60 Years Old, Salary Drop... Re-employment vs. Extension of Retirement Age: The Polarization of Senior Employment in Japan

Recently, Toyota Motor Corporation's announcement of expanding re-employment from the age of 60 to 70 has sparked a significant discussion in Japanese society. While Toyota already had a re-employment system in place until the age of 65, employment beyond 65 was exceptionally limited to a select few employees. Now, they have introduced a system that allows employees in all job categories to work until the age of 70.

Nitori Holdings also garnered attention by expanding its re-employment upper age limit from 65 to 70, effective July. However, it's somewhat surprising that these news items are making headlines. This is because the Elderly Persons' Employment Stability Act (Ko-rei-ho) already mandates the "re-employment of all willing employees" up to the age of 65, and the April 2021 revision of the act made securing employment opportunities up to the age of 70 a mandatory effort for companies. With the implementation of the law, many major companies have established re-employment systems up to 70 years old, making Toyota's move seem somewhat belated.

Furthermore, in cases of re-employment rather than an extension of the retirement age for senior employees, it's common for individuals to transition from regular employee status to re-employment, effectively becoming non-regular employees. In this process, salaries can experience a significant decrease.

Let's take a closer look at the "polarization" in the responses of Japanese companies regarding senior employee employment.

**Companies Can "Select" Employees After 65**

While the Elderly Persons' Employment Stability Act mandates securing employment opportunities up to the age of 70, it only requires companies to make efforts. Unlike the "mandatory re-employment of all willing employees" up to the age of 65, companies can apply certain criteria to decide whether or not to re-employ individuals beyond 65. Toyota stated that their re-employment program will target "employees with advanced knowledge and skills, who are expected to continue contributing to the workplace." In essence, this means that if employees fail to meet these two criteria: 1) possession of advanced knowledge and skills, and 2) the necessity of their work for the company, they will not be re-employed.

On the other hand, among major companies, a considerable number are adopting a policy of re-employing, in principle, all willing employees after 65, as long as they maintain good health, similar to the practice before the age of 65. In this context, Toyota's re-employment system up to 70 might be viewed as simply adhering to the minimum legal requirements.

**Is it Appropriate to Treat Re-employed Employees as "Finished"?**

Japanese society still lacks a comprehensive understanding of senior employee employment. In particular, some instances exist where employees re-employed after retirement are treated as "finished." This can lead to a failure to recognize the potential and value of senior employees.

Senior employees can make significant contributions to organizations based on their rich experience and expertise, and they can serve as valuable mentors to younger generations. Companies should remember that senior employment allows them to secure a diverse workforce across age groups and enhance organizational vitality.

Japan's aging population will only accelerate in the future, making senior employment an increasingly vital issue. Companies must recognize the value of senior employees and strive to utilize their capabilities to the fullest extent possible.