Japan tries new ideas to keep senior citizens employed

Japan has revised a law on stabilizing employment for its elderly, requiring employers to guarantee the employee retirement age of 65 from April this year.

Japanese companies have let go of employees over age 60 or signed new contracts with them at much lower pay. The Japanese government, however, is preparing for a retirement era of age 65 by extending the employment period up to that age by cutting managers` salaries or paying more to talented staff aged 60 or older.

The Nihon Keizai Shimbun, a major business daily in Japan, on Friday said the heavy industries company IHI will allow employees aged 59 to select when they will retire between 60 and 65. Until last year, it had terminated contracts with those who turned 60 with severance pay then selectively rehired certain staff for part-time work and half of their previous salaries.

Theoretically, IHI employees can work full-time for their departments after turning 60 from this year. Their pay will dip slightly after turning 60 but they could earn more depending on job type and performance. The company, however, will give a severance pay equal to those who retire at 60.

Mitsubishi Heavy Industries has renewed annual contracts with employees who turned 60 but they will earn 40 percent less than their original pay. Their pay, however, will be in proportion to their performance even when employees turn 60 this year. The contract period, however, will continue to be one year.

In these cases, overall payroll will increase and companies will be under greater financial pressure. Experts, however, say young employees can learn from their more experienced coworkers and companies can use seasoned employees longer. So more manufacturing companies are trying to pay more to employees aged 60 or older.

Mitsubishi will also give a 20-percent raise to those who are over age 60 this year and extend their employment. Toyota Motor is considering giving a part-time employment to staff over 60 and hold their severance pay until they are 65. JEF Steel said it will give 35,000 yen per month (377 U.S. dollars) to team leaders who are over 60.

Not all companies can give pay raises to employees aged 60 or older, and this has attracted attention to NTT Group’s salary system. The conglomerate is considering guaranteeing the retirement age of 65 instead of cutting pay for employees in their 40s and 50s.

Under the plan, payroll expenses would not increase even if the retirement age is raised. The group’s new system is expected to alleviate fears that companies might reduce hiring youth due to the payroll burden.

lovesong@donga.com