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To help alleviate the pensions crisis, the Japanese government has increased the retirement age from 60 to 65 years and slashed state pension benefits by 5%.
Historically, companies have provided housing and family allowances for staff.
Statutory guidelines on holiday state 10 days after six months rising to 20 days with more than six-and-a-half years’ service.
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Although the Japanese economy is in recovery mode, its pensions programme is under pressure due to a rapidly-ageing society and low birth rates.
The country recorded its lowest ever birth rate in 2005, of just 1.25 babies per woman over a lifetime, however, a rate of 2.1 is needed to keep the population level static. Life expectancy levels, meanwhile stand at 81 years in Japan – the UK is at 78 years.
In 2000, the government decided to take steps to help address the pensions funding issue by raising the retirement age from 60 to 65 years and reducing state pension benefits by 5%.
Outside of the state system, retirement benefit plans have traditionally consisted of defined benefit schemes, with formulae linked to final salary or a points-based system relating to employee performance.
Pensions laws, introduced in 2001 and 2002, have also allowed for the introduction of defined contribution-type plans and cash-balance plans. The government increased the tax-free contribution limit in 2004 to make these schemes more popular and their take-up is expected to accelerate, according to Mercer Human Resource Consulting.
Apart from pensions, the state also provides comprehensive medical coverage, but companies with more than 700 employees can contract out of the government-managed health insurance by setting up an Employees’ Health Insurance Society plan. These schemes generally secure more advantageous contribution rates and often provide additional benefits. As all employees must be covered by either system, there is little scope for private medical insurance.
Short and long-term disability benefits also tend to be uncommon in Japan.
Jeff Howatt, a consultant at Towers Perrin’s office in Tokyo, says: "Becoming more common is providing mental health arrangements under employee assistance programmes and more flexibility to allow employees to take leave to try to address mental health issues."
Firms’ retirement pension plans are often used to provide involuntary termination payments to employees who are retiring due to work-related disability.
The majority of Japanese companies also provide group term life insurance cover, however, the terms vary depending on the employee’s job classification.
One benefit that sets Japan apart is help with housing, which tends to be expensive, especially in metropolitan areas. Company-owned housing is not unknown and organisations also encourage staff to buy housing or land through company-sponsored savings plans, while some also offer subsidies or specially-negotiated low-interest rate mortgages.
Where the traditional pay structure still exists, family and other allowances are paid. There is also a slight trend towards paying for performance.
Jim Humphrey, a consultant at Hewitt Associates’ Tokyo office, says:"Variable pay dependent upon performance, company or individual, has been introduced although there is often not so much individual variability and a true pay-for-performance culture is not usually found in Japan."
The expectation of a job for life has also diminished in the last few years, partly due to the recent economic recession. Long hours are the norm, while statutory guidelines on holiday stipulate 10 days after six months of employment, rising to 20 days with more than six-and-a half years of service. Staff are motivated with incentive bonus and stock purchase plans.
"However, employers are becoming somewhat more sensitive to this [hard-working culture] than in the past. Work-life balance is a concept that is not strong here yet, but the country is moving in that direction," adds Howatt.