RECRUITING INDUSTRY IN JAPAN
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INDEX Corporate Recruiter........................................................................................................24 Executive Search Consultant.........................................................................................24 Executive Search Recruiter............................................................................................24
HISTORY OF RECRUITING IN JAPAN
While white-collar and management recruiting traces its origins back to the Depression era in the United States, the industry only started moving in Japan in the early 1960s. Historically, recruiting in Japan used to be considered as an exclusively governmental responsibility. In the early-mid 20th century, it existed to help prevent unfair treatment of laborers by their employers! Government agencies such as the Employment Service Agency played that role in the past. Private white-collar recruiting activities were confined to dealings with upper business managers and scientists/technicians. However, it became increasing clear that the government organization was not equipped to respond to a large number of white-collar job seekers with highly specific and technical skills. This was especially true given that the government agency was supposed to treat all job applicants in a fair manner. Expansion & 1997 Deregulation
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With the influx of foreign firms needing professional help to find qualified people, and the expansion of the computing and financial industries in the early 1980s, demand for private recruiting services steadily increased. By 1989 there were 200 registered private operations. This number jumped to 300 in 1992 and remained steady at about that level after the collapse of the "bubble economy". Then, following deregulation of the industry in April 1997, private firms were allowed for the first time to perform recruitment and placement of candidates at all levels and in all industries. Not only independent placement firms but also businesses affiliated with other HR service companies (such as temporary employment agencies), subsidiaries of large business firms, and foreign-affiliated HR firms have since joined the recruiting & placement business. The number of placement firm offices nearly tripled.
THE RECRUITING INDUSTRY TODAY
There isn't really an up-to-date government report on the size of the recruitment market in Japan. However, according to a JETRO publication, back in August 2001 statistics from the Ministry of Labor gave the overall size of the combined staffing and placement market as being about 1.77 trillion. Although this sounds like a lot, it was still only about one sixth the size of the U.S. market, which was worth $101.8 billion in the previous year. Of that Japan market amount, 86.7 billion yen was paid out as commissions to private recruitment companies and 50.6 billion yen of this was for placements of white collar workers, including engineers, managers, and sales staff. The Ministry statistics also say that there were 4,675 recruitment firms servicing the market in 2000, who between them successfully placed 49,322 people. Now, 5 years later, the guess would be that these numbers have increased around 50%. Thus, the estimated number of recruiting companies now exceeds 6,000 firms, and the value of white collar placement sector commissions is probably worth about 70-80 billion yen Another report says, In 2005, the total number of recruiting firm offices in Japan (including local branches of the same firm) was 3,727, which is 6.5% higher than the 1999 figure (Source: Ministry of Health, Labor and Welfare). There are approximately 800 recruiting firms in Japan. The current market size of the industry hovers in the ¥70 - 90 billion [607-780 million USD] range, and some estimates expect it to exceed ¥250 billion by the end of 2005. The total number of placement firms and their branch offices is also rapidly increasing and is forecasted to continue on the rise for years to come. But 75% of all agencies have less than 5 staff and limited resources, facilities and technology access. As has been the pattern in the past, it is estimated that about 40% of Tokyo recruiting firms will cease operations within 2 years. A full 30% of firms currently registered have been operating for less than one year and another 30% for less than 5 years. Only 17% of all recruiting firms have been operational for over 10 years.
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1. The human resources industry in Japan can be classified into three categories:
a) Temporary staffing, b) Job placement and c) Outplacement.
2. The market for temporary staffing services was pioneered in 1966 by Manpower Japan, an affiliate of the U.S.-based firm. Japan was experiencing rapid economic growth and its demand for workers was extremely high. Job placement services began with the establishment of publicly run employment agencies, in accordance with the Employment Stability Law enacted in 1947. In 1997, the market was broadly opened to enable private-sector companies to provide job-placement services for a fee. The area had been slow in opening up to the private sector because such services were generally regarded as a government responsibility, a viewpoint that accorded with the conventions of the International Labor Organization. The human resources market was inaugurated by foreign-affiliated staffing firms such as Korn/Ferry Japan (U.S.) in the field of executive search services3 and DBM Japan (U.S.) in outplacement services.
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Temporary Staffing Expands, Job Placements Level Off The market for temporary staffing soared following deregulation under the Temporary Staffing Services Law, reaching ¥2.36 trillion in fiscal 2003 (Fig.5). Thereafter, however, the growth rate slowed and the market became saturated due to increased competition, but new growth was anticipated owing to deregulation under the amended Temporary Staffing Services Law enacted in March 2004.
According to a report by the Ministry of Health, Labour and Welfare in fiscal 2003,4 the number of offices providing temporary staffing services that year was 16,8045 (Fig.6). Preliminary figures indicated that the number in Tokyo in fiscal 2004 increased 21.9% to 8,593, suggesting that growth was also achieved nationwide.
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Executive Search & Search Firms Approximately 10% of all recruiting firms in Japan are executive search or search firms. Executive search firms focus on proactively scouting new talent. They may specialize in certain industries, or restrict themselves to handling certain types of assignments. East West Consulting K.K. is the leader in this category, though unlike most of its competitors it is a full-service recruiting firm, able to satisfy client needs in a very broad range of positions and industries. A search firm, especially in the Japanese market (which has far fewer proactive job seekers than most comparable industrialized nations), generally has a far greater capacity to be able to identify and introduce suitably qualified candidates in accordance with a client's request. Within the Search category are companies fashioning themselves as "retainer" firms, or firms requiring (usually substantial) sums of money from a client in advance of commencing a search. The "retainer" system has not been readily accepted by many Japanese and savvy Tokyo-based foreign companies, who are accustomed to results-oriented rather than heavily upfront fee structures. Major sources of business for these firms have been clients developed through international associate offices, and individual client contacts experienced in using a style of executive search that is common in - and perhaps more suited to - the United States and Europe. Other Types of Firms Placement Agencies: Over 40% of all recruiting firms in Japan are placement agencies. This is the most common type of recruiting agent in the Japanese market. Placement agents generally do not proactively scout talent, but rather introduce to prospective employers registered job seekers and respondents to advertisements (usually placed by the agent). Placement agents generally focus on clerical and lower professional through mid-management level positions. Outplacement Agencies: This is a market segment that has grown in recent years, though only a little over 1% of all the recruiting agencies in Japan are this type. Outplacement, also known as "re-hiring assistance", involves assisting companies with their personnel restructuring projects. That is, an outplacement agent (like EWCC) specializes in assisting, retraining and finding alternative jobs for persons that a company is forced to let go.
