After decades of flat pay, some Japan firms boost salaries to retain skilled staff

Lasertec

28/02/2022 23:00

* Japan's average salary of $38,515 in 2020 vs OECD average
of
$49,165 
    * Spring labour talks set pace for rest of economy
    * More firms are now turning to performance-based pay

    By Tetsushi Kajimoto
    TOKYO, March 1 (Reuters) - Over the last five years
Yokohama-based Lasertec Corp  6920.T  has delivered what much of
Japan Inc hasn't in decades: big pay rises.
    The maker of chip-measuring equipment has boosted salaries
by about a third overall since 2016. Employees at its main unit,
many of them engineers, make on average just under 14 million
yen ($121,00) - more than three times the national average of
4.3 million yen.
    Lasertec is among a subset of Japanese firms, often in
specialised areas such as technology, where pay is increasingly
tied to employee performance and not determined by seniority or
the base pay set in annual labour talks.
    While "shunto" spring wage talks between big manufacturers
and unions still have immense significance for the economy -
especially this year - more firms are opting for
performance-based pay, experts say, a change that speaks to a
wider shift slowly taking hold in Japan. (For an EXPLAINER on
the 'shunto' talks, click on  urn:newsml:reuters.com:*:nL4N2U72V7)
    "For companies like us, employees are valuable assets, not
costs," said Yutaro Misawa, a senior executive at Lasertec, 
whose profit has soared nearly five-fold and shares have surged
more than 2,800% over the past five years.   
    Attractive pay makes it easier to retain talented engineers
who specialise in research and development, especially given the
labour crunch as Japan's population shrinks, Misawa said.
    But for much of the rest of the world's no.3 economy, wages
remain lacklustre. Thanks to decades of deflation, companies,
like households, tend to hoard cash instead of spending.
Japanese companies now sit on a record $2.8 trillion in cash and
deposits. 
    In dollar terms, average annual pay totalled $38,515 in
Japan in 2020, well below the OECD average of $49,165 and little
changed from the early 1990s.
    Higher wages are critical for the government's target of
stable 2% inflation. Prime Minister Fumio Kishida has called on
companies to boost salaries and kick-start a virtuous cycle of
spending, as part of his platform of "new capitalism" to push
for greater wealth distribution.
    
    LAGGARD?
    Renewable energy start-up Abalance Corporation  3856.T  has
actively hired mid-career executives over the past three years,
lifting the average salary in Japan by more than 30%. Its
roughly 100 employees in Japan - both locals and non-Japanese -
are paid on average more than 7 million yen.
    "Acquiring talented people from all over the world is vital
for a company's growth," said Yuichi Kawauchi, a senior
executive. "If we leave things as they are and fail to show
Japan as an attractive place to work, Japan will fall further
behind the rest of the world."
    To be sure, performance-linked pay means bonuses can get cut
in a downturn - an unattractive prospect for the many Japanese
workers who prize stability. Unions typically seek incremental
increases to base pay, which is permanent.
    Most firms don't plan to raise base pay at spring labour
talks this year, the latest Reuters Corporate Survey showed. A
slim majority expect to raise total pay, which includes one-off
bonuses, the survey showed.
    That won't be enough to keep up with recent spikes in
commodity costs, analysts say, eroding household spending power.
 urn:newsml:reuters.com:*:nL4N2UN01Y
   
    RAISING CHILDREN
    For Yamada Consulting Group  4792.T , which helps midsize
companies restructure, attractive pay and perks are necessary to
keep staff from being poached, President Keisaku Masuda said.
    The consulting firm allows staff to work shorter hours to
encourage them to raise children. 
    "We face stiff competition for high-performance workers. We
have substantially raised pay and improved working conditions to
prevent head-hunting," Masuda said.
    It raised pay by an average of 19% in 2020 and by 5% last
year and now its average employee earns 9.2 million yen.
    Japan's labour talks will eventually shift from uniform
hikes in base pay towards more flexible wages that reflect the
market value of workers, said Yuya Takada, a researcher at
recruitment and staffing firm Recruit Holdings Co.
    Even Toyota Motor Corp  7203.T , itself the long-time
pace-setter of the spring labour talks, has stopped disclosing
details of base pay, highlighting the gradual decline in
importance of the labour talks.
    Seniority-based pay will become a thing of the past,
Recruit's Takada said.
    "That'll lower the significance of the way management and
unions struggle for base pay hikes at annual rituals."
    ($1 = 115.4800 yen)

 (Reporting by Tetsushi Kajimoto; Editing by David Dolan and
Muralikumar Anantharaman)
 ((tetsushi.kajimoto@thomsonreuters.com;))