Under nenko joretsu, pay rises every year you stay, and promotion to section manager or department manager comes at a broadly predictable age. The system pairs with lifetime employment: the company pays you less than you are worth when you are young and more than you are worth later, and the deal only works if you stay.
No law requires it, and many large companies have spent the last decade moving towards job-based or role-based grades. But in a great many Japanese companies, age still predicts salary better than job title does.
What it means for a foreign employer
- Salary tracks age, so compare like with like. A 38-year-old manager at a Japanese company may earn less than a 30-year-old in a similar role at a foreign company. The gap is the system, not the candidate.
- Expect large jumps when people move to you. Candidates leaving a seniority system for a foreign company often look for a 20% to 30% increase, partly because they are giving up the back-loaded pay they had been waiting for.
- Title inflation runs the other way too. In a seniority system a "manager" title can reflect age rather than people managed. Ask how many direct reports there are and what budget they control.
- Older senior hires may be expensive for the role. A 55-year-old leaving a Japanese company has reached the top of a seniority curve. That salary reflects tenure, not the market rate for the job you are hiring for.
Sources
- Long-standing employment practice; no statute governs it.