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Other Types of Agencies: Approximately 45% of all recruiting firms in Japan are this type of firms. There are other styles of recruiting agent, including a number of hybrid types. Some are branches of US-, Europe- and Asia-based operations. Some firms offer outsourcing, human resource consulting, training, market research and/or other services in conjunction with recruiting services.
Source: NLI Research Institute
WHY USE A RECRUITING FIRM IN JAPAN? Japan is a "Search" Market. While there is clearly an enlarged and still-increasing pool of available people, Japan remains in recruiting terms - a "search" market. All other industrialized nations are "selection" markets. Statistics tell us that more people may be ready to interview, but they also tell us that many of those are younger - non-managerial - people. The person you need is probably busy building up an excellent career with an appreciative present employer. Japanese companies have been restructuring, but have also been fighting hard to retain their key players. Good candidates generally have to be sought out and encouraged to risk changing jobs. Executive search - by professionals who know the labor market and how to approach and persuade Japanese professionals - is invaluable in leading proper candidates to good opportunities. And no firm in the Japan market carries out executive search as well as East West.
Reasons for Using Professional Recruiting Firms: Newspaper advertisements are not generally effective Qualified people who work at Japanese companies don't typically read the want ads. Nevertheless, Japanese are just as ambitious as anyone, and if given the right opportunity, they will change jobs. They aren't necessarily closed to new ideas. The key is to scout them, and then to meet with them personally and present an opportunity.
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Family Pressure Sometimes it is even necessary to meet with family members to ease their fear of change. If a man changes jobs, the entire family - wife, parents, and in-laws, often must approve the decision. The identity of many non-working wives is tied closely to their husband's work. Many wives are proud of being married to an employee of a large, well-known company and don't want to lose that prestige when the husband goes to work for a lesser known or smaller company. There is a well-known story about a manager - not an executive - who resigned from a major Japanese company to go to a foreign company. He had formally accepted the foreign company's generous offer, and left his old company. A few days after his departure, a blue limousine stopped unannounced outside his Tokyo home. None other than the president of the Japanese conglomerate himself emerged from the vehicle - accompanied by the candidate's mother! The company had solicited her support and flown her to Tokyo from Kansai without the knowledge of her son. Shortly after the ensuing conversation, and to the bewilderment of the new prospective employer, the candidate rescinded their offer and stayed with his lifelong employer. Loss of "bragging rights" and loss of face A great deal of prestige - both for the individual concerned and his family - comes from working for a large, well-known company. Despite a new title, excellent growth opportunity and huge compensation package on offer from a new company, a candidate knows that people he cares about will interpret his leaving the major company as a kind of demotion. The same people will ask, "Why did he have to leave? What did he do wrong?" It is generally believed that "good" employees are rewarded by and remain loyal to their companies, and that a departing employee must therefore have somehow failed in their duties. Worse: the departed employee can be seen to have betrayed his old employer. The loss of face can be considerable. Companies that are well known in the U.S. or Europe are not known in Japan. This is due to the historically closed nature of the Japanese economy. A very few companies, like IBM and to a lesser extent McDonalds, have attained a respectable status here only because they are well-established and have achieved recognition in Japan. There are also advantages to working for a large Japanese company that many foreign or smaller Japanese companies cannot match. For example, it is easier to borrow money from a bank to buy a house if one works for a large company. Or, in some cases, it is possible to borrow money directly from the company at low rates. Also, it is easier for children to be accepted at good schools if their father works for the "right" company. Many private schools assume that jobs with small companies are not secure. Small Companies Are Unattractive There are relatively very few small dynamic companies in the Japan market. Most graduates of the best universities join large firms. In addition, almost all technological innovation has come from the largest companies. They are the only ones who have the capital necessary for research and development. So if someone wants to have influence in his industry, he must work for a large company. The lifetime employment system "hangover" Until recently, because employment at Japanese companies had been relatively stable, there were generally few opportunities for people in mid-career who wanted to change jobs. Large Japanese companies still focus on hiring university graduates, rather than mid-career employees.
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Due to this historical absence of a mid-career hiring "market", most employees aren't accustomed to thinking in terms of changing jobs. The historic guarantee of lifetime employment also ingrained a sense of security in Japanese company employees, enabling them to sacrifice potentially higher pay at foreign firms for greater security. The system was the plank of a great sense of loyalty and obligation to the company, which was in turn a source of pride to the employee. Because the company had given the employee a job for life, the employee felt the need to live up to the company's expectations. Companies leveraged these emotions to successfully pressure employees wanting to leave - and still do. The emotional and actual infrastructure supporting this system will take considerably longer to disappear than the lifetime employment system itself. Charts herein were reproduced from statistics obtained from Japan's Ministry of Health, Labor and Welfare, as well as NLI Research Institute, Statistics Bureau of Management and Coordination Agency, and other government and private institutions.
