JAPAN: Companies Rehire Their Own Employees After Retirement

TOKYO (Straits Times), February 22, 2006: To overcome its shortages of staff, Japanese companies are rehiring their own employees. Why? Managers can rehire workers on lower pay. New Japanese laws settle the options that are available to companies to deal with the mass retirement of post-war baby-boomers. By April 2006, companies must publish a rehiring policy. Only selected employees will be welcomed back into their former companies. For the others the future is a lot less certain. In 2007, 6.8 million baby-boomers will retire. Japanese companies will face severe shortages of staff. For baby-boomers, mass retirement is also a problem as the retirement age goes up. This means that employees will retire before they reach a pensionable age. Presently, workers retire at 60 will start receiving their pensions when they turn 63. For those retiring in 2009, they will have to wait until their 65th birthday. The obvious solution is to allow employees to carry on working until they receive their pensions. The Japanese government is offering companies different options to keep their workforce working longer. First, they can abolish their retirement age, so that employees retire when they start receiving their pensions. Few companies are expected to take this option. Secondly, they can raise the age of retirement. Kawasaki Heavy Industries chose raise its retirement age to 63. But again few companies will follow suit. It expected that most companies will retire their staff at 60 and rehire a number of retirees. This option is most attractive because companies will be able to pay rehired employees at half or 60% of their last-drawn salaries. Most employees want to work past 60 according to a Nomura Research Institute. But not all employees though will be lucky enough to be rehired. Companies are only welcoming back selected employees. Toyota Motor is only rehiring model workers with sharp technological skills. By April, companies must have published a rehiring policy. But there is no obligation to do so. Employees who feel they should have been rehired by their former companies may consult their local unemployment office and possibly sue their employees.