Push for equal work, equal pay principle

The equal work, equal pay principle — under which workers should be equally treated in terms of wages and other conditions irrespective of their contract status if they engage in the same work — is one of the policies pursued by the government in its work-style reform agenda. The 2013 amended labor contract law stipulates that there should not be irrational disparities in the conditions of regular full-time corporate employees and people on irregular contracts such as part-timers, contract workers and temporary dispatch staff. In 2016, the government compiled a draft guideline on what kind of disparities between regular and irregular workers constitute irrational discrimination. As the number of people hired as irregular workers tops 20 million and accounts for nearly 40 percent of the nation’s workforce, closing the pay gap between them and regular employees remains an urgent task.

The first top court decisions on a series of lawsuits filed across the country over claims of irrational treatment of workers on irregular status took place last week when the Supreme Court last week handed down rulings on two cases. From the viewpoint of plaintiffs, the decisions were mixed. In one of the lawsuits, filed by a man who works as a contract employee at a firm in Hamamatsu, Shizuoka Prefecture, the top court ruled that it’s illegal for the company to deny the worker certain work-related allowances that are provided to regular employees on the grounds of his contract status.

But in the other case — involving three drivers at a Yokohama-based trucking company who were rehired on an irregular status after reaching retirement age and were suing the firm over cuts to wages and allowances even though they continue to engage in the same work as when they were hired as regular employees — the Supreme Court said the reduced pay cannot be deemed irrational, given that they were rehired following mandatory retirement.

Lower courts had been split in their decisions on the case. The Tokyo District Court said the company violated the labor contract law for reducing wages for the drivers when they continue to engage in the exact same work as the regular employees. But the Tokyo High Court reversed the decision, ruling that it is a socially accepted norm for businesses to reduce the pay for workers who have been rehired after retirement. The top court said it should be taken into consideration that the workers had received full-time pay for years until retirement and soon expect to receive pension benefits. Given that the mandatory retirement age system is a scheme designed to allow companies to cap their manpower costs within a certain range on the basis of long-term employment and seniority-based pay, the wage system is assumed to change after the workers hit retirement age, it reasoned.

The case of the Yokohama trucking company highlights the similar conditions facing the growing ranks of elderly workers in this country. According to an Internal Affairs and Communications Ministry survey, the number of people 60 or older on payroll reached 13 million in 2017, rising annually by hundreds of thousands in recent years. A 2015 study by the Japan Institute for Labor Policy and Training showed that of the people aged between 60 and 64 who were rehired by their employers after the retirement age of 60, roughly 60 percent became contract workers, much higher than the 35 percent employed as regular workers. Roughly 80 percent of the workers engage in essentially the same work as they did before retirement — a trend that is more evident among smaller companies, the survey found.

Irregular workers are said to be paid roughly 60 percent that of regular full-time company employees in terms of hourly wages. The government hopes to narrow the gap to around 80 percent — on a par with many European economies. However, the government’s draft guideline against irrational wages and other treatment of irregular workers does not touch on what to do with people who are rehired after retirement — many of whom are given irregular job statuses.

As the nation’s population is on a decline and rapidly aging, the government is pursuing policies that encourage more elderly people who are willing and fit enough to continue working to stay on the job — partly to make up for the declining ranks of the productive-age population and also to sustain the social security system under the graying society. The number of elderly people on company payrolls will likely continue to expand. But to encourage more people to keep working into their senior years, decent employment opportunities for them must be prepared. The government should look into developing criteria on the proper work conditions for people rehired after their retirement. Businesses, for their part, should review the conditions they offer retired workers if they need their skills and experience.