References Include: Special Report on Labor Force in Japan, February 1998, February 2000, August 2000, Statistics Bureau, Ministry of General Affairs (Management and Coordination Agency) Status Report on People Wishing to Change Jobs, 2000, Japan Institute of Labor "Placement Firms, The Key Player of Flexible-Employment Era", NLI Research Institute Report
Recruiting industry in Japan – Recent update 1
A recent Nikkei survey of 4,500 companies found that collectively the firms plan to increase hiring by about 20%, for the third year in a row. But it's not just demand by the market that is bringing new players to the recruitment market; it's also old fashioned greed. The March 17 IPO of Tempstaff, one of Japan's largest temporary staffing and general recruitment agencies, was rather good, with the stock climbing about 25% before settling back to a price near the listing value of 150,000 yen per share. The company now has a current market cap of 103 billion yen, of which CEO Yoshiko Shinohara still owns 71.64%. Not bad for a self-made business woman. Another interesting side note about the TempStaff IPO is the very timely investment of $18 million by Kelly Staff of the U.S. in 2005, as part of a larger tie-up between the two companies. The valuation of Tempstaff at that time was apparently around $360 million and Kelly Staff decided to borrow the money from MUFG bank at just 0.57% interest. The one-year loan was repayable in February this year, just 2 weeks before the IPO. So for a measly $102,600 in interest, the folks at Kelly Staff landed a windfall gain of $36 million. Their shareholders must be pretty happy right now. There isn't really an up-to-date government report on the size of the recruitment market in Japan. However, according to a JETRO publication, back in August 2001 statistics from the Ministry of Labor gave the overall size of the combined staffing and placement market as being about 1.77 trillion. Although this sounds like a lot, it was still only about one sixth the size of the U.S. market, which was worth $101.8 billion in the previous year. Of that Japan market amount, 86.7 billion yen was paid out as commissions to private recruitment companies and 50.6 billion yen of this was for placements of white collar workers, including engineers, managers, and sales staff. The Ministry statistics also say that there were 4,675 recruitment firms servicing the market in 2000, who between them successfully placed 49,322 people. Now, 5 years later, my guess would be that these numbers have increased around 50%. Thus, I estimate the number of recruiting companies now exceeds 6,000 firms,
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and the value of white collar placement sector commissions is probably worth about 70-80 billion yen. This is not say that everyone is making money. Indeed, end-hiring companies are now a lot more choosey than they were, and of course there are plenty more vendors to place orders with. And since almost all recruitment in this country, other than high-end executive search, is done on a contingency basis, the vendors are all pretty hungry. As a result, Japan's famously expensive (30% of a candidate's annual salary) recruiting fees are coming down and indeed some of the larger and better known technology companies won't pay more than 20%. Of course, being well known firms, the online recruiting sites are almost ready to let these companies list for free, since they pull lots of job-seeker visits and subsequent job applications. Just how many more recruiters have joined the field in the last 5 years is also quite astounding. In just one year, 2000, the number of licensed consultants soared by 1,176 firms, a 25% increase. This was admittedly a unique year, because in 1999, the Diet passed a new law significantly increasing the number of industries that recruiters could legally operate in. Then in 2000, the law was further amended to allow temp-to-perm transitions, which of course brought many staffing agencies such as Tempstaff into the recruiting industry as well. What is the future for recruiting firms in Japan? I believe that both online recruiting and personal consulting (e.g., executive search) have a bright outlook, so long as the economy maintains momentum. The problem is, of course, that no one knows how long this current bull market will continue. I recall only too well the blood on the streets from mass firings of personnel conducted by the high-tech and banking industries in 2002 and 2003. During that time, almost no one in the recruiting industry made any money and many went out of business. The good news is that even compared to 3-4 years ago, recruitment in Japan established, with about 30% of white collar placements being made through However, since the business is truly cyclic, i.e., when there are no jobs, or when are scared to move, then there are no placements. Still, anyone getting out of the gate in the next 12 months stands to make a good slug of cash. is now well consultants. job hoppers IPO starting
Terrie Lloyd writes a weekly newsletter for entrepreneurs and business people about business and political opportunities in Japan. You can find the newsletter at www.terrie.com. For further contact with Terrie, email him at firstname.lastname@example.org.
Recruiting industry in Japan – Recent update 2
The staffing industry has been rapidly growing in Japan during the period of economic recession after the collapse of the 'babble economy'. Most of companies concentrated their management resources into core activities and their peripheral operations tended to be reduced including contract out to outsider. They have introduced temporal workers instead of permanent employees to cut labor costs and to meet unstable fluctuation of workforce demand. Therefore, the number of temporal workers in Japan reached 2.1million in 2002, which was four times bigger than that of 1990. Deregulation of Worker Dispatch Law also accelerated the growth of labor market for temporal workers as well as the staffing industry.
Following results were obtained. 1) A business model of the staffing industry tends to seek 'scale' because of low profit rate per temporal worker. This type of business sends mostly female office operators to customers. Another model is to dedicate in highly specialized staffing markets, for example IT engineers, designers, announcers, etc. 2) Business offices of the staffing industry have concentrated on the three major metropolitan areas, namely Tokyo, Osaka and Nagoya. Especially Tokyo has so much demand for temporal
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workers that makes it the largest agglomeration of the industry. Regional centers, typically Sapporo, Sendai, Hiroshima and Fukuoka, also enjoy location of the industry because of their branch office economies. 3) In any metropolitan areas city centers provide best accessibility to customers' offices, so that location of the staffing industry remarkably concentrated on that place. 4) Large staffing companies allocated their business offices according to the hierarchical system of cities. In the initial stage, location of their offices was mostly confined to the three major cities and four regional centers, after that they established branch offices in prefecture capitals.
