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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-andseniority-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 jobperformance 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. • 1987 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. • 1998 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.