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Making layoffs in Japan isn’t so easy

When business is bad, banks in Western countries tend to wield their axes with abandon. Not so the J-banks.

Take Mitsubishi UFJ Financial Group. When it announced in late March plans to close 50 branches and cut 1,000 jobs, it didn’t go pink-slip crazy, it chose to make the cuts through attrition over the next three years. For cultural and legal reasons it may have been difficult to do anything but that.

Japan has among the toughest and most employee-friendly labour laws of any developed economy, says Pete Millett, director of recruitment firm People Services International. “Even though staff cuts are obviously necessary in the current economy and are definitely taking place here, they remain quite difficult to implement,” he says.

Yasuhiro Fujii, an employment law partner at Baker & McKenzie GJBJ Tokyo Aoyama Aoki Koma Law Office, agrees that Japan’s labour laws are tough compared to the US or even Europe. And he explains that when making redundancies for business reasons, four strict requirements have been established for employers to properly justify dismissals.

“First, the employer must have a financial need to reduce the number of employees, sufficiently based on a business slump, decline or depression affecting the employer,” he says.

Secondly, the employer must also have exhausted all efforts to avoid dismissals in restructuring.

“Primarily, the employer should be able to show that it has made every effort to, among other things, cut overhead costs, place restrictions on overtime work, suspend hiring and transfers, second or transfer employees to related parties, terminate temporary staff from agencies and part-time workers, grant temporary leaves and temporary layoffs, and implement a voluntary termination scheme,” Fujii says.

Finally, the employer must use objective standards and a fair application of those standards in targeting the employees to be dismissed, and must follow proper procedures.

While the J-banks and the local offices of foreign banks in Japan are governed by the same set of employment laws, Millett says there are noticeable cultural differences between the two when it comes to cutting jobs. “Differences arise more from the cultural willingness of when, how widely, and how deeply to make or not make staff cuts,” he says.

David Swan, director of financial services at Robert Walters Japan, adds that from a cultural perspective it can be more difficult for Japanese firms to make layoffs because many employees view their jobs as being for life and Japanese companies tend to take a more paternal approach to their employees’ careers.

The pay might not be so hot and the business culture might be off putting for many Western bankers, but in troubled economic times, maybe life at a J-bank isn’t so bad after all.

Comments (5)

  1. But they wont hire Americans.

  2. In current economic gloom (in japan) all it boils down to is do you have the talents that the current markets need. `talents` needed by current markets may be different than your own perception ! slay dog, its time for the reality check that you have been procastinating since 2007.

    Good Luck.

    Slayer of slay dogs Reply
  3. What does “talents” mean – mostly Japanese proficiency or do they look for other skills in J-banks?

  4. How do non Japanese get hired by MUFG and the other banks, does anyone know of the process that they go through?

  5. By means, global recession hit and the banks still in trouble. How does the employee subject for termination get benefits to remain her/ his post? Banker is always on top of this.

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