Japan turns contract workers into permanent staff as labour market tightens

  • Business
  • Saturday, 02 Sep 2017

Tight market: Workers assemble indoor units of air conditioners on the production line in Japan. The country has started converting contract and part-time workers into full-time employees due to the tight labour market. — Bloomberg

JAPAN’S labour market is getting so tight that companies are starting to convert contract and part-time workers into full-time, regular employees to prevent them from leaving – a move that could lift wages and spending but squeeze profits.

The trend is a reversal from the decades-long practice here of hiring cheaper contract workers who receive few benefits and are easier to hire and fire. They now make up more than a third of the workforce.

Companies are willing to reverse course and take on the extra costs that come with regular employees because of the tightest labour market since the 1970s, as Japan’s population ages and declines.

“We consider this as necessary investment for the future rather than a burden,” said Mayumi Kuroda, a spokeswoman for Credit Saison Co Ltd, a credit card issuer that plans to turn 2,200 part-timers and other contract workers into regular employees in mid-September.

They will qualify for bonuses and benefits, such as retirement plans, when they join the regular ranks. The company won’t disclose the cost but predicts it won’t have a big impact on earnings, Kuroda said.

Last year, the average monthly pay for regular workers was 321,700 yen (US$2,932) while for contract workers it was 211,800 yen (US$1,924), so a change in status can mean a big jump in pay plus benefits workers weren’t previously receiving. That isn’t across the board – some will see little change in their compensation but will get more job security.

Increased labour costs may squeeze corporate profits, forcing companies to either raise prices or improve labour productivity.

“We are fully aware of the risk that keeping employees as regular workers will raise fixed personnel costs, but I doubt pursuing profits by exploiting workers will boost creativity,” said Takayoshi Hontao, chairman of Going.com, which develops and operates business management systems. It has turned 10 of its contractors into full-timers, making all of its 40 employees regulars.

One of the biggest positives is that it gives employees a sense of job security.

“When the company offered me a permanent job last year, I felt I was needed, which has increased my motivation. It opened the doors for my promotion to a section chief, and a pay raise,” said Mami Tanaka, a 29-year-old employee at Going.com.

Japan Post Holdings Co Ltd has offered full-time jobs to 3,145 contract employees this fiscal year, and Fast Retailing Co Ltd, which includes the Uniqlo brand, has done the same with about 16,000 part-timers.

At Japan Airlines Co Ltd, about 1,100 cabin attendants on contracts were offered permanent full-time jobs last year, following a similar move by its domestic rival ANA Holdings Inc.

Some small companies in need of specialised workers are also following suit.

“It’s very difficult nowadays to secure plasterers at a time when our business is busy thanks to the construction boom ahead of the Olympics,” said Muneaki Harada, president of plastering firm Harada Sakan.“There’s a risk of fixing costs, but I believe benefits outweigh costs,” he said. — Reuters

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