ECONOMICS – SETTING UP AND COSTS
Region: Organisation Of Economic Co-Operation And Development Income category: High income Population: 127,956,006 GNI per capita (US$): 38,980.00
Ease of... Doing Business Starting a Business Dealing with Licenses Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business
2006 rank 11 18 2 36 39 13 12 98 19 5 1
2005 rank 12 87 3 28 35 13 12 89 20 6 1
Change in rank +1 +69 +1 -8 -4 0 0 -9 +1 +1 0
Note: 2005 rankings have been recalculated to reflect changes to the 2006 methodology and the addition of 20 new countries. Starting a Business (2006) The challenges of launching a business in are shown below. Included are: the number of steps entrepreneurs can expect to go through to launch, the time it takes on average, and the cost and minimum capital required as a percentage of gross national income (GNI) per capita. Indicator Procedures (number) Time (days) Japan 8 23 Region — — OECD 6.2 16.6
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Cost (% of income per capita) Min. capital (% of income per capita) Employing Workers (2006)
The difficulties that employers in face in hiring and firing workers are shown below. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the three indices. Indicator Difficulty of Hiring Index Rigidity of Hours Index Difficulty of Firing Index Rigidity of Employment Index Hiring cost (% of salary) Firing costs (weeks of wages) Japan 28 60 0 29 12.7 8.6 Region — — — — — — OECD 27.0 45.2 27.4 33.3 21.4 31.3
LAWS & REGULATIONS ON SETTING UP BUSINESS IN JAPAN
1. Incorporating Your Business
Types of operation in Japan Foreign companies generally establish a business presence in Japan in one of four modes. Representative office Representative offices are established as locations for carrying out preparatory and supplemental tasks aimed at enabling foreign companies to engage in full-scale business operations in Japan. These offices may conduct market surveys, collect information, purchase goods and implement publicity/advertising efforts, but they are not permitted to engage in sales activities. The establishment of representative offices does not require registration. A representative office cannot ordinarily open bank accounts or lease real estate in its own name, so agreements for such purposes must instead be signed by the head office of the foreign company or the representative at the representative office in an individual capacity. Branch office Foreign companies wishing to engage in business operations in Japan must establish a branch office or a subsidiary company. The simplest means for a foreign company to establish a base for business operations in Japan is to set up a branch office. The branch office can begin business operations as soon as an office location is secured, the branch office representative determined, and the necessary information registered. A Japanese branch office is a business location that provides services in Japan decided upon by an organization authorized by the foreign company, and ordinarily is not expected to engage in independent decision making. A branch office does not have its own legal corporate status, but instead is deemed to be encompassed within the corporate status of the foreign company. In general, therefore, the foreign company is ultimately responsible for all debts and credits generated by the activities of its Japanese branch office. A Japanese branch office, however, may open bank accounts and lease real estate in its own name.
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Subsidiary company A foreign company establishing a subsidiary company in Japan must choose to establish the subsidiary company as a joint-stock corporation (Kabushiki-Kaisha (K.K.)), limited liability company (Godo-Kaisha (LLC)), or similar entity stipulated by Japan's Corporate Law. Both unlimited partnerships (Gomei-Kaisha) and limited partnerships (Goshi-Kaisha) are granted corporate status under the Corporate Law, but they are rarely chosen in practice because equity participants bear unlimited rather than limited liability. All types of subsidiary companies can be established by completing the required procedures stipulated by law and then registering the corporation. A subsidiary is a separate corporation from the foreign company, so the foreign company will bear the liability of an equity participant stipulated by law for all debts and credits generated by the activities of the subsidiary. Other methods by which a foreign company may invest in Japan using a Japanese corporation but without establishing a subsidiary are by establishing a joint venture with a Japanese enterprise or investment company, and by equity participation in a Japanese enterprise. Limited liability partnership (LLP) It is also possible to do business by using a Yugen Sekinin Jigyo Kumiai. This type of entity, considered the Japanese version of a limited liability partnership (LLP), is not a corporation, but a partnership formed only by the equity participants, who have limited liability. LLPs are also distinguished by the fact that internal rules can be freely determined by agreement between the equity participants, and that taxes are levied on profits allocated to equity participants without LLPs themselves being liable for taxation.
2. Human Resource Management
1. Recruitment a) Recruiting methods Japan has a government-run employment agency known as "Hello Work" with offices throughout Japan. Hello Work offers free support for people looking for work and companies looking for workers; all industries are covered by the agency. Similarly, some regional public organizations and education institutions such as universities also provide employment services for free. There are also many privately-run employment agencies; these come in several types, including executive search-type agencies, as well as those which build up a database of registered potential employees and employers, and where the agency collects fees on a contingency basis (i.e., when someone from their database is successfully employed with a company). Japan also has a wide range of newspapers, magazines (e.g., job-transfer magazines, industry-specific magazines, etc.), and internet websites through which companies can find employees. b) Legislation on recruitment As far as labor contracts are concerned, the principle of freedom of contract applies to the hiring of workers, and allows an employer to decide what kinds of workers and how many to hire. There are, however, some restrictions. For instance, under the Equal Employment Opportunities Law, employers must afford the same opportunity for employment to women as to men when recruiting and hiring workers. For that reason, employers may not specify male or female employees when advertising situations vacant, with the exception of a few specific positions. 2. Labor contracts a) Working conditions When hiring workers, companies enter into labor contracts with each worker. At that time, the employer must notify the employees in writing of the following employment conditions.
The term of the agreement (or where there are no provisions pertaining to term, the fact that there are no provisions pertaining to term).
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• • • •
The workplace, and the duties that the employee will have to perform. Matters pertaining to start and finish times, work in excess of regular working hours, breaks, days off and leaves. Methods of determining, calculating and paying wages; the wage calculation period and payment times. Matters pertaining to resignation and dismissal (including all grounds for dismissal).
b) Term of labor contracts Labor contracts generally do not stipulate a term. Where a term is specified, however, it must be no longer than three years except in a few special cases. However, a worker may resign by notifying his/her employer at any time as long as at least one year has elapsed since the date of the start of the contract term. c) Probation period Employers are allowed to set a limited period of probation prior to fully employing somebody, so as to see whether or not the probationary employee is able and suitable for the job. Probation periods generally last for about three months. However, it should be noted that if the employer decides not to fully employ somebody during or after the probation period, this refusal to employ is treated in the same manner as dismissal of an employee; in order for such a refusal to be legally allowed, valid reasons for refusal (which were not evident at the time of probationary employment) must have come to light during the period of probation, and it must be objectively reasonable for the employer to refuse to fully employ that person for the aforementioned valid reasons. d) Re-assignment and external assignment Japanese companies frequently redeploy their workers through internal re-assignment and external assignment, and such redeployments may often require a worker to relocate. Generally, employers have considerable discretion when it comes to changing a worker's duties or temporarily assigning him or her to another company if this is reasonably necessary to business.
