Japanese companies are promoting a global unified compensation system

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International Business News – Japanese companies are promoting a common pay system for domestic and foreign employees. In March, Japan’s Xpress, which operates Uniqlo, will unify its domestic and international compensation systems and increase annual salaries for employees in Japan. Astellas Pharmaceuticals has also unified its global compensation system at the ministerial level and above. Compared to major countries, Japan’s compensation system is considered rigid and inferior in terms of treatment of talented people. By making the system universal, it will be easier for Japanese companies to raise their pay levels, and will lead to more flexible global talent allocation. Strive to make a comeback in the international competition for access to talent.

Ken Okazaki, chief financial officer (CFO) of Xpress, explained the new system, which will be introduced in March, at an earnings announcement on January 12. In Japan, there were previously job allowances and regional allowances, and the basic salary was determined by rank. In the future, these allowances will be eliminated and the salary system will be unified in Japan and abroad.

At the same time, the annual salary of regular employees in Japan will be increased by several percentage points to approximately 40 percent. Due to the devaluation of the yen, Japanese salaries have shrunk in dollar terms, making it difficult to attract talented digital professionals and others from overseas to Japan.“ The year 2023 will be the year of the big global move,” said Masayoshi Yanai, chairman and president of Xpress. International personnel transfers will be activated through the co-optation of systems.

Astellas Pharma 2021 introduces a globally unified compensation system for employees at the ministerial level and above. We hope to reduce the disparity in pay levels between regions in stages, and in January 2023, we launched a global pay increase to raise base salaries across the board. Targeting all employees except directors, the salary increase was 2% in Japan and 6% in some parts of Europe based on price increases in each country. With the introduction of a globally uniform personnel system at the local level, it will be easy for personnel departments in each country to cooperate.

According to the Organization for Economic Cooperation and Development (OECD), Japan’s average annual salary in 2021 ranks 24th among the 34 countries whose average annual salary is lower than the average of OECD member countries. Japan’s salary is at a low level among developed countries.

According to Hiroyo Yamauchi of Mercer, a Japanese company that is part of the U.S. talent consulting giant, “The number of Japanese companies that are promoting the introduction of a global unified compensation system for the purpose of efficient talent management and other purposes, and locally driving up salaries, is increasing.”

Hitachi, Ltd. will extend “job-oriented employment” to all of its companies by fiscal 2024, based on job content. The same employment system will be applied to 370,000 people in Japan and overseas, and it is hoped that it will be easier to select talented people from overseas subsidiaries. When employees are transferred from the United States, where salaries are higher, to Japan, we plan to provide subsidies that are commensurate with the salary levels in the employees’ home countries.

Fujitsu is also introducing job-oriented hiring in Japan in stages after 2020. By April 2022, 90% of employees at global headquarters and its companies will be converted to a work-oriented pay system. The mechanism is based on a globally uniform job rating to determine the basis for pay.

Nomura Securities acquired the business of Lehman Brothers in the United States in 2008 and subsequently established a global-type compensation system premised on Lehman’s personnel system and compensation levels, primarily in the investment banking and marketing divisions. The results and compensation are more clearly defined than the traditional system applied only in Japan, and the system is currently applied to most Japanese employees working in both divisions.

Adjusting the system and using talented people flexibly across borders has also helped improve productivity.

According to Japan’s Productivity Headquarters, Japan ranks 27th among the 38 OECD member countries in terms of labor productivity per unit of time in 2021, down one position from the previous year. Yanai of Xpress emphasizes that people overseas are working hard and that it is necessary for Japan to recognize the low productivity situation. With the increase in annual salaries, Swift is expected to increase its labor costs in Japan by about 15 percent. However, the company believes that it can absorb the increase in labor costs by promoting digitalization and improving productivity in all processes from manufacturing to sales. The human resources strategy of Japanese companies with a global perspective is being tested.