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Hitachi Set To Eliminate Seniority-Based Wage System
Feb 21, 2003
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Hitachi Ltd. has decided to end its seniority-based salary system in favor of a new pay system based entirely on job performance.

Hitachi's move is the first among major electrical appliances companies in Japan trying to dismantle the seniority-based pay structure. It reportedly is likely that such a decision by a giant company like Hitachi will affect the entire manufacturing industry in Japan.

The official said Hitachi hopes to enforce the new pay system in April and the management is trying to sell the plan to the company's labor union, according to a report in the Kyodo News.

Hitachi's move follows similar moves by other major Japanese manufacturers to move away from the seniority-based pay system, which together with lifetime employment has been a key feature of the Japanese corporate employment system.

Like other major Japanese electrical appliances makers, Hitachi has been struggling amid a prolonged slump in the information technology industry, while facing tough competition in the global market posed by China and other emerging economies.
"Many young employees are supportive of a merit-based wage system. In a globalized market, you cannot secure talented people without a merit-based system," a senior Hitachi official said.

Under the existing Hitachi pay system, a general employee gets 40 percent of salary through seniority-based basic pay and 60 percent through performance-linked pay.

The new pay proposal eliminates the seniority-based pay, meaning the entire salary would be linked to job performance.
Hitachi says it hopes to clinch an agreement with its union by March 12, when this year's spring wage negotiations end. (Kyodo News)

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