3. Wages a) Principles of wage payment Employers must pay wages in legal tender, directly to the employee, not less than once per month, and on a specified date. However, employers are allowed to remit wages into a bank account specified by the employee where the employee agrees to that method of payment, and may also deduct social insurance premiums, taxes and similar expenses from wages. b) Guarantee of minimum wage The minimum wage is determined according to region and industry. Where an employee is subject to two different minimums, the employee is entitled to the higher of the two minimum wages. To give an example, following the latest revision in October 2006, the current minimum wage for Tokyo is 719 yen per hour. c) Wage system It is typical for Japanese companies to pay wages on a monthly basis, and to pay employees summer and winter bonuses. One characteristic of Japanese wages is the make-up: monthly wages usually include a basic wage and a range of allowances, which may include accommodation, family and transportation allowances. Another characteristic is that the amount paid in bonuses makes up a relatively high proportion of total wages paid to employees (*1). An effect of the high proportion of wages made up of various allowances and bonuses consequently is to lower the rate of overtime pay paid for work outside normal
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working hours. The typical wage system in Japan has traditionally been based on seniority, whereby employees' wages increase in accordance with the number of years of service at a company. However, recently, an increasing number of businesses are introducing ability-based and duty-based pay systems, and some are even implementing performance-based pay systems where wages are determined according to each employee's rate of achievement of set targets. As a result, more and more businesses are adopting a yearly wage system (*2). Further information is available through the Basic Survey on Wage Structure statistics collated annually and provided by the Ministry of Health, Labor & Welfare in both Japanese and English. *1. In FY2004, the average bonus paid by private-sector companies was 4.41 months' worth of prescribed monthly wages (for clerical and technical occupations). (Source: National Personnel Authority) *2. Whether or not a yearly wage system is introduced or extra wages are paid for overtime work is irrelevant. If a company in Japan introduces a yearly wage system, it almost always only covers management-level employees.
4. Legislation on working hours, breaks and days off a) Working hours, breaks, days off 1. Working hours must, in principle, not exceed 40 hours per week or eight hours per day excluding breaks (this is known as "statutory working hours"). However, some businesses are permitted to have their employees work up to 44 hours per week at a maximum of eight hours per day. These businesses include retail and beauty services, cinemas and theatres, businesses related to health and hygiene, as well as restaurants and entertainment businesses with less than 10 regular employees. In the event that an employee works six hours, the employer must give that employee not less than a 45 minute break; this increases to a one hour break where working hours exceed eight hours. Employers must grant employees at least one days off per week, or four days off in any four-week period (this is known as "statutory days off"). Sundays or public holidays need not necessarily be days off; employers may determine employees' days off at their own discretion.
b) Agreements on overtime and work on days off Any employer that requires workers to work in excess of statutory working hours or on statutory days off must submit a Notification of Agreement on Overtime and Work on Days off to its local Labor Standards Inspection Office.
c) Overtime payment Companies must pay an increased rate of wages as set forth in the table below to employees who work in excess of statutory working hours, work on statutory days off or work late at night (between 22:00 and 05:00). Table 4-1 Rate of increase Work in excess of statutory working hours Work on statutory days off Work late at night 25% 35% 25%
Work late at night in excess of statutory working hours 50%
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Work late at night on statutory days off
d) Exceptions for managers and supervisors Persons in positions of management or supervision and persons handling confidential administrative work who are closely involved in management are not subject to the regulations on working hours, breaks and days off (with the exception of regulations on night work).
e) Modified working hour system Some jobs entail large peaks and troughs in the number of working hours according to the year, month or week. In some of these cases, companies are allowed to adopt a system of calculating working hours whereby the company need not pay increased rates in certain weeks or on certain days even where employees work in excess of statutory working hours, provided that the employees involved work no more than the statutory number of working hours on average within a predetermined period. In this case, however, a labor-management agreement must be entered into or appropriate provisions included in work rules before a flexible system can be adopted.
System of annual modified working hours Employees' working hours must not exceed 40 hours on average per week for a specified period of more than one month but not more than one year. If a company adopts this system, even workers whose statutory working hours are 44 hours per week, under the exemptions detailed in 4.5.1. 1), are subject to the aforementioned 40-hour average. System of monthly modified working hours Provided that provisions are drawn up prohibiting employees' working hours from exceeding 40 hours(*) on average per week for a specified period of not more than one month, the employer may have employees work in excess of 40 hours in a specified week or in excess of eight hours on a specified day. Flextime system Another system under which working hours can be adjusted within a monthly period is the flextime system. Under this, the total number of working hours that a worker must work during a fixed period of not more than one month is established, and workers are free within limits to determine what time they start and stop work each day provided that they meet the total number of working hours required. Week-based modified working hours Under this system, employers may have employees work for more than eight hours but not more than 10 hours per day without having to pay increased rates of wages, provided that employees' working hours do not exceed 40 hours per week. It should be noted, however, that this system is limited to retailers, inns and restaurants with less than 30 regular employees. Furthermore, if a company adopts the system, even workers whose statutory working hours are 44 hours per week, under the exemptions detailed in 4.5.1. 1), are subject to the aforementioned 40-hour average.
* Under this system, the working hours of workers whose statutory working hours are 44 hours per week under the exemptions detailed in 184.108.40.206) shall remain 44 hours.
f) Paid leave Employers must grant 10 days' paid leave to employees that worked for six consecutive months from the time of hiring and who worked on not less than 80 per cent of all schedule
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work days. This paid leave may be taken consecutively or separately. Where an employee's application to take paid leave will hinder the normal business operations, the employer may require the employee to take such paid leave at a different time. The number of days of paid leave available to employees increases in proportion to employees' length of service as set forth in the following table.
