International companies often call an offer competitive because the base and target bonus beat the candidate's current figures. For senior people in Japan that comparison is usually incomplete. What matters is the offer measured against everything the candidate walks away from.
The largest item is often the retirement allowance. At a Japanese company it grows with years of service and final grade, and people who resign of their own accord usually get a lower rate than those who retire. A senior executive with 15 or 20 years' service may be giving up an amount worth tens of millions of yen. Next come seasonal bonuses. Many work rules pay them only to people on the payroll on payment day, and the Supreme Court upheld that condition in the Daiwa Bank case in 1982. A candidate who leaves in May may lose a summer bonus they consider already earned. Then there is unvested equity at a foreign employer, housing and family allowances, company housing, and for non-managers, overtime pay that disappears in a management role.
There are softer costs too: seniority rebuilt from zero, an internal network left behind, and the risk of joining a foreign subsidiary that could be restructured from overseas.
What it means for a foreign employer
- Model it before you frame the offer. Ask for the components, not just the total: base, bonus months and payment dates, the retirement allowance formula, vesting schedules, allowances.
- Use the right tools. Sign-on payments, a guaranteed first-year bonus, replacement equity or accelerated vesting can each cover a specific loss. Match the tool to the loss.
- Time the start date. Moving the start date by a few weeks so the candidate collects a bonus is often cheaper than buying the bonus out.
- Say the trade-off out loud. Even if you cannot cover everything, acknowledging what the candidate is giving up matters. An offer that ignores it reads as a pay cut, whatever the headline number, and it breeds resentment that hurts retention.
Sources
- Supreme Court, Daiwa Bank case, 7 October 1982 (bonus eligibility conditioned on employment on the payment date).
- Labour Standards Act, Article 89 (retirement allowances and bonuses in work rules).