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In today's dynamic work environment, a job-based employment system is gaining prominence over the traditional membership-based employment system in Japan, prioritizing the recruitment of individuals for specific skills and experience over seniority. In this blog, we examine the job-based and membership-based employment system and their influence on HR strategies and recruitment.
What is a "Job-Based Employment System"? How Does it Differ from a "Membership-Based System"?
A "job-based employment system" is an approach that defines job roles and recruits individuals possessing the requisite skills and experience for those roles. It distinguishes itself by its focus on finding the perfect fit for each job, clearly outlining job responsibilities, and emphasizing performance.
In contrast, Japanese companies have traditionally leaned towards the "membership-centric employment system," which hires talent first and allows them to undertake a variety of roles and responsibilities through job rotation over time. This approach places a greater emphasis on tenure when it comes to promotion.
However, due to factors such as labor shortages arising from declining birth rates, an aging population, and the forces of globalization, the "job-based employment system" has recently gained traction. This system puts skills and job responsibilities at the forefront. Let's delve into the key differences of each system.
Job-Based Employment System:
- Clearly Defined Jobs: In this system, every role and job is precisely defined. Recruitment is based on detailed job descriptions, ensuring that each hire is tailored to a specific job with well-defined responsibilities and rewards.
- Performance-Based Evaluation: Employees are assessed based on their job performance and duties, rather than their seniority or the number of hours they work. Performance and contributions take center stage in evaluations.
- Specialist Development: The job-focused HR system revolves around assigning individuals to particular roles, with career advancement primarily based on the roles' well-defined descriptions, making it conducive to nurturing specialists.
Membership-Based Employment System:
- Hiring First: In a membership-based employment system, employees are recruited first and then assigned to different roles through job rotations and transfers. People are brought in before job specifics are determined.
- Tenure-Based Evaluation: Evaluation criteria and timing of promotion tend to be based on years of service.
- Generalist Development: The membership-centric employment system adopts a people-to-role approach, making it conducive for developing generalists through periodic job rotations across various positions.
Why is the Job-Based Employment System Gaining Momentum?
The increasing prevalence of job-based employment systems can be attributed to several key factors, as follows:
- Shift from Lifetime Employment: Historically, Japan's robust economy thrived on systems like lifetime employment and seniority-based wages. However, the intensifying labor shortage driven by declining birth rates and an aging population has rendered the long-term employment model unsustainable. Consequently, there's a rising demand for job-oriented employment arrangements that prioritize immediate work capabilities.
- Lack of Specialized Skills: Japan's present labor market faces a dire shortage of individuals possessing highly specialized skills, particularly in technology-related fields. According to a study by the Ministry of Economy, Trade, and Industry (METI), there's a projected shortfall of 400,000 to 800,000 IT professionals by 2030. This increasing skills deficit is a significant driver behind the adoption of job-based employment systems, which prioritize the recruitment of individuals with specialized expertise and experience to meet the demands of rapid digital transformation.
- Decline in Global Competitiveness: Japan's global human resources competitiveness has hit a historic low, ranking 43rd out of 63 major countries and regions in the Global Human Resources Ranking (2023) by IMD, a Swiss business school. This ranking reflects a decline in Japan's human resources competitiveness on an international scale. To enhance international competitiveness amid the rapid wave of globalization, securing highly specialized, skilled, and competent human resources, especially in the IT sector, has become essential. This growing imperative is a key motivator for the adoption of job-based employment systems.
- Spread of Remote Work: The widespread adoption of remote work due to the COVID-19 pandemic has made it challenging to maintain traditional employment evaluation methods, particularly in environments where individual work processes are less visible. As a result, there's an increased need to assess employees based on their actual work performance. This shift in evaluation methods has contributed to the growing demand for job-based employment systems.
Advantages and Disadvantages of a Job-Based Employment System
Advantages:
- Recruitment of Skilled Talent: Job-based systems streamline the hiring process by providing clear job descriptions, allowing applicants to gauge their fit for a role before joining a company.
- Productivity Improvement and Cost-Effectiveness: Clarity in job assignments reduces duplication of work, boosting productivity and reducing labor costs. Performance-based evaluations enhance salary fairness.
- Prevention of Post-Employment Mismatches: Clearly defined job descriptions align employee and company expectations, reducing turnover and enhancing workplace satisfaction.
Disadvantages:
- Difficulty Finding Suitable Talent: The stringent job descriptions may limit the pool of potential candidates, making it challenging to recruit individuals with specialized expertise.
- Limited Employee Transferability: The job-based employment system often restricts flexible employee transfers to different departments, as employees are primarily assigned to roles specified in the job description.
- Difficulty in Retaining Talent: Job-based systems may lead employees to seek better opportunities elsewhere, necessitating competitive salaries, benefits, and corporate cultures to retain top talent.
Steps to Implementing a Job-Based Employment System
When introducing a job-based employment system, it's crucial to follow these steps and create an effective implementation plan:
- Determine the Scope of Application: Begin by defining the scope of application for the job-based employment system. Given its fundamental departure from traditional Japanese employment practices, it's often challenging to transition all employees simultaneously. Consider adopting a hybrid employment system that accommodates various job types and levels, such as general employees and managers.
- Create Job Descriptions: Crafting comprehensive job descriptions is pivotal in a job-based employment system. Job descriptions should encompass essential elements like position title, department, scope of responsibilities and authorities, job objectives, specific tasks and responsibilities, required skills and qualifications, desired skills and qualifications, as well as salary and benefits details. Collaborate closely with the human resources department and field employees to develop clear and consistent job descriptions.
- Revise the Salary and Evaluation System: During the transition to a job-based employment system, it's imperative to revisit the salary and evaluation frameworks. Establish transparent evaluation criteria based on skills, shifting away from seniority-based systems. Additionally, conduct market research to align compensation with market values to maintain competitiveness.
- Educate and Communicate: Properly educate and communicate with employees when implementing a job-based employment system. Provide detailed explanations of the new system, outlining changes and benefits to ensure a smooth transition. Encourage open communication and actively seek feedback from employees, demonstrating a commitment to system improvement.
- Monitor and Enhance: After implementing the job-based employment system, continuously monitor its effectiveness and make necessary improvements. Regularly assess employee satisfaction, productivity, and the appropriateness of the salary structure to optimize the system.
The adoption of a job-based employment system represents a significant change for a company. However, by following these appropriate steps and strategic planning, an effective employment system can be established.
Summary
Job-based employment systems are garnering attention as a means to adapt to labor market changes and enhance competitiveness. Companies can benefit from considering this innovative approach, which combines flexibility, efficiency, and the harnessing of employees' skills and motivation.
At Robert Half, we offer support to our clients in recruiting highly specialized and talented individuals. If you are contemplating hiring, please feel free to reach out to us for further information and assistance.