Table 4-2 Years of service 0.5 1.5 2.5 3.5 4.5 5.5 6.5
Leave days granted 10 11 12 14 16 18 20 The right to annual paid leave expires after two years. In other words, annual paid leave left over from one year may be carried over and taken the next year only. For instance, if an employee is awarded 10 days' paid leave in 2004, but opts not to take paid leave in that year, the employee may carry those days over to 2005 and use them in addition to any leave days which become available in 2005. However, those 10 days awarded to the employee in 2004 cannot be carried over to 2006 or beyond. It should also be noted that employees that have been continuously employed at the same company for not less than seven years and six months can take a maximum of 40 days' paid leave in any one year, including days that became available within that year and those carried over from the previous year. Employers are not required to grant paid leave days in addition to those described above to cover days on which employees did not work as a result of any non-work-related illness or injury. It should also be noted that most Japanese companies grant a few additional paid leave to employees for marriage, death of close relatives, and childbirth by the employee's spouse, etc.
g) Maternity, childcare and family care leave
Maternity leave: If an employee of expectant mother requests permission for leave of absence six weeks prior to the expected date of delivery (14 weeks in the case of multiple pregnancies), the employer must approve the request. Furthermore, employers are, in principle, prohibited to cause any female employee to work for a period of eight weeks commencing from the day following that on which the employee gave birth. Childcare leave: If an employee with a child aged less than one-year-old requests permission for a leave of absence (by the child's first birthday in principle, or up to the age of 18 months if certain conditions are met), the employer must approve the request. Employers may deem employees who have worked at the company for less than one year and employees with a spouse who is able to take full-time care of the child to be ineligible for childcare leave, provided, however, that the employer does so by stipulating to that effect in a labor-management agreement. Family care leave: If an employee with a family member who has been judged to require a certain level of nursing care requests permission for a leave of absence to provide such nursing care (up to a maximum of 93 days in total per that family member), the employer must approve such a request once only for each occasion that a family member falls into a condition requiring full-time nursing care. Employers may deem employees who have worked at the company for less than one year and those whose employment will terminate within three months ineligible for family care leave, provided, however, that the employer does so by stipulating to that effect in a labormanagement agreement. Leave of absence to nurse a child: A worker with a child of preschool age may take a leave of absence of up to five days per year to nurse a sick or injured child.
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(Reference 1) Corporate benefit costs The expenses that a company spends on the welfare benefits of its employees can generally be divided into two groups: statutory welfare expenses, which include labor and social insurance premiums, as well as other legally required costs; and voluntary welfare expenses. According to a study (*) carried out in FY2003 (April 2003 through March 2004), the portion of wages comprised of welfare benefits was 17.8%. Specifically, the aforementioned statutory welfare expenses took up 12.9%, while voluntary welfare benefits amounted to 4.9% of the total. There has been a trend in recent years towards an increase in statutory welfare expenses, while voluntary welfare benefits are on the decrease. Voluntary welfare benefits include providing accommodation, health check-ups and other health-related benefits, general life assistance such as subsidized meals at in-house cafeterias, and the provision of recreational facilities. By far the most common of these is accommodation. * Performed by the Japan Federation of Economic Organizations.
(Reference 2) Labor unions In Japan, the right of its labor unions to carry out their activities is guaranteed by law. Employers cannot employ a person on the condition that he/she does not join a union, and cannot cause any disadvantage to an employee because he/she is a union member. Furthermore, no company may refuse its labor union's request for collective negotiations without due cause. For their part, membership of Japan's unions is decreasing year by year; membership was estimated to be 19.2% in June 2004. Examining labor unions by scale, we can see that workers at 50.6% of companies with 1,000 or more employees are unionized, while the same can be said of only 15.8% of companies with employees of between 100 and 1,000. In the case of companies with less than 100 employees, employees at only 1.2% of businesses are unionized.
(Reference 3) Temporary workers The term "Temporary worker" refers to a worker that enters into an employment contract with a temporary staffing agency (the company that temporarily places the worker), and who, under the orders of the agency, reports for work at a client company of that agency (i.e., a company that enters into a temporary worker placement contract with the agency, and then accepts temporary placement of the worker), and who performs duties under the orders of the client company.
Restriction of length and type of temporary work As a rule, temporary workers can be placed at companies to perform any duties other than port transport, construction and security, as well as some medical work. With the exception of some jobs, which require expert knowledge, skill and experience, and which are not subject to limitations on the term of temporary placement (known as the "26 specialized jobs"), temporary workers' placement terms are limited to a maximum of three years, provided that the term can be recognized as being temporary. It should be noted, however, that the term of placement for temporary workers that perform manufacturing work is limited to one year. Coverage of temporary workers by labor law Labor laws such as the Labor Standards Law, the Industrial Safety and Health Law, and the Equal Employment Opportunity Law apply to temporary workers. Companies that accept placement of temporary workers bear the responsibility of complying with the provisions of the Labor Standards Law pertaining to working hours, breaks and days off; those companies may have temporary workers work overtime within the scope allowed by the Labor Standards Law provided they enter into a labor agreement regarding workers' overtime with the agency that places the temporary worker. In this case, the
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temporary staffing agency bears the responsibility to pay increased rate of wages. It is the temporary staffing agency's responsibility to ensure temporary workers' annual paid leave, and to supply the client company with a replacement worker if necessary while the original temporary worker is on annual paid leave. Furthermore, it is the temporary staffing agency rather than the client company that must take out labor insurance (Workers' Accident Compensation Insurance and Employment Insurance) and social insurance (Employees' Pension Insurance and Health Insurance) for the temporary worker and pay the appropriate premiums.
(Reference 4) Subsidies The Government provides various assistance for enterprises that create jobs, two examples of which are as follows:
Subsidy for employment of human resources contributing to the development of Small and Medium-size Enterprises' business base A subsidy of 1.4 million yen per person (up to a maximum of five) is provided for startups (or the establishment of Japanese corporations in the case of foreign enterprises) that employ human resources that help strengthen the business base. Career development subsidies If vocational training for clear goals is provided to workers, one third of the wages of workers is subsidized during training.
