A revision to the labor contract law that took effect in 2013 was intended to stabilize the employment of irregular employees by requiring companies to convert workers on fixed-term contracts who have worked for the same employers for at least five years from when the law took effect into permanent employees if they so wish. In April five years will have passed since the law’s implementation and cases are being reported of workers with irregular statuses being denied renewal of their contracts before they become eligible to apply for conversion to permanent status.

Businesses should stop such practices, which clearly run counter to the purpose of the revision, and instead regard full implementation of the legislation as an opportunity to reassess their employment policy, including improving the conditions of irregular workers, which should in turn benefit the employers from the viewpoint of securing manpower amid the tightening labor market.

The number of people with an irregular job status, such as part-timers and temporary workers — who are easier to hire and fire than full-time regular company employees — have increased since the 1990s and today account for nearly 40 percent of the nation’s workforce. The number of workers on fixed-term contracts has reached some 15 million, of whom roughly 4.5 million are estimated to have worked with the same employers for more than five years — an indication that despite their temporary job status, many employers rely on them as an indispensable source of long-term manpower.

Once they have worked for the same employers for five years by renewing their contracts after the revised law took effect in April 2013, they can apply to the employers to switch their status to permanent contracts so they can work until mandatory retirement age, just like the companies’ regular full-time employees. If they do, the employers cannot turn down their request — although the revised law does not oblige the employers to raise their wages or put their conditions on par with those of regular full-time employees.

Companies that have used fixed-term workers as an “adjustment valve” in employment — who could be laid off when their business goes bad — are reportedly concerned that the new rule could add to their long-term manpower costs. Although the revision to the labor contract law was intended to increase job security for workers on irregular contracts, worries have been expressed that the rule might in fact destabilize their jobs if their employers deny them renewal of their contracts before the workers’ earn the right to seek a conversion to the permanent status. Complaints that have been filed with labor authorities as well as consultations made with labor unions in growing numbers in recent months indicate that such a concern has not been unwarranted.

Employers should realize that improving the conditions of irregular workers on their payroll will work to their own benefit — increased security for such workers should boost their morale and productivity. That should contribute to securing needed manpower amid the growing labor shortage, which is increasingly becoming a problem for Japanese firms. As the economy continues to grow and the ranks of people in the working-age population decline, the labor market is the tightest it has been since the 1970s, with the ratio of job openings to job seekers in December reaching 1.59 on a national average. Many companies are already beginning to convert irregular workers to regular employees and offer them better conditions in a bid to retain the manpower they need. Full implementation of the new rule under the revised labor contract law should encourage more firms to take such a step, not the other way around.

A survey taken last year by the Japanese Trade Union Confederation (Rengo) found that more than 80 percent of workers on fixed-term contracts polled were not aware of the specifics of the new rule. It should be made known to the workers that conversion to permanent contracts is not automatic, and they have to apply to their employers to obtain it. The government should step up efforts to inform the public of the new rule as its full-scale implementation draws near. In the same survey, 11 percent of the respondents said that since the revised law took effect, their employers have set an upper limit on the duration of their contract or the number of times the contract can be renewed — an apparent attempt to circumvent to the rule — and 6 percent said they had been denied renewal of their contract. Such practices run counter to the purpose of the revised law and should be stopped..

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