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If Your Reaction is, "Yeah, I Agree, That's Us,"
You are One of the Luckier Foreign Capitalized Firms
1. Your firm divides annual income by 16 or 20, for 4 to 8 months
of summer and winter bonus. This means that up to 25% to 40% of
pay is at risk. Although such bonus is generally paid, at our
company on an exceptional basis, and to secure the resignation
of a non-contributor, sometimes even no bonus is paid. (This is
Japanese practice, not the aberration know to some foreign capitalized
firms.)
2. Given the same total pay, the more bonus the better. Non-pensionable
pay components also keep our retirement benefit in line with other
companies. We realize that people considering joining us do not
know the details of our retirement benefit. Having a rich one
gives us no strategic, competitive edge. We have a very large
difference between what we are willing to pay at the fixed retirement
age, and what is payable when someone voluntarily resigns or is
terminated. This gets people to think twice about quitting, and
is a sensible use of scarce resources. Employee turnover is reduced.
3. In Japan it can be so difficult to terminate staff at a reasonable
cost. We need specific policies that give us a strong legal
position to flexibly reduce pay. Facing this, people will
leave with a modest severance package. Our offer letters, Rules
of Employment, and Salary System help us.
4. As a company we have come to appreciate that selection (the
people doing the work), quality of management, and the right corporate
culture well communicated, are key to our success. We also
know that strategically structured employment contracts, pay practices,
and Rules of Employment play a critically defining role in attracting
strong people, screening out weak people, and cultivating and
rewarding winning behavior.
5. We realized some time ago that if we believed the prevalent
views of what is "legal or possible in Japan," it would
be too difficult (and not much fun) to run a successful business
in Japan -- "extra severance packages must be offered to
everyone when reducing staff," "pay levels cannot be
reduced unless the person agrees," "there can be no
negative change," or "you have to get the agreement
of the union."
6. Attractive cash compensation -- money in the pocket now has
credibility. Today's Japanese worker does not trust long-term
paper promises. They want to keep it simple -- cash under the
futon. Even if you switch from your "Defined Benefit Retirement
Plan" to the much-talked about "Defined Contribution
Plan," if your firm requires employees make a matching contribution,
your firm will probably end up without a retirement benefit!
(The new law effective from October 1, 2001, did not
allow for matching contributions.)
7. It is an unfair imposition on your Japanese management staff
to expect them to drive changes that upset the status quo, and/or
affect certain entitlements (including their own). It is easier,
more effective, and more considerate to have the home office,
and/or one-step-removed expat bosses drive change.
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