly large conglomerates (keiretsu), have been forced to downsize. Some Japanese arebeing forced to change jobs, even in mid-career, and for the first time some traditional Westernoutplacement firms have appeared in Japan to help with corporate downsizing. While the vastmajority of Japanese companies still hire their employees on lifetime contracts, a growingnumber of companies have begun to emulate Western-style hiring practices in order to improve

efficiency.

With the increased efforts to lower personnel costs, more and more companies are hiring contractand dispatched workers to complete tasks. According to the Ministry of Labor's 1997 IndustrialLabor Situation Survey, which queried 4,500 private firms with 30 or more regular employees,50% of respondents said they commissioned work to other firms, and 31% pointed to reductionin personnel costs as a major reason for contracting out work. In fiscal year 1997, firms that mostactively hired dispatched workers reported a 30-40% increase in their profits, many of them


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recording their "largest profits ever." Over the next few months, hourly wages for dispatchedworkers are expected to rise by 2-3%, and firms contracting out dispatched workers are expectedto increase their charges to client companies by an average of 3-5% to cover growing socialinsurance premiums.

Figure 3. Composition of Non-Regular Employees in Japan, 1996 (%)

Wages and Compensation

Current Salary System

In Japan, employees usually receive their salaries in 14 equal parts, 12 of which are paid monthlyand the other two in June. Additional bonuses are paid to employees in the form of extrapayments in early December. On the other hand, if the company has not done well, the employee


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is new, or the employee has not met performance standards in the past six months, the Decemberbonus would be canceled and the regular 14-payment plan would apply. Although this practicevaries from one company to another, it is still quite common in Japan and encourages employeesto save money for such things such as large consumer purchases, children's education, or buyinga house. Foreign employees may be paid on the Western system of 12 months' pay plus a bonus,

which is what they are used to at "home." When discussing salary with a potential employee inJapan, it is useful to know:

For all applicants, the total annual salary should be the main issue, not the incrementalpayments. Bonuses can vary or not be paid based upon company performance(particularly in the last six months) and/or the employee's starting date.

As mentioned above, the seniority system in Japan still dominates the pay scale. To alarge extent, level and experience are valued more than special skills or education,although some major companies are trying to reverse this trend slowly. Most employees,therefore, will not ask for salaries that are significantly higher than others withcomparable responsibilities. In some cases, Japanese companies may pay a higher base

salary to a foreigner depending on the foreigner, his or her expertise, and the job. For anoverview of the breakdown of the salary structure in Japan, see Figure 4. In general, Japanese companies do not tailor individual benefits and compensation

packages to specific employee needs. New employees typically join a company in thespring as a "class," and are initially given the same pay and benefits. While there isvariation from industry to industry, companies within the same industry usually payapproximately the same annual salary to new employees who are university graduates.Bonuses may vary from one employee to another, but such bonus payments are based onperformance and cannot be determined in advance.

Figure 4. 1997 Salary Structure in Japan


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Source: Pacific Bridge, Inc.

Recent Changes in Salary Structure

From the 1980s to the early 1990s, wages in Japan steadily increased. This growth has stagnated,however, since the recession began. Japan's average wage hike for workers of major corporationssaw a record-low rise of approximately 2.5% in fiscal 1996-97, compared to a 3.1% gain in1994-95. Wage growth has slowed for several reasons. First, the Japanese economy is flat.

Second, the growth of temporary and part-time workers (who are paid much less than regularemployees) has contributed to some of this stagnation. Third, the Asian financial crisis is alsoresponsible for flattening wage growth; foreign companies employing local Japanese will findthat the rapid depreciation in the yen over the past year has cut real wage costs for theseemployees by as much as 20%.

Figure 5. Average Monthly Cash Earnings per Regular Employee by Industry, 1985-

1996(Establishments with 30 or more employees)


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Changes in the Salary System

Some large Japanese corporations are now adopting the Western-based annual salary system inplace of the 14-payment convention. A 1998 Central Labor Committee survey queriedapproximately 360 large Japanese companies that had paid-in capital of more than 500 millionand more than 1,000 employees, and found that close to 30% have already introduced (or plan to

introduce) Western-based annual salary systems for managerial employees. Moreover,manufacturing companies represent approximately 66% of the firms that have alreadyestablished annual salary systems, and many have also taken major steps towards eliminating theseniority-based pay system.

Benefits: Health Care

All employees in Japan are covered under one of three health care plans: National HealthInsurance (NHI), Employer's Health Plan, or Private Health Insurance.

National Health Insurance

Japan 's local governments administer NHI (kokumin kenko hoken). Individuals who do notreceive health care benefits from their company (for example, if one works for a company whichemploys fewer than five employees) or who are self-employed can obtain coverage under thisprogram if they do not already belong to another private health plan. Under NHI, the individualmust pay approximately 30% of clinic or hospital costs. The plan also covers approximately 70%


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of medical, dental and prescription drugs. The annual premium for NHI participation is based onthe previous year's income and individual residents' tax payments, with a maximum monthlypayment of 63,000 (approximately $450). Within the 23 Tokyo wards, for example, the annualpremium is calculated as follows:

(Residents' Tax)(1.07) + (16,800)(Number of family members)

Employer's Health Plan

Most employers enroll their workers in the Employer's Health Plan (shakai hoken). Under thissystem, insured employees pay approximately 10% of the cost for medical services, dentaltreatment, and medicines, while their dependents are charged approximately 30% of the cost ofoutpatient services and 20% of inpatient or hospitalization service costs.

