A union at Toyota Motor Corp. is planning to propose that a larger emphasis be put on performance when determining workers' pay increases, rather than continuing the current system in which seniority is the main criteria, a source close to the matter said Thursday.

The policy set out by the Toyota Motor Workers' Union is widely used as a standard-setter for annual shuntō wage negotiations across Japan each spring. The proposed system, which also reflects management's wishes, would increase the possibility that larger wage gaps could form between union members at Toyota.

The policy change comes as Japan's largest automaker faces a difficult market environment, with the industry rapidly shifting to electrified and autonomous vehicles, leaving the company looking to improve its competitiveness. Some union members have called for the introduction of a system in which wages are decided on the basis of performance, the source said.