HR September 2012

Fight or Flight

The effect of Japan’s ageing and declining population on recruitment strategies in multinationals

  • Firms want staff to work past retirement age
  • Strong demand for Japanese-speaking leaders
  • Healthcare and medical sectors booming
  • Need for temporary, contract staff growing

Japan’s recruitment market is experiencing severe challenges due to the shift in demographics currently taking place. Research indicates that, by 2060, Japan’s population will have shrunk by one-third, while the number of people aged 65 or over will almost have doubled.

As a result of the mounting pressure on firms’ human resources departments to find and retain the next generation of leaders and managers, firms are offering rolling and renewable contracts to encourage employees to work past their retirement age.

At the same time, recruitment firms are seeing a significant increase in demand for young, talented professionals. According to an HR director of a major multinational firm, only 6% of employees in Japan are under the age of 35.

Retaining future leaders is becoming increasingly important in Japan, even as the increase in candidate demand ushers in an increase in salary demands. This is not likely to change.

Although many organisations are becoming more receptive to the idea of hiring non-Japanese who speak Japanese fluently, there is always the possibility that these foreigners might wish to return to their home countries. Nevertheless, at present the demand is strong for non-Japanese, manager-level candidates, who show potential for reaching director-level positions.

The need for haken (temporary) and keiyaku (contract) workers is also growing. Older employees are increasingly accepting these roles but, with the retirement age at 60, many firms are cautious about hiring older candidates permanently who cannot be long-term employees.

In contrast, the healthcare and medical industries are benefiting from the ageing population. These industries are booming in Japan, and global organisations continue to invest heavily in the world’s third-largest economy.

Healthcare and medical businesses have proved