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The World Ahead

Pandemic prompts Japan Inc. to rethink traditional hiring systems

Companies under pressure to ditch lifelong employment amid COVID-19

The coronavirus pandemic has unexpectedly become a driving force behind the collapse of traditional Japanese-style employment. (Photo by Nikkei)

TOKYO -- Arriving at the office every morning at a set hour and spending time and sharing space day in and day out with bosses and colleagues, a working style once seen as immutable, has been destroyed by the novel coronavirus.

Now, working from home is the global trend. And particularly in Japan, the pandemic has unexpectedly become a driving force behind the collapse of traditional Japanese-style employment.

Japanese brewer Kirin Holdings in October announced that it will stop paying allowances for commuter passes for about 4,000 employees at its four group companies. Instead, it will pay a remote work allowance of 3,000 yen ($29) a month. The company will shift to a teleworking-based system, except for employees for whom it is difficult to work remotely, such as those at work at plants and logistics facilities.

Kirin Holdings has struggled to inspire employee' creativity over the past few years, but teleworking - which it was forced to introduce due to COVID-19 -- gave the company a clue. "Remote work has increased employee morale because they can work at their own discretion," said a human resources and administrative department spokesperson. The pandemic has also prompted the company to promote group-wide work reforms, including lifting a ban on side jobs.

Attention is now centered on job-focused employment, which is common in Europe and the U.S. Leading Japanese companies, including Hitachi, Fujitsu, Shiseido and Sompo Japan, announced that they will introduce job-focused employment.

Companies are required to decide and present responsibilities, goals and the abilities and experiences required to achieve objectives to employees. Job-style employment has an affinity with remote work as what should be done is clear regardless of where and when employees do their jobs. Companies can also improve productivity by placing the right people in the right work according to the capabilities of employees.

Japanese companies have long adopted seniority-based wage and lifelong employment systems. In exchange for lifelong employment, employees were expected to work long hours or on weekends and accept transfers or relocations. That is quite different from job-focused employment. Japanese-style employment took root during the period of the country's rapid economic growth decades ago, when companies needed to efficiently allocate labor to growth sectors.

But the economic situation has changed since then and the premise has already gone. Still, Japanese companies could not give up traditional working style, even though they knew they were inefficient. The emergency brought by the pandemic, however, finally prompted companies to change.

Yukio Ishizuka, Nikkei senior staff writer(Photo by Nikkei)

Japan is at significant crossroads as its population declines. This year, the country's working-age population, ages 15 to 64, is estimated at about 74 million. But that population is expected to continue declining, by 2.36 million from 2020 to 2025 and by 8.98 million in the 2030s. That means that workers equivalent to the population of London will disappear from Japan in 10 years' time.

Even today, Japan ranks lowest among developed countries in terms of productivity. For companies to remain competitive, they must become organizations that are productive and capable of creating innovation even with a small number of employees. Otherwise, Japan's economy will decline in the 2030s.

Therefore, the next five years will be important for Japan to lay the groundwork for transformation. Companies, under pressure to find solutions, are going through a trial and error process that includes the introduction of teleworking, job-focused employment and allowing side jobs.

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