![]() ![]() ![]() Also, many Japanese mortgages and long-term savings plans were, and often still are, structured with relatively low monthly payments and larger summer and winter payments to match employees’ receipt of bonuses. Summer and winter bonuses became so prevalent that until the mid 2000s, Japan’s mandatory state employee health, pension and unemployment insurance system contribution rates were much less on summer and winter bonuses than on regular monthly salary. With many Japanese joining a large company at 18 after graduating high-school, or at 22 after graduating university, then staying until retirement at 60, seniority-based pay traditionally made sense as part of Japan’s infamous ‘lifetime employment’ culture. Japanese call it ‘seniority-based pay’ because a company automatically increases an employee’s pay annually, and promotes the employee, depending on his or her years of service. Most employees earn a ‘divide-by-18’ annual salary, with 1/18th paid on the 25th of each month and semi-annual summer and winter bonuses, each equal to 3/18ths salary, paid each June and December. ![]() Let’s step back for a moment to understand how Japanese companies traditionally pay their employees. Performance-related pay in Japan, where performance-related means personal performance related? Doing business in Japan in the 1980s it would have been impossible, but three decades later, given the changes in Japanese employee attitudes resulting from two decades of recession and deflation, it is now an achievable goal to have every employee in your company’s Japanese office earning on a pay for personal performance basis. ![]()
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