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Ask Senpai: How does the salary system work in Japan?


Imagine standing at the crossroads of a career decision, weighing the significance of salary as you ponder over accepting a job offer. If your path leads you to a Japanese company, unlocking the mysteries of their salary system becomes necessary. But fear not, for the wisdom of the Senpai, the seasoned employees who have walked these professional landscapes, can enlighten you.


We gather these answers from Tokhimo Review, our company review platform for employees in Japan. Tokhimo Review allows employees to anonymously share their working experiences in some positions or companies, especially regarding foreign employees’ support and the international environment.


Here's what they said about their salary in Japanese companies. Click the link to find more reviews.


Age-based compensation

In many Japanese companies, seniority and hierarchy hold significant importance. It is customary for individuals to join a company immediately after graduation and remain employed in that company until retirement. During their early years, recruits are trained to develop a wide range of skills, rather than specializing in a particular area.


As a result, overall performance is emphasized over individual achievements. Consequently, the salary structure is primarily based on an employee's age, reflecting the prevailing seniority-based system. Look at this review:


Typical age based, regardless of what HR says, with little room to merit based compensation and not politics based evaluation.Read full review.


Age and seniority matters in Japanese companies


Experience-based compensation

It's worth noting that while the age-based salary system is prevalent in Japan, there has been a gradual shift towards more experience-based systems in certain industries and companies. This shift is attributed to the rise in mid-career recruitment and job-type employment among younger generations in Japan, as well as the recruitment of international employees. Therefore, multinational corporations and startups are more likely to adopt this structure.


Here are some employees' reviews regarding their salary system.


Good performance does translate to salary increases, so evaluations do seem fair.Read full review.


According to skills and experience salary is good enough. Salary improvement depends on individual performance result.Read full review.


Annual wage raise

In Japan, wage raises typically occur annually, regardless of whether the company follows an age-based or performance-based salary policy. However, employees have the potential for more significant changes in their compensation if the evaluation is based on performance. Those who performed exceptionally well in the previous year can expect a higher increase, reflecting the correlation between their performance and the magnitude of the raise.


The sales team evaluation is mainly based on target achievement which makes the evaluation logical. The base salary is decided on an internal rank that may go up once a year, or once every two years if you perform well.Read full review.


Good salary based on experience and they will increase for every year based on my performance. Read full review.


There is a revision on salary once every year. The revision is based on performance. Read full review.


Is the salary good?

The answers to this question vary from unsatisfied to very good. However, according to these answers, there are a few things you need to consider regarding salary. One, consider the compensation outside base salary. Sometimes the pay is not much, but the benefits and bonuses make it up.


The salary is okay to buy the wants and needs, they also give benefits and bonuses. Read full review.


The salary is not great to be honest, but I felt that the flexibility provided by the working hours and the long school holidays helped make up for the lower salary. I also appreciated having social insurance and they do not prorate salary for summer/winter which is the usual practice in this industry. It was not a job that would make me rich but it was enough to live on.Read full review.


Two, read your contract carefully. There are fair Human Resources departments and unfair ones. Make sure your contract gives what you deserve and protect your rights.


Salary is below average, HR will divide your initial contract's salary into 2 parts, which means your base salary will actually be lower than what you agreed to and your bonus will be lower as well. Read full review.


Three, understand your company's approach to salary raises. Japanese companies are generally known to have a more conservative approach to wage raises compared to some other countries. They value seniority, loyalty, and group performance and thus result in slower wage increases. However, there can be variations in wage raise practices among different industries, companies, and individual circumstances, so you need to check by yourself.


Due to the gap between fast title promotions, but slower raises in base salary, and less ratio in sales incentives, the evaluation system may seem fair to some people, but for the people who are more salary driven, it may not feel as satisfying.Read full review.


Salary of foreign workers

Unfair compensation for foreign workers is an issue that highlights the challenges and disparities faced by individuals who relocate to other countries for employment opportunities. Despite their contributions and skills, foreign workers are often subjected to unequal pay and treatment. This issue stems from various factors, including discrimination, inadequate legal protections, language barriers, visa restrictions, and a lack of market awareness.


Unfortunately, Japan is not an exception to compensation discrimination. Here are some reviews regarding this issue.


I feel dissatisfied. If compared to Native Japanese same work done by Indian employee is less remuneration.Read full review.


Little transparency before start, miscommunication leading to unfair compensation for foreigners. Read full review.

 

The salary system in Japan is deeply rooted in the traditions of seniority and collective approaches, but some companies have shifted towards performance-based systems. Understanding the nuances of the salary system is crucial for job seekers in Japan. Moreover, it is important to read your contracts carefully before signing them to avoid misunderstandings and to receive fair compensation.

 

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