Human Resource Management Keiichiro HAMAGUCHI

Chapter 3 Section 5 Wage System and Working Hours

(1) Characteristics of Wage Systems in Japan

(a)Seniority-based Wage System Wages are determined by job and performance in other countries. In Japan, wages are determined by worker’s attributes (length of service, age). Wages remain the same through transfers. Japanese blue-collar workers are unique in their steep wage profiles. Seniority-based wage system provides strong incentive to remain the company.

(2) Wage Structure in Practice Actual wage systems are designed to reflect skills and performances. Basic wages consist of 2 types, age-and- seniority-based wages and skill-based grade systems, which have grades and subgrades. Workers can automatically be promoted to higher subgrades. Promotion to higher grades are based on job- performance evaluation.

However, job-performance evaluation has evolved to seniority-based evaluation. Evaluation of individual’s performance is difficult in the team-oriented environment. Recently, drastic wage reform is required because of global competition and population aging. Companies have introduced more individual performance-based wage systems. Seniority-based wage system must be modified to preserve long-term employment practice.

(c) Bonuses Bonuses are normally paid twice a year (June and December). Amount of bonuses is normally determined by collective agreement, not by discretion of employers. But they respond to economic performance. Employers may differentiate individual workers’ bonuses based on performance evaluation.

(d) Retirement Allowance Amount of retirement allowance is calculated by multiplying the basic wage at the retirement by length of service. But it can be reduced in case of personal retirement or disciplinary discharge. Retirement allowance has the nature of deferred wage payment and reward for meritorious service.

(2) Wage System in US Wages are determined by the job, not length of service, Hourly wage system is applied to blue-collar workers. Annual salary system is applied to white-collar workers. Actual wages are determined based on performance and skills. 50% overtime pay for blue-collar workers. (Non-exempt) White-collar workers such as executive, administrative and professional employees and outside salesman are exempted from overtime pay regulation. (Exempt)

(3) 40 Workweek System and Overtime Agreement Overtime and rest day work are possible if Article 36 agreement (agreement with trade union or majority representative) is concluded. Employer must pay 25% overtime premium. There are no statutory limitation on overtime. Supreme Court held work rules provided the duty to overtime, individual consent was not necessary (Hitachi Ltd. Case). Protective regulations on overtime and night work by women were abolished because of equality. There are no restrictions on shop opening hours, which enables “convenience store” opening 24 hours.

(4) Conclusive Presumption of Hours Worked (a) Work Outside the Workplace Working hours for outside work (ex. salesman) is difficult to determine. LSL allows the number of hours in the agreement with majority representative is regarded as the hours worked (conclusive presumption).

(b) Discretionary Work Scheme (Professional Work Type) Japan has no “white-collar exemption” except for managerial or supervisory staff. Employers must pay 25% overtime premium to other white-collar workers revised LSL introduced conclusive presumption system for limited white-collar workers (professional work type discretionary work scheme).

(c) Discretionary Work Scheme (Management Work Type) Employers demanded that white-collar workers were exempted from overtime regulation. “Service overtime” (undeclared overtime without pay) is prevalent in Japanese offices. Performance-based yearly salary system is impossible for non-managerial white-collar workers without discretionary work scheme revised LSL introduced management planning type discretionary work scheme. New type of white-collar exemption is now under discussion in the tripartite Labor Policy Council. These argument is intertwined with the shift of HRM from seniority-based to result-oriented.