Nearly 41% of firms have adopted merit-based annual pay

Nearly 41 percent of listed companies have adopted merit-based annual pay systems, according to a survey by a nonprofit organization.

The Japan Productivity Center for Socio-Economic Development said Tuesday that 40.9 percent of the companies questioned determined pay for staff based on performance in 2002, up about 6 percentage points over the previous year.

The rate came to 46 percent for big companies and 35.7 percent for small and medium-size firms, the center said. The survey was conducted on some 2,600 listed companies between October and December last year. About 300 replied.

The finding represents a steep increase from 9.8 percent in 1996, when the survey was conducted without separating companies in terms of their size.

The latest survey also found that companies adopted merit-based annual pay systems mainly for managerial workers, with 81.3 percent of department heads and 60.4 percent of section chiefs subject to the system.

Among other findings, 22.4 percent of the respondents have introduced a system of hiring staff as part-timers before accepting them as full-time employees.

While a comparison with the previous year is unavailable as the question was included in the latest survey for the first time, a center official said an increasing number of companies initially hire workers on a part-time basis and then “judge their work” before promoting them to full-time status.