(Reference 5) Consultation with specialists on human resource management Social insurance and labor consultants are human resource management experts with special nationally administered qualifications. At the request of companies, they perform a range of services including: 1. 2. Carrying out labor and social insurance-related procedures and other administrative work as a proxy for companies when hiring staff. Consulting services in relation to safety and hygiene, as well as labor management (including drawing up work rules, planning and redesigning wage structures, as well as settling employment problems). Mediation in individual employment disputes. Consulting and handling of claims regarding pensions. Other employment-related tasks.
3. 4. 5.
(Performance of services covered by 1. and 3. by persons other than certified social insurance labor consultant and attorneys is prohibited by law.)
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Flowchart 1. Social and labor insurances procedures when setting up a company and hiring staff
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HUMAN RESOURCE PROFESSIONALS AND SALARIES
Recruitment: a job, industry and way of life Labor law of the land helps skirt potholes in road to success Temp Staffing Agencies Eyeing for New Graduates, Women and Foreigners
SALARIES IN JAPAN
Earnings for recruiters can vary as much as from 3 million yen to 30 million yen annually. Some companies only pay a commission of client fees for successful hires, while others offer a base salary plus commission. Generally the lower the salary, Gibson says, the higher the commission: “The maximum is about 4.5 million yen for newcomers. After a couple of years, if they build a good reputation with clients they could make up to 40 to 50 million yen. The rule of thumb is the longer you’re in it the more you earn.” But there are risks to consider in the headhunting business. It’s an industry with a high turnover rate, especially among companies that pay on a commission-only basis.
SALARIES BY SPECIALITY Compensation & Benefits There has been extensive demand for experienced Compensation & Benefits professionals with thorough knowledge of Japanese labor laws, pensions and social insurance requirements. This as resulted from companies carrying out pension reform and the impending introduction of the Japanese 401k style pension plan. Demand is also being driven by the ongoing process in any companies of changing the traditional seniority based pay system into a pay by performance based model. Although most larger multinationals have now had this in place for some time, many smaller firms and most Japanese companies still use a seniority based pay system.
Due to the shortage of in-house Compensation & Benefits specialists, the consulting firms and HR outsourcing firms have certainly been busy with requests for their services, but they in turn have also found it difficult to find experienced staff to meet this demand. Many of these firms have been targets for companies seeking the skills of their consultants.
Staffing Increased recruitment volumes across most industries has led to additional opportunities for in-house recruiters as companies look to centralize and streamline their recruitment functions. This is in contrast to previous years in which headcount freezes and budgetary restrictions meant that recruitment had been looked after by other HR team members.
Learning & Development Demand in Training and Learning and Development has remained steady due to improved economic circumstances and headcount approval to invest in and develop Learning & Development functions.
Diversity Diversity training remains a current hot topic amongst many multinational firms. Many foreign firms have been conducting workshops and training in this area for a few years, largely driven
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by financial institutions. In some instances however, the introduction of training on harassment and workplace conduct issues has only been implemented after specific internal cases highlighted the need for employee education in this area. In others, the issues of diversity and workplace conduct are not on the agenda at all. So there is certainly a large variance in the adoption of these concepts across the market.
HR Generalist Demand also remains strong and constant for the HR Generalist who can be a real business partner and provide strategic and advisory support, either for the business unit they support or at the more senior level, to the CEO or President. Firms are increasingly recognizing the value that a proactive, involved HR department can bring.
Human Resources Salary Table 2005
[in MIL. ¥]
BANKING & FINANCE
Human Resources Director –Large organization Human Resources Director – Medium organization Human Resources Manager – Large organization Human Resources Manager – Medium organization Compensation & Benefits Manager Compensation & Benefits Staff 5–8 Recruitment Manager Recruitment Staff Learning & Development Manager Learning & Development Staff 6–8 Human Resources Generalist (Senior/CRM) Human Resources Generalist (Junior)
22–35 18–24 12–18 10–15 10–18 6–10 9–15 5–9 9–15 6–10
18–30 14–20 10–15 8–12 8–14
8–11 5–8 8–13
7–11 5–7 4.5–6
Human Resources Admin (incl. recruitment, C&B, training) 4.5–6
Table notes: 1. The above salary figures are based on million yen per annum. 2. The above represent mid-point salaries and do not include discretionary performance based bonus/incentive schemes. 3. The above information is based on salaries prevailing in multinational companies in Japan.
RANDOM ADS FOR RECRUITERS
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Corporate Recruiter Company Type International Strategic Communications Mid-career
Full/Part Time Full-time Salary 200,000 - 250,000/Month Commission based 6% of gross sales Location English Level Den-en-chofu, Tokyo Business
Japanese Level Native-level Date Posted Requirements 2006-11-13 Native-level Japanese level Must currently reside in Japan
Executive Search Consultant Company Type Ingenium Group, Inc., The Mid-career
Full/Part Time Full-time Salary from Location English Level 10.0M - 20.0M/Year Commission based Minato-ku, Tokyo Native-level
Japanese Level Basic Date Posted Requirements 2006-11-06 Must currently reside in Japan
Executive Search Recruiter Company Type TMT (Technics in Management Transfer) Mid-career
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Full/Part Time Full-time Salary from Location English Level 6.0M - 25.0M/Year Commission based Chiyoda-ku, Tokyo Business
Japanese Level None Date Posted Requirements 2006-11-01 Must currently reside in Japan Working or spouse visa (not tourist visa). University graduate. A commitment to 3 or more years in the job.
