Although ranked fairly low by the World Bank for ease of doing business, there remains a number of compelling reasons for companies to consider expanding into Japan. Notably, Japan is third globally in terms of gross domestic product (GDP), has a rich culture of innovation and offers well-established labor and intellectual property laws. In fact, marketers and western-based business are increasingly recognizing Japan’s potential as an attractive test market due to its large, savvy consumer base.
However, before investing, it is important to acknowledge the issues surrounding human resource practices facing employers targeting Japan.
Japan Labor Laws: General Legal Framework
Certain fundamental employment rights are guaranteed in Japan’s Constitution. These include the right and duty to work, bans on child labor and the right to organize and act collectively within a union. With respect to work conditions, there are three major Japanese labor laws: The Labour Standards Law (LSL), the Trade Union Law (TUL) and the Labour Relations Adjustment Law (LRAL).
The LSL deals with workplace health and safety, while the TUL guarantees rights to organize and engage in collective bargaining. The process for labor disputes is outlined in the LRAL. These acts impact private sector workers and represent a clear framework within which employment policies can be developed. This structure should encourage investors; as the presence of established acts make business operations much more straightforward.
It should be noted that Japanese employees are also highly unionized, although the collective agreements are typically drawn up between the enterprise trade union and the respective employer. Any employer with eleven or more employees is required to draw up “work rules.” These rules outline working conditions in tandem with the trade unions and are part of employment contracts. As well, these must be filed with the Labor Standards Inspection Office.
An Aging Working Class
Japan is in the midst of a re-envisioning around the nature of its workforce. Currently, society is aging rapidly and producing fewer children, skewing the mean age and productivity of existing workers. This is creating issues around part-time employment, inflexible workstyles, and lower employment mobility. Prime Minister Shinzo Abe has made it a priority to reform labor laws in Japan this year, however, to address working condition issues. His plans include developing a legal system to ensure equal pay for equal work and limiting overtime on working hours.
Some issues within Japanese labor force stem from the manner in which employees are classified and paid. Those categorized as ‘Non-Regular Employees’, for example, make up about 40% of Japan’s labor force. Japanese employers have a tendency to pay these workers lower wages, with few incentives or planned salary increases. Younger workers tend to fill these roles, meaning they are stuck in a job with low pay and little opportunities for advancement. As a result, they forego having children — compounding the aging crisis in Japan. Other workers are frequently women who have had children but have since been pushed out of regular work.
The government is now aiming to raise the salary of these employees to put them on par with ‘Regular Employees’. This should encourage younger people to accept this type of work, reduce gender inequality and stave off some of the aging concerns. As well, it would reduce the trend of hiring irregular workers which has become popular given the ease of hiring and firing. With these reforms, businesses would be expected to reduce the number of irregular workers in their organizations, which will support more secure, equitable employment across these classes.
Japan has the unfortunate reputation of expecting punishingly long hours from its workforce and its workers endure some of the longest, standard working weeks in the industrialized world. Stories in the news of ‘karoshi’ or death and illness from overwork are becoming too commonplace.
Currently, Japanese employment laws require a maximum 40-hour working week, at a maximum of 8 hours each day. Law also requires at least one day of rest each week. Employers that require employees to work on prohibited days, or in excess of these hours, face both civil and criminal penalties. However, employers often get around this mandate by entering into an agreement to permit overtime work with the union representative.
Recent proposals recommend that overtime limits be capped at no more than 100 hours each month, and no more than 80 hours per month on average for any work period from two to six months.
The government’s commitment to healthier work-life balance, as well as addressing the country’s aging crisis, would suggest that new parents’ obtaining maternity or paternity leave would be welcomed. Currently, by law, mothers and fathers are entitled to take child leave at the same time, for up to one year. Although this excludes fixed-term contractors. However, harassment for those who opt to take their offered leave is rampant across both gender groups.
One example of the leave culture is shown in the case of Cleeve v. Shane Corp, an example making news today:
Mr. Cleeve was a teacher employed under a fixed-term annual contract, who sued Shane Corp., a school chain, to get his job back after his contract was not renewed following the birth of his daughter. His first child was due in mid-November of 2016, and when he first asked Shane management for leave, the company refused, saying he did not have enough remaining paid leave. After a formal complaint, the Labor Board told Shane Corp. to amend its leave policy.
Mr. Cleeve’s wife’s pregnancy was complicated, and in spite of Shane’s refusal, he took off twenty-four days until the school holiday break. He applied for official child care to begin on January 10, and Shane agreed. Shane also sent Cleeve notice that his second contract would not be renewed when it ended on February 28 – meaning Cleeve lost both his job and the benefits of paid paternity leave.
While this case is still pending before the Tokyo District Court, it shows the reticence of employers to accept work-life balance standards, even with enforceable laws in place.
Despite Japanese law mandating equal employment opportunities for men and women, discriminatory practices and outright discrimination are common in Japan. Today, women account for 43% of the labor force, and irregular workers represent over half of employed women. In the World Economic Forum’s 2013 global gender gap index, Japan ranked 114th out of 136 countries – a decrease from years past.
Maternity harassment stands a significant reason why many women leave their careers. Today, around 70% are leaving permanent employment after giving birth. Those that do work often settle for low-paying irregular work, exacerbating a cycle of vulnerability, poverty and employment insecurity. Prime Minister Abe has recognized the potential for women to fill the gap in the shrinking population’s workforce and has enacted a law requiring businesses to compile and disclose plans to hire more women in management. This is a promising step which could spur change and reduce the stigma currently facing women who take maternity leave.
While true that Japan faces certain challenges regarding its employment and labor laws in practice, societal change is compelling updates in legislation and regulation. This will prove an exciting time for employers and businesses that want to develop and influence a healthy employment ecosystem and capitalize on the economic promise and market potential within Japan.
The team at Blueback Global makes it our mission to be in the know about legal and employment-related developments around the world – including in Japan – and our advisory practice can guide your internal HR practice and policies.
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