The issue of whether to give nonregular workers permanent status has bedeviled companies and employees alike, especially with the end of a five-year waiting period on a labor law revision looming in less than a year.
The 2013 revision to the Labor Contracts Act requires companies to convert their nonregular employees — including part-time and temporary workers — to permanent ones if they have worked there for at least five years and opt for the change in status. That means companies need to plan ahead because the rule will take effect next April.
Some companies, especially small and midsize firms, have been dragging their feet because adding permanent employees makes it more difficult to implement layoffs.
“It’s not too late yet. Just begin your preparations,” Hiromi Morohoshi, a legal consultant on labor and social security, told a group of personnel and human resource representatives from 18 companies at a promotional event in Tokyo.
“It is important to make everybody in your company aware of the new rule. You must establish in-house procedures to prevent disputes with your employees,” Morohoshi said.
Organized by job placement agency Aidem Inc., the event was aimed at the many small and midsize firms that are struggling to develop a clear policy on the revision. Employers are concerned that hiring too many permanent workers will limit their flexibility.
“Many companies think of nonregular workers as ‘an adjustment valve’ in employment. They really don’t want to use the new system,” a Tokyo-based consultant on labor and social security said.
Some of them have even asked the consultant about potential loopholes and the risks of using them.
The revised law took effect on April 1, 2013, and the five-year waiting period stated in the new permanent status rule began the same day.
The Tohto consumers’ cooperative society launched preparations to convert its 326 nonregular workers desiring permanent status in March 2014. The decision was made amid concerns about the potential for sudden dismissal.
“It’s good thing that we can retain people who are already well-trained and skilled at their jobs,” an official of the co-op said.
The official said the co-op is considering giving the new permanent workers a raise and improving their labor conditions.
According to a recent survey by Aidem, roughly 80 percent of nonregular workers seeking permanent status are hoping they will get better wages or labor conditions.
But their optimism overlooks one apparent loophole: The revised law does not require employers to provide these benefits.
According to Morohoshi, a company can fulfill its legal obligation simply by changing an employee’s status and leaving the compensation and other labor conditions unchanged.
The Bank of Tokyo-Mitsubishi UFJ, for example, gave about 8,000 workers permanent contracts in April 2015. One worker in her 50s, however, complained that this brought her no new benefits and may have actually reduced her income.
“My pay is the same as when I was a contract worker and they don’t pay me a bonus,” said the woman, who works at a branch in Osaka. “They just changed my status to permanent.”
The woman feels dejected every time she sees regular workers rejoice at their bonuses on paydays because if she had remained a contract worker, she would have been able to demand a bonus under the government’s “equal pay for equal work” guideline.
According to the Labor, Health and Welfare Ministry, the guideline does not compel management to pay bonuses to permanent employees who were converted from nonregular status.
“This bank said permanent employment was a very good thing but I’ve discovered that’s not true in reality,” the woman said.
According to a March survey by Aidem, 85.7 percent of nonregular workers are unaware or little aware of the new rule.
The online survey, which covered 679 nonregular workers and 554 officials from various companies, found that only 14.3 percent understand the tricky rule in detail.