ENVIRONMENT OF HUMAN RESOURCE MANAGEMENT OF JAPAN

The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what staffing needs you have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies. Usually small businesses (for-profit or nonprofit) have to carry out these activities themselves because they can't yet afford part- or fulltime help. However, they should always ensure that employees have -- and are aware of -- personnel policies which conform to current regulations. These policies are often in the form of employee manuals, which all employees have.

Introduction Japans economy continued to grow slowly in 2007. GDP is expected to grow 2% for the year, compared to 2.2% in 2006 (IMF figures). Unemployment also stayed relatively steady, at 3.8% in November 2007. However, competition for skilled employees and graduates of top colleges has intensified significantly. In addition, a combination of new laws and changing attitudes among employees is changing the human resources landscape in Japan. This article discusses the relevant developments that have taken place in Japan over 2007.

Laws and government activity On January 1st, 2007, new tax rates became effective in Japan. Although there was no net change in rates counting local taxes, a regulatory change broadened the definition of a permanent resident for tax purposes. Before, tax law treated a foreigner in Japan as a permanent resident after living there for five years continuously. Now, a foreigner becomes a permanent resident if they live in Japan for five years out of ten non-continuously. The law was meant to stop the practice by some expatriates of periodically leaving and returning to Japan to avoid gaining permanent resident status, and therefore not needing to pay taxes on foreign-sourced income. The Japanese government has frequently altered its pension system to account for the quickly aging Japanese population. According to the most recent government draft, monthly National Pension (NP) payments are to increase by as much as 25% from the current 66,000 yen (about USD$577) to

83,000 yen (about USD$725). Another bill has proposed expansion of the Employee Pension Insurance (EPI) system, which currently receives contributions from both employers and employees, to also include freeters, or part-time workers. Discussion is also underway to regulate overtime spent by employees, to ensure that incidents of karoshi, or death from overwork, can be reduced or eliminated. Average overtime worked in Japan hovers around 2,000 hours per year, with little recent change. If the law is passed, companies would be required to increase overtime pay from the present 1.25 times regular pay to 1.5 times, when overtime exceeds 80 hours a month. However, even if the bill is passed, many doubt that Japans entrenched situation of long hours and unpaid overtime can be rectified easily. Changes are proceeding for foreigners living in Japan. On November 20, 2007, the revised Immigration Control and Refugee Recognition Law came into effect, intended to strengthen the screening process for foreign visitors entering Japan. The law requires all foreign citizens entering the country to have their fingerprints and facial photographs taken at immigration every time they visit. In addition, they will need to be interviewed by immigration inspectors. This law may create long waits at airports, and also make Japan a less appealing site for international business in comparison with Hong Kong or Singapore. However, it is too soon to see the laws full impact on business in Japan. Japans Equal Employment Opportunity Law (EEOL), originally passed in 1985, has been heavily revised, effective April 2007. The 1985 law had often been referred to as a toothless lion because it banned discrimination and harassment in theory, but did not actually establish legal penalties for them. The current law does give concrete penalties, which will make it have more practical effect for HR managers. It also prohibits indirect

discrimination, which refers to employment practices that appear neutral but are effectively discriminatory. An example of indirect discrimination would be requiring a prospective employee to agree to possible nationwide transfers, which is difficult for women with families to accept. In addition, before it only protected women generally, but now it also protects men, pregnant women, and women with newborns from discrimination and harassment. Finally, the government is ramping up child-rearing support in an effort to encourage working mothers to return to the labor force. The government has proposed to raise the monthly allowance for women on maternity leave from 40% to 50% of their salaries, as well as other programs. The original childrearing support program, introduced in 2005, made it compulsory for companies with over 300 employees to draft an action plan with numerical goals for child-rearing support. Current changes to the program are meant to make small to medium-sized businesses friendlier to working mothers as well. Hiring and HR trends During the long recession of the 1990s, many Japanese companies significantly cut back their hiring of new college graduates. Now that the economy has improved, college hiring has also picked up. (At the same time, the use of part-time and contract employees in addition to regular employees has become prominent.) Interestingly, in higher-ranked colleges, with increased competition, more graduates are reportedly turning down jobs from traditionally prestigious companies such as banks, large manufacturers, and securities brokerages. Students reasons for turning down jobs extend beyond factors such as salary, company reputation, or fringe benefits. They include poor prospects for future advancement, negative impressions during a job interview, or work/life imbalance.

Foreign HR managers should realize that some younger Japanese are increasingly individual-minded as compared to their parents consensus generation. More Western-style hiring practices such as appealing to recruits interests and ambitions should not be neglected. Quality of life initiatives are also increasingly popular. According to the Japan Productivity Center of Socio-Economic Development, 15% of companies employing 5,000 or more employees now have work-from-home programs in place, and more are starting similar programs every month. Family-oriented initiatives are growing as well, with SoftBank Corporation, a huge Japanese communications group, recently announcing that it will pay its employees up to 5 million yen (about $42,700) to have children. At the same time, foreign companies are in a position to recruit talent that local companies might neglect. For example, over 2.5 million university graduates in Japan are currently working in temporary or part-time jobs at low salaries, since companies were not hiring when they graduated. The longer they stay freeters, or aimless part-time workers, the more difficult it is for them to find full-time jobs in traditional Japanese companies. Appropriate full-time positions may be very appealing to them. Women are also a relatively neglected category of skilled employee. According to Japans Gender Equality Bureau, in 2005, women occupied only 10% of management positions in Japan (up 1% since 1995), compared to 32% in Germany and 42% in the United States. Ambitious members of this developing talent pool are often good choices when hiring employees for Western companies in Japan. Many foreign companies have begun to send their most promising female employees to training workshops and executive coaching programs to help women join the next generation of leaders.

Another newly-emerging source of skilled talent is retirees. Close to 10% of Japans current labor force is expected to retire within the next five years. Even when their retirement is secure, older Japanese may choose to take new jobs to stay busy and keep their minds active. These retirees often have skills in demand and require significantly lower salaries than other candidates with similar skills. However, they may also prefer more limited hours.

Conclusion HR professionals at Western companies in Japan need to contend with many complicated issues, including government preparations for Japans coming aging crisis, shifting social attitudes on work, and increasing job competition and mobility. At the same time, since Western companies are less traditionbound, they are also more able to take advantage of these changes, by hiring new kinds of employees and offering innovative workplace arrangements. Innovative workplace arrangements include pay for performance and non-lifetime employment.

ENVIRONMENT OF HUMAN RESOURCE IN JAPAN

NAME: SACHIN BAKSHI ROLL NO. 31 ( S.Y BBA )