RESOURCES AND LINKS
JOB PLACEMENT AGENCIES AND RECRUITERS
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Japanese-Experts If you're thinking of living and working in Japan, we offer job seekers methods which are "tried & true" from people just like you who have been through the procedures and policies of relocating to Japan. Visa assistance, employment assistance, and general daily living assistance. We have done it all and offer you the best in our collective knowledge. (A2004-1263) URL http://www.japanese-experts.com Japan Recruiters International (A858-2478) URL http://www.japanrecruiters.com/ ExecNet (A863-635) URL http://www.execnet.co.jp IT Convergence Information technology, Internet, multimedia. (A854-751) URL http://www.k-n-y.com/it/index.html IMCA America (A857-604) URL http://www.imcaamerica.com/ Top Money Jobs (A860-994) URL http://www.topmoneyjobs.com Arts C Models Foreign models in Japan. (A861-803) URL http://www.artscmodels.com/ JDV International JDV International Inc. is a technical search firm specializing in the placement of Information Systems professionals worldwide. Their site includes job listings available in Japan. (A847-1322) URL http://www.jdvinternational.com/ James Harvard International An international placement firm specializing in IT. At the site you can search for jobs available in Japan. (A850-741) URL http://www.jhint.com/ IMC Systems Solutions (A852-492) URL http://www.imc-systems.com/ Stoneman Corporation Information technology. (A856-732) URL http://www.stonemancorp.com/ Cambridge TranSearch (A864-883) URL http://www.transearch.co.jp/english/index.html Juno Systems Juno Systems specializes in IT Staffing, Project Management and Management Consulting. The site includes a job search page where you can identify jobs in Japan. (A848-989) URL http://www.junosystems.com/ iHumans Biotechnology, Science, Medical (A851-593) URL http://ihumans.com/ A-TEN Associates Financial services (A859-636) URL http://www.a-10.com/
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Access Technology Japan ATJ places people in the Japanese IT industry. Website includes job search. (A849-1069) URL http://www.atj.co.jp
EMPLOYMENT WEBSITE LINKS
• The English Job Maze An International ESL/EFL job & information site for ESL/EFL teachers and employers in Japan and around the world. But it is also much more than 'just another' ESL/EFL job site. It contains a wealth of free TESL industy-related info for teachers, including 'Countries @ a Glance' - the most comprehensive TESL guide to pay, taxes, visas, travel, etc, in 50 of the world's most popular teaching destinations, including Japan. (A880-2687) URL http://www.englishjobmaze.com DotJapan dotJapan is a job listing site for companies and recruitment firms for advertising their open positions all for free. (A2083-1144) URL http://www.dotjapan.com CFN %7c Bizpro (A875-719) URL http://www.careerforum.net/bizpro/jp/index.asp BrassRing (A871-1069) URL http://www.brassring.com/cim/cim_advsearch.asp CareerCross Japan (A869-1866) URL http://www.careercross.com/ Asia-net (A867-1746) URL http://www.asia-net.com/ GaijinPot (A872-1557) URL http://www.gaijinpot.com/ Asiaco Jobs Center (A868-1694) URL http://jobs.asiaco.com/jobbank/ InterCareer Net Japan (A874-1875) URL http://www.intercareer.com/japan/ CareerBuilder (A873-1124) URL http://www.careerbuilder.com/JobSeeker/Jobs/jobfindil.asp? Japan Research Career Information Network Japanese language site. (A876-1359) URL http://jrecin.jst.go.jp/ Work in Japan (A878-3996) URL http://www.workinjapan.com/ PlanetRecruit (A877-1535) URL http://www.planetrecruit.com/channel/int/ FlipDog (A870-1648) URL http://www.flipdog.com/js/jobsearchresults.html?loc=world_JP&cnlist=1&job=1 TEFL.COM Jobs (A879-853) URL http://www.tefl.com/jobs/ Career Net, an information board for Japanese students studying abroad, and a conduit for companies who want to reach them.
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Midcareeer.com, is geared towards bilingual professionals with experience and fits a typical job board model. DaiJob.com Japan's biggest global job site BitValleyJobs.com Layer-8Jobs.com WorkinJapan .com Speed & Pride Corp A-Ten Associates (Japan) Limited - Executive Search for foreign and domestic securities firms, banks, and asset management/ITM firms as well as legal recruitment Brooke Consulting - Asia based pre employment screening and background vetting company. CDS Consulting - CDS is a leader in consulting-based executive search and market entry solutions in Japan East West Consulting - Executive Search Company. Our team concentrates on the Finance Industry in Tokyo. ICPA - Jobs for Technology, Marketing & Finance Professionals in Japan Ingenium Group, Inc. - a Tokyo-based executive search firm that sources and introduces executives and senior-level managers to industry leading companies in Japan. Inkinen & Associates - Executive search and HR consulting firm placing IT professionals in Hawaii, Asia and the mainland. JCI Consulting K.K. - Tokyo's Premiere Executive Search Agency delivering results quickly and professionally JDV International - specializing in the placement of information systems professionals worldwide. Positions in Tokyo, HongKong, Singapore and New York JOB ACCESS Ltd - Placing canidates in a large spectrum of industies throughout Asia and the Middle East. Juno Systems - IT placement in New York, Japan and Hong Kong Kimata Personnel & Consultants, Inc - Placement of Japanese-English Bilinguals and experienced and/or trained professionals in Sales, Engineering, Accounting, Clerical/Administrative and Customer Service positions among others Link Consultants Group - IT and Finance recruitment company, covering markets of Japan, Switzerland, EU and Balkans MAX Consulting Group, Inc. - Employment agency specializing in Bilingual Japanese placements in New York metro, Los Angeles, Chicago, San Francisco and Japan Pasona Europe Ltd - Recruitment Specialists for the UK, Europe and Japan The Bridge Group - Executive search in Japan
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The Ingenium Group, Inc - Tokyo-based executive search firm that sources and introduces executives and senior-level managers to industry leading companies in Japan and Asia Veritas International, Inc. - Consulting-based bilingual executive search firm, with over 15 years' experience, specializing in recruiting high-caliber Japanese/English bilingual professionals and providing Japan market entry services. WIN Advisory Group - a search consultant firm specializing in placing professional, managerial and executive candidates with Japanese owned and managed companies in the United States. O-Hayo Sensei - a free electronic newsletter that lists 40-50 teaching (and many other English language-related) positions at dozens of different schools and companies all across Japan Adept Group Inc.
OTHER ORGANISATIONS/ GOVT. BODIES • • • •
Japan Executive Search Recruitment Association (JESRA) American Chamber of Commerce in Japan (ACCJ) Japan External Trade Organization Ministry of Health, Labour and Welfare Japan
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