Under this plan, the employer and employee contribute each contribute 50% of the monthlypremium, with the employee's share deducted from payroll. The employee's monthly premium is

calculated as follows:

Monthly premium = (Basic monthly salary)(85/1000)

As with NHI, the maximum payment per month is 63,000 ($450).

Private Health Insurance

In principle, the Ministry of Health and Welfare mandates that anyone residing in Japan mustbelong to either the national health plan or company health insurance supervised by the

government. However, many individuals, particularly foreign employees, are allowed to "quit"their national or corporate plans and obtain private health insurance. Private insurance isgenerally more flexible and provides more options than current government plans, and a growingnumber of foreign companies are offering private insurance programs in Japan throughcompanies' central insurance policies. Foreign employees are especially drawn to privateinsurance because they can avoid having to complete the numerous legal documents necessaryfor coverage under local health insurance systems. Expatriates should be aware, however, thatmany private plans do not offer coverage in their home country as part of their basic service, andthus cannot cover the employee while he or she is away from Japan. Also, while privateinsurance holders are increasing rapidly in the urban areas of Japan (like Tokyo), hospitals inrural Japan are not yet used to private insurance schemes. Thus, certain procedures like obtaining

reimbursement can be very difficult for privately insured workers in rural areas.

Employee Benefits: Housing, Transportation, and Sick Leave

Benefits can typically be divided into housing, transportation, special family allowances,vacation, sick leave, health benefits, and pension. A detailed listing of all employee benefits is


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usually found in a company's work rules or personnel handbook, which must be submitted to thegovernment by all employers.

Housing and Transportation

Single employees may be offered dormitory housing and may receive travel allowances forcommuting to and from the workplace. Special family allowances, rental benefits, business tripexpenses, and allowances for relocation may also be granted depending on the company and theindividual. Most of the time, the size of the benefits package received by an employee dependson his or her title and position in the company. In some cases, the amount of benefits may alsodepend upon whether the employee has an ownership position in the company.

Vacation and Sick Leave

Vacation time accorded to employees in Japan depends upon the length of time they have

worked with their company. After a new employee's six-month probation is up, he or she mayaccumulate up to 10 days of paid vacation for that year. For every year thereafter, additional paidvacation is accrued up to a ceiling of 20 days. In general, a limited amount of vacation time mayalso be carried over from one year to another, but after the ceiling is reached, employees mustforfeit additional leave if not used within the year. Sick leave policies vary from one company toanother. Often, companies will require a doctor's report if an employee uses more than three daysof sick leave.

Employee Benefits: Pensions

Current Pension System

Currently, companies choose between two different pension plans: the National Pension Systemand the Employee's Pension Program.

National Pension System

The National Pension System (kokumin nenkin) was introduced in 1961, and is regulated by theNational Pension Law. This system has provided pension coverage for all citizens, and has cometo be a major source of financial support for the country's elderly. All employees between the

ages of 20 and 59 are eligible to participate in this system. Benefits can be paid after theemployee turns 59 andif he or she has contributed to the fund for at least 25 years. As of April 1,1995, the monthly premium for participation by an employee is 11,700 (about $83). A premiumtax on participants and a government subsidy have been the major sources of financing for thispension system.

Employee's Pension Program


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The Employee's Pension Program (kosei nenkin) is regulated by the Employee Pension InsuranceLaw. This pension plan must cover all individuals under 65 whose employers participate in theprogram. Benefits and contributions are decided by standard remuneration; monthly standardremuneration (MSR) comes in approximately 30 types and ranges between 92,000 (about $660)and 590,000 (about $4,200). A simplified calculation of the annual pension benefit is as

follows:

(Average MSR for entire career)(7.5/1,000)(Number of months as a contributor)

In this program, the employer and employee each contribute 50%, and the employee's share isdeducted from the company payroll each month. The monthly contribution for men is calculatedby multiplying (145/1,000) and for women by multiplying (141.5/1,000).

Recent Changes in the Pension System

Japan 's pension market, currently the largest in Asia and second largest in the world, is expectedto increase its holdings of funded pension assets from about $2 trillion to $4 trillion within thenext ten years. However, socioeconomic changes in Japan are increasing the burden on thepension system. Japan's aging population, stagnant economic growth, and increased participationof women in the workforce have initiated serious discussions within the government aboutrevamping the pension system (particularly the Employee's Pension Program) to accommodatefuture demand.

Figure 6. Labor Force Projection in Japan by Age

Japan 's Ministry of Health and Welfare (MHW) also plans to revise the Employee's PensionProgram in 1999, and has identified five options for doing so in its 1998 White Paper onPensions:


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Keep the premium for maintaining benefits currently available (currently 34.3% ofmonthly income);

Keep the Employee's Pension Plan premium to within 30% of monthly income; Keep the Employee's Pension Plan premium to within 20% of annual income (which

includes bonuses);

Maintain the premium for the Employee's Pension Plan at the current level (20% ofmonthly income); or Abolish (i.e. privatize) the Employee's Pension Plan.

The debate on these options has centered on three major concerns. The first major concern is themanner in which the pension system should be restructured in order to amass more revenue andcreate a better balance between the contributions given and benefits received for each generation.Currently, the MHW can choose to implement an assessment system, an accumulation system, orsome combination of the two.

Second, there is a growing debate over how to adjust the level at which pension benefits and

contributions are calculated. The Employee's Pension Plan is still premised upon the male wageearner as the only working member of the household; it thus reduces the pension-earningcapacity of female members of the household. In the latter case, for example, a husband whosewife has earned five years' salary receives a pension of 239,000 (about $1,700), only 8,000($57) more than he would receive were his wife not to work at all. A 1998 MHW survey recentlyreported that over 70% of Japanese familiar with the national corporate pension plan revisionssupport monthly benefit reductions of 10-20% and monthly pension premiums between 26-30%.

The third issue being debated is whether premiums should be collected monthly or annually(including bonuses), and whether part-time and full-time housewives should be required tocontribute to the public pension system. Currently, part-time employees (those who work less

than three-quarters of the hours worked by regular employees), workers earning less than 1.3million (about $9,300) a year, and full-time housewives are exempt from paying pensionpremiums -- although these groups are still eligible for receiving basic pension in old age. TheMHW is studying ways that this exemption can be reduced for part-time workers andhousewives in order to lessen the growing burden on the pension system.

Recruiting Employees in Japan

Recruitment strategies vary according to the size and type of company in Japan. Under thetradition of lifetime employment, most Japanese companies hire a new class of graduates fromcolleges and universities each year, and provide on-the-job training to their employersthroughout their working lives. Most large Japanese companies (those having more than 100employees) are able to recruit their new class of managers successfully from these institutions.Smaller companies, however, must rely on other recruitment methods as well. Foreigncompanies also face some difficulty in hiring new employees from universities, which involves


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breaking through the strong company-university ties in Japan. Most foreign companies thereforerely on temporary staffing, mid-career hiring, overseas Japanese returnees and expatriates to filltheir positions. Common recruitment methods for foreign companies include word of mouth,employment agencies, newspaper ads in English and Japanese (in such publications as The JapanTimes, for example) and executive search firms.

University Recruiting

As mentioned above, university recruiting is still by far the most popular method for largeJapanese companies to hire new professionals, and there is a great deal of prestige thataccompanies being hired by a major Japanese firm. As a result, university recruiting is extremelycompetitive among companies that are especially intent on hiring graduates with engineering andother technical degrees.

Due to the longstanding popularity of hiring university graduates, many Japanese companieshave been able to establish a large alumni base and thus maximize their exposure on campuses.

These companies develop strong relationships with the faculty, alumni programs, and universitymanagers; many also make charitable cash and in-kind donations. As a result, strong connectionsare developed between these institutions and company representatives, whose sole job is torecruit candidates from universities and maintain their contacts there. Foreign companies, manyof who have little or only recent exposure in Japan, are therefore at a marked disadvantage whenit comes to university recruiting.

The cycle of recruiting begins in the student's junior year. Interested students typically sendapproximately 100 postcards to various companies to inquire about employment; some alsocontact companies directly. Many companies sponsor forums (usually held April throughAugust) that are heavily attended by university prospects. The formal recruiting cycle begins in

April through contacts with professors, and the formal selection process takes place between Julyand November. Successful recruits begin their careers the following April (the academic year inJapan begins in April and ends in March). Japan enacted a law that regulates all recruitingpractices; it prohibits companies from recruiting on campus before July 1 st and sets standardsfor other recruiting-related activities. However, this law is not enforced, and many companiesignore it.

Due to the fierce competition among companies and students for employment, some companieshave recently begun to cancel job offers at the last minute if a better candidate accepts. Manystudents have responded by accumulating as many offers as possible and then waiting until thelast minute to notify the companies of their decision. Foreign companies should therefore becareful about making an offer too early; the sooner an offer is made, the more companies mustworry about whether the student will change his or her mind. While employment contracts areenforceable in Japan, it is possible for a student to successfully cancel such a contract.

Mid-Career Hiring

Despite changing hiring practices, it is still very difficult to hire mid-career professionals inJapan. A well-rooted stigma still exists against changing jobs (chuto saiyo) in Japan, and


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employees generally switch companies only when there is a significant problem. Economicstagnation and international competition are changing this practice, however, and a slow butincreasing number of individuals are beginning to switch jobs mid-career. There are someadvantages to this trend, since mid-career recruiting involves a greater emphasis on a candidate'sabilities and experience than traditional considerations (such as seniority). Also, by hiring mid-

career candidates, companies do not have to invest as much in training as they do for newgraduates.

Given that university recruiting is so difficult, foreign companies will find that mid-career hiringis often the only way to "hit the ground running." This is especially true for start-up companies,who do not have much capital to invest in training. To lure hesitant Japanese middle managersthat are often fearful of losing seniority, foreign companies can offer a substantial salary increasewith excellent benefits and/or a prestigious title. As in other countries, personal contacts,networking, advertising and executive search firms are always helpful in canvassing the pool ofJapanese mid-career candidates.

Temporary Staffing

Under current law, employers can hire temporary staff for up to one year, after which newsingle-year contracts can be made. Companies typically hire such staff in Japan from temporaryhelp agencies, which charge a fee to the hiring company if it decides to hire the temporaryemployee on a permanent basis after the trial period is over. Several such firms cater to foreigncompanies in Japan and provide English-speaking candidates.

Hiring Overseas Japanese: Japanese Returnees

Given the traditional constraints on employment in Japan, foreign companies are also

increasingly turning to Japanese returnees -- that is, Japanese nationals studying and/or livingabroad who either want to return to Japan or have already returned. These individuals, many ofwhom are in their late 20s or early to mid-30s, are often well trained and highly motivated. Theyhave Japanese roots and some Western business and/or cultural experience, and many(particularly women) believe that they will have a difficult time readjusting to the highlyformalized Japanese way of doing business. A Western company may therefore offer a welcomealternative to the Japanese corporate environment.

Returnees' international exposure andJapanese language and cultural skills offer a dynamicadvantage for foreign companies. Not only do foreign companies avoid having to train theseindividuals in international business practices, but returnees offer a better understanding of localbusiness practices as well. Furthermore, the visa requirements for returnees are considerablemore relaxed than those for expatriates; often, there are no special requirements for them toreenter the country, except to go through customs at the airport. Many of the advantages to hiringreturnees are difficult to achieve by employing either local Japanese candidates or expatriates(see below). In general, returnees may be more expensive than local Japanese, but the benefitsand compensation they expect varies widely from one returnee to another. Other potential areasof concern include whether the returnee will be able to get along with other local Japaneseemployees (local workers may feel it unfair that the returnee receives higher status and/or salary


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simply because of his or her study in the West) and the returnee's visa status. Foreign companiesinterested in recruiting Japanese returnees can start by looking on foreign university campuses,particularly at science, engineering, and business schools.

Expatriates

While expatriates may be necessary to start a foreign operation, they are generally veryexpensive and should be kept to a minimum. This is particularly true in Japan, which has beenone of the most expensive countries in the world to maintain an expatriate. Currently, however,the depreciation of the yen and the recent proposal by Japan's Finance Minister and the LiberalDemocratic Party (LDP) to make significant income tax cuts in 1999 (reducing the highestincome tax rate from 65% to 50%) may make it (temporarily) slightly easier to hire expatriates.

Figure 7. Japan's Proposed Individual Tax Cuts in 1999

Retaining Employees in Japan

Changing Motivational Tools

Ten years ago, employees of large Japanese firms expected to receive continuous salary growth,regular career promotions, and long-term employment security. However, Japan's economicstagnation has forced changes in these expectations. In 1996, a survey was taken of 3,130 white-collar and managerial employees on what they believed were the most important employeemotivators. The respondents came from over 30 firms in the Tokyo and Osaka metropolitanareas. Although their answers reflected a continued belief in some Japanese employment


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practices (i.e. in-house skill development), many also favored "newer," productivity-raisingmanagement practices such as performance and evaluation feedback that affect an individuals

paycheck and career growth.

Figure 8. Importance of Rewards and Reward Allocation Procedures as Motivators in

Japan

The survey revealed a strong bias against the seniority system in terms of training andpromotion; a strong majority of the employees who responded (78.7%) would prefer staffingpolicies that promote employees with high potential even if it involves a reversal of the seniorityorder. An even higher proportion of employees stated that they would like to acquire skills thatare transferable among firms even if it means that they will not be promoted to seniormanagement positions. As a caveat, however, these preferences generally decline as theemployee gets older. In addition, employees are still split 50-50 on whether they would preferhaving their wages based solely upon job performance without consideration of age or seniority.As changes in the economy and company outlook continue, employee expectations will certainlychange. However, at present, employers should not overestimate Japanese employees'enthusiasm for a wholly performance-based corporate environment.

Termination of Employees

Because Japanese law typically requires "just cause" for dismissal, terminating employment inJapan is significantly more difficult than in Western countries. However, if employers are awareof the laws governing termination and follow them carefully, termination in Japan is possible,albeit uncommon.


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Under existing laws, if there is no fixed term for employment, both the employer and employeeare free to terminate employment by giving 14 days' notice. In this case, no specific reason fortermination is required. Where the employee's contract involves stated periodic payments, theparties can terminate employment at the start of the next pay period if notice is given in the firsthalf of the current pay period. In cases where employment is for a definite period of time, the

employee and worker can only terminate employment at any time during that period if there is an"unavoidable" reason.

Special Labor Laws and Working Conditions

Equal Employment Opportunities for Women

The Equal Employment Opportunity Law (EEOL) was enacted in 1985, and later revised in1997. Despite the fact that women's participation in the workplace increased markedly after the

EEOL was enacted, the legislation itself remains quite conservative. Although the share ofwomen workers in the Japanese workforce increased 36% between 1985 and 1996, the 1985EEOL refrained from any intervention against discriminatory practices other than advisingcompanies that they had a duty to follow equal employment guidelines. As a result, womencontinued to experience widespread discrimination in recruitment and hiring.

The 1997 EEOL takes a more active approach to ending discrimination in the workplace.Mediation procedures can commence at the request of one party (the 1985 EEOL required thatboth parties agree to mediation), retaliation against a discontented worker (dismissal, forexample) is illegal, and any company's violation of equal employment provisions will bepublicized by the Ministry of Labor. The law also attempts to create a more "equal" working

environment by abolishing special privileges accorded to women under the 1985 EEOL. Forexample, it abolishes the 1985 version's provisions to "improve the welfare of women" byeliminating the special treatment accorded to women for overtime, rest-day work and night work.Thus, after April 1, 1999, women are in principle subject to the same working-hour regulationsas men. Preferential treatment in hiring women is only permitted when a company is trying tocorrect obstacles to equal employment opportunity in the workplace.

Nevertheless, some problems still exist with the current EEOL. The law does not imposecriminal penalties for companies violating equal employment laws, nor does it take a firm standagainst sexual harassment (sexual harassment is not considered a form of discrimination underexisting Japanese law). Progress in Japan's equal employment law remains to be seen as morewomen enter the Japanese workplace and the enforcement of such "equalization" has yet to befully achieved.

"Harmonizing" Work and Family Life: The Childcare and Family Care Leave Law

Two major factors have influenced Japan's drive to find a proper equilibrium between work andfamily life. First, the growing number of women in the job market has raised concerns about howwomen will be able to balance their responsibilities at work and at home. Second, Japan's rapidly


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aging population is placing an increased burden on working individuals, many of whom musttake care of their aging relatives themselves due to the lack of elderly care facilities in Japan. Asa result of these two factors, the Japanese government created the Childcare Leave Law (CCLL)in 1991, later renaming it the Childcare and Family Care Leave Law (CCFCLL) in 1995.

With regard to childcare, the CCFCLL and the CCLL are fairly similar. Upon request, a workerhas the right to take leave in order to care for his or her child, including adopted children lessthan a year old. Workers that are employed on a day-to-day basis or have fixed term contracts areexcluded from this provision. Although the CCLL did not explicitly require the employer toguarantee any payments during this leave, a 1994 amendment to the Employment Insurance Lawcodified a payment structure. Under the amendment, 20% of the worker's regular monthly wagesearned before taking leave must be paid as a Childcare Leave Basic Allowance from theemployment insurance, with an additional 5% as a Returning Job Allowance.

In addition to childcare allowances, the CCFCLL will also grant workers the right to take familycare leave effective April 1, 1999. A worker can request this leave in order to care for a family

member who is in a condition requiring constant care for two weeks or more due to sickness,injury, physical or mental disability. "Family members" in this case include the spouse, parentsand child of the worker, parents of the worker's spouse, and the worker's grandparents, siblings,and grandchildren, provided that they reside with (and are dependents of) the worker. The periodof family care leave cannot exceed three months, and in principle, the right to family care can beexercised only once for each family member.

The employer must grant a worker the right to take family leave, unless: 1) the worker has beenemployed for less than one year by the employer; 2) the worker will be leaving the companywithin the next three months; or 3) the worker's weekly work days are two days or less. Otherexceptions are also included in the Enforcement Order of the CCFCLL. In order to be eligible for

these exceptions, employers must conclude a written agreement with a majority representative atthe company. Still, the CCFCLL does not require the employer to guarantee payments duringfamily care leave. Unlike childcare leave, current Japanese law does not provide social securitybenefits or social security premium exemption for family care leave.

Deregulation and Increased Flexibility in Working Conditions

Japan 's deregulation measures and the influx of temporary, part-time and female workers led thegovernment to revise certain provisions of the Labor Standards Law in December 1997. Themaximum length of labor contracts was extended from one to three years (limited, however, to"older employees" and those with "sophisticated knowledge") and the upper limit of flexibleworking hours was relaxed to allow workers up to 10 hours in one day and 52 hours in one week.These measures aim to fulfill the growing need for diversified contract periods and workpatterns, particularly in an increasingly competitive economy. The government is alsoconsidering an increase in the upper limit of overtime to 360 hours a year (compared to the 150hours proposed by labor unions). Japan's Central Labor Standards Council also seeks tostrengthen worker protection and clarify working conditions under the Labor Standards Law,which currently focuses on wage-related matters.


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Conclusion

Japan is undergoing a period of major economic change. As economic stagnation and growing

competition forces companies to downsize, human resources practices that once formed the coreof Japanese corporate life are being superseded by more competitive recruitment and retentionmethods. While conventions such as lifetime employment and seniority are still visible, thenumber of mid-career shifts and companies switching to performance-based pay is growing.Foreign companies looking to hire staff for their Japanese operations should pay close attentionto these developments, including the new and changing expectations of Japanese employees, inorder to build a successful staff in Japan.

Sources

Asia Commercial Overview , US and Foreign Commercial Service (USFCS), February13, 1998.

" Japan: Jobless Rate to Soar in Economic Age of Uncertainty."Asahi Shimbun/AsahiEvening News; July 29, 1998

CIA World Factbook 1997. "Labor Dispatchers Continue to Expand." Working Conditions and the Labor Market,

Japan Institute of Labor, June 1, 1998. Ibid. "Survey Finds 30% of Big Corporations ending Seniority-Based Pay System." Comline-

Tokyo Financial Wire, April 6, 1998. Japan 's Pension Market to 2005 . Curuby & Company, ISI Publications, 1997. "Trends in Debate on Revision of Pension System: White Paper on Pensions." General

Survey, Japan Institute of Labor, June 1, 1998. M. Morishima, Keio University. Changes in Japanese Human Resource Management:

Japan Institute of Labor, November 1997. T. Araki, University of Tokyo. Recent Legislative Developments in Equal Employment

and Harmonization of Work and Family Life in Japan. Japan Institute of Labor, April 1,1998.


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Human Resources

Human Resource or HR, as it is popularly known, highlights thecontribution of workers behind the functioning of an organization. Here

the term worker signifies all the classes of workers irrespective of theirskill set or educational background. Human resource planning is now avery important issue as every business house is bound to plan a prosperousfuture for all its employees. The HR processes information and delegates itto the various organs of the organization for the smooth and efficientfunctioning. Bestindiansites.com enlists top five Indian websites whichdiscusses the popular Human resource issues and practices.

education.nic.in

It is the webpage of the Ministry of Human Resources

development of India. It primarily focuses upon the compact developmentof all its citizens beginning from childhood and continuation of thisprocess through out their lives. From this site, we also come to knowabout the two departments of this Ministry, namely the Department forschool education & literacy and the Department for higher education. Thissite is instrumental in providing valuable links regarding elementaryeducation, secondary education, minority education and many morerelated subjects.

ranbaxy.com

This webpage enlists the various HR policies which are followed byRanbaxy, the pharmaceutical giant. Ranbaxy, well known for its soundHR policies, empowers all its employees to identify their own potentials ina professional set up. It is an equal opportunity employer where employeescan innovate and find new ideas to work upon. This company takes pain indeveloping its employees as an attempt to increase their contributionbehind their corporate success. It also trains its employees in their latestdomains so that they can become a master performer in their particularfield. An added advantage here is that you are entitled to be a share holderof your parent company.

nationalfertilizers.com

National Fertilizers Limited values its employees as its most valuableresource. It offers a number of career opportunities to young and qualifiedprofessionals in various domains. It is also renowned for arrangingtraining programs for all its employees by which it ignites the fire ofmotivation in their minds. It also meets the statutory obligations withrespect to employee health, safety and welfare. Apart from all these it also

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provides well maintained canteens, recreation clubs, housing facilities,schools and a sound and safe working environment. It is indeed a rolemodel for other companies when it comes to respecting your employees.

hrfolks.com

Hrfolks.com, a premier HR consulting company, isknown for its academic offerings in the field of recruitment & selection ofemployees. It also provides certification courses competency mapping,and also conducts benchmarked development programs. It also providestraining on psychometric tests, aptitude tests, leadership buildingprograms, capability development programs and many more efforts. It alsoprovides you with the various job openings as per different domains. So ifyou are looking forward to visit a website which will answer all yourqueries regarding recruitment and employee development, then this site isthe one to look out for

tcs.com

Tata Consultancy Services (TCS) is well known for its sound HR policies.The primary motive of this consulting firm is to make its employeesknowledgeable about the on going practices in their respective domains.For this, it invests 4% of its annual revenue on training, development andother employee empowerment programs. Its learning centre at Trivandrumhas state of the art facilities coupled with all modern day amenities tomake learning fun. The other employee benefits which are offered hereinclude house building loans, automobile loans, mentoring, careercounseling, stress development programs and many more. TCS is reputedto be a world class employer which always cares for its employees andmaintains sound yet flexible HR policies.

mercerhr.co.in

This site, hosted by Mercer, one of the leading HR Consulting agencies ofIndia, will be worth visiting in case you are looking to mull over somenewsletter addressing to exciting topics like developing your labordistributive decisions, conciliatory benefit schemes for your employees,latest Indian HR issues and current practices of compensations, benefits,allowances, expatriates and taxation. To view in details, please click on

the following link.

hr-one.in

It's an undisputed fact that HR personnels hold the key of success for anyorganization since they are the one to spot the talent in a potentialemployee at the time of the interview. But the process of empowerment islong and slow, demanding a lot of persistence and diligence on an HR's

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part. Visit this site to know the operational know-hows of this premier HRorganization from India. Their basic methodology comprises of TalentSearch, Flexitalent, HR Services and Training.

humanresources.co.in

This imposing site is brimmed with essential links and topics related to theworld of HR. It offers a free registration service to you so that you cansign up and start opining your views and thoughts on human resource andHR events taking place around the world. Join an elite group of HRprofessionals, students and service providers online to get your interactiongoing. Check out the job openings and a number of relevant links likeDownloads, Forums and Profile.

fibre2fashion.com

This trusted portal in the world of garments portrays some HR jobopenings in India , middle-east and the USA. Find your convenient jobafter carefully glancing over the job criteria, industry and job description.Check out similar job opportunities and other job opportunities from thefeatured companies as well. The smart search boxes enable you to go for aresult-oriented search rather than scrambling around for the exactkeywords. Feel free to come up with your valued feedback to assist thesite developers make things better and user-friendly.

cdac.in

C-DAC family is renowned for their considerate and amicable attitudetowards their employees. Their strength lies in their interpretation of workculture and individualistic treatment of employees. Weaving policies thatfirstly and fore mostly revolves around the employees and creating aninformal, easy-going working environment so congenial for the sproutingof innovative ideas are the attributes that single them out from otherorganizations engaged in similar activities. Visit their site to know further.

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NEW TRENDS IN HR
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Human resource management is a process ofbringing people and organizations together sothat the goals of each other are met. The roleof HR manager is shifting from that of aprotector and screener to the role of a planner

and change agent. Personnel directors are thenew corporate heroes. The name of the gametoday in business is personnel . Nowadays itis not possible to show a good financial oroperating report unless your personnelrelations are in order.

Over the years, highly skilled and knowledgebased jobs are increasing while low skilledobs are decreasing. This calls for future skill

mapping through proper HRM initiatives.

Indian organizations are also witnessing achange in systems, management cultures andphilosophy due to the global alignment ofIndian organizations. There is a need formulti skill development. Role of HRM isbecoming all the more important.

Some of the recent trends that are beingobserved are as follows:

The recent quality managementstandards ISO 9001 and ISO 9004 of2000 focus more on people centricorganizations. Organizations nowneed to prepare themselves in order toaddress people centered issues withcommitment from the top management, with renewed thrust on HRissues, more particularly on training.

Charles Handy also advocated future organizational models likeShamrock, Federal and Triple I. Such organizational models alsorefocus on people centric issues and call for redefining the future roleof HR professionals.

To leapfrog ahead of competition in this world of uncertainty,organizations have introduced six- sigma practices. Six- sigma usesrigorous analytical tools with leadership from the top and develops amethod for sustainable improvement. These practices improveorganizational values and helps in creating defect free product orservices at minimum cost.

Human resource outsourcing is a new accession that makes a

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traditional HR department redundant in an organization. Exult, theinternational pioneer in HR BPO already roped in Bank of America,international players BP Amoco & over the years plan to spread theirbusiness to most of the Fortune 500 companies.

With the increase of global job mobility, recruiting competent peopleis also increasingly becoming difficult, especially in India. Thereforeby creating an enabling culture, organizations are also required towork out a retention strategy for the existing skilled manpower.

NEW TRENDS IN INTERNATIONAL HRM

International HRM places greater emphasis on a number of responsibilitiesand functions such as relocation, orientation and translation services to helpemployees adapt to a new and different environment outside their owncountry.

Selection of employees requires careful evaluation of the personalcharacteristics of the candidate and his/her spouse.

Training and development extends beyond information andorientation training to include sensitivity training and fieldexperiences that will enable the manager to understand culturaldifferences better. Managers need to be protected from careerdevelopment risks, re-entry problems and culture shock.

To balance the pros and cons of home country and host countryevaluations, performance evaluations should combine the two sourcesof appraisal information.

Compensation systems should support the overall strategic intent ofthe organization but should be customized for local conditions.

In many European countries - Germany for one, law establishesrepresentation. Organizations typically negotiate the agreement withthe unions at a national level. In Europe it is more likely for salariedemployees and managers to be unionized.

HR Managers should do the following things to

ensure success-

Use workforce skills and abilities in order to exploit environmentalopportunities and neutralize threats.

Employ innovative reward plans that recognize employeecontributions and grant enhancements.

Indulge in continuous quality improvement through TQM and HRcontributions like training, development, counseling, etc

Utilize people with distinctive capabilities to create unsurpassedcompetence in an area, e.g. Xerox in photocopiers, 3M in adhesives,Telco in trucks etc.


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Decentralize operations and rely on self-managed teams to delivergoods in difficult times e.g. Motorola is famous for short productdevelopment cycles. It has quickly commercialized ideas from itsresearch labs.

Lay off workers in a smooth way explaining facts to unions, workersand other affected groups e.g. IBM , Kodak, Xerox, etc.

HR Managers today are focusing attention on

the following-

a) Policies- HR policies based on trust, openness, equity and consensus.

b) Motivation- Create conditions in which people are willing to work withzeal, initiative and enthusiasm; make people feel like winners.

c) Relations- Fair treatment of people and prompt redress of grievanceswould pave the way for healthy work-place relations.

d) Change agent- Prepare workers to accept technological changes byclarifying doubts.

e) Quality Consciousness- Commitment to quality in all aspects of personneladministration will ensure success.

Due to the new trends in HR, in a nutshell the HR manager should treatpeople as resources, reward them equitably, and integrate their aspirations

with corporate goals through suitable HR policies.

Chillibreeze's disclaimer: The views and opinions expressed in this article arethose of the author(s) and do not reflect the views of Chillibreeze as acompany. Chillibreeze has a strict anti-plagiarism policy. Please contact us toreport any copyright issues related to this article.

Out of 5 chilies, our editorial team gave thisarticle...
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Issacshaikh

Beautifully explained .. ....

About our writer:

Rituparna says, "I have a very positive attitudetowards life. I believe that there is no short cut tosuccess. I love reading books and listening to

music. I try to give everything in my life the bestshot. The real measure of a human being is notwhere he stands in times of succes but where hestands in times of challenge and controversy. Iwould like to achieve huge success in myprofessional life through hard work and mytalent."
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oLike

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shreya

hi i am shreya," I believe that in life few values should be set like,strong commitment,honesty,concrete decision making quality so thatu can achieve ur goals in personal and professional life

o Likeo Replyo 5 months agoo 3 Likeso

Neelkanth Bandal

Rituparna,Good article. Keep on .Prof.N.D.BandalHead:Training &PlacementA.P. MBA (HR)

o Likeo Replyo 2 months agoo 1 Likeo

rajshree
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a wonderful article...to be read by all who want to pursue a career in HR

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Natesh

Good article.HR is having pivotal role in any organisation as they arehandling people who in turn managing all other activities.

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Rahul_27devsharma

That's the spirit for which you deserve


Swati Singh

great article. I must surely appraise the writer to xplain the things soclearly......!!!

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rajesh acharya

thank you for this informative posting ....ur right how man goeshandtohand with time in adversity determines his success

Top 10 List of HR Trends SHRM 2004-2005 Workplace Forecast

Alexandria, Virginia -

The Society for Human Resource Management (SHRM) has released the SHRM

Workplace Forecast which projects the top ten trends affecting the American

workplace according to a survey of HR professionals. The rising cost of health care

tops the list, while security issues, labor shortages and exportation of U.S. jobs alsorank as hot topics.

Successful businesses can adapt to changing economic, political, and social

conditions. Being aware of trends affecting the workplace can help an organization

proactively anticipate challenges ahead, said Susan R. Meisinger, SPHR, president

and CEO of SHRM. Great companies have HR professionals leading the way with

smart people strategies as organizations adapt to changing times.

The SHRM Workplace Forecast 2004-2005: A Strategic Outlook examines theissues that are affecting macro-trends in the workplace and the jobs, duties and

concerns of HR professionals. The forecast surveyed a random sample of 558 SHRM

members.

TOP 10 LIST

1. Rise in health care costs

2. Focus on domestic safety and security

3. Use of technology to communicate with employees

4. Growing complexity of legal compliance

5. Use of technology to perform transactional HR functions

6. Focus on global security
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7. Preparing for the next wave of retirement/labor shortage

8. Use and development of e-learning

9. Exporting of U.S. manufacturing jobs to developing countries

10. Changing definition of family

In addition, the SHRM Workplace Forecast Survey looks at the top ten key

concerns, and other trends identified by the SHRM Workplace Trends and

Forecasting Program, that influence overall trends within the following eight key

areas: demographics, economics, employment, international issues, political trends,

society, science and technology, and HR industry trends.

Demographics

The aging of the workforce, the need for elder care, changing family patterns, and

high rates of immigration are all demographic trends that impact organizations and

their workforces.

Economics

Economic trends include health care and pension costs, demand for high-skilled

workers, and changes in corporate governance resulting from scandals.

Employment

Lower HR staff to employee ratios, demand for flexible work schedules, linking pay

and performance, employee demand for customized employment relationships,

and the backlash against managed care all impact the key employment trends.

International

International trends are formed by exporting U.S. jobs, security concerns, the

expanding global marketplace, ethnic and regional differences, anti-Americanism,

and a growing economic interdependence among the countries of the world.

Politics

The political trends in the U.S. reflect the issues that are most important in

workplaces and households across the nation. These include a focus on domestic

security, health care reform, increased political partisanship, 2004 elections, and a


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weakening of affirmative action policies.

Society

The changing definition of a family, a 24/7 work culture, and broadening diversity

are some of the components that make the list of societal trends.

Science & Technology

The use of technology for employee communications, employee monitoring, and

development of e-learning are all trends of growing importance to HR

professionals. However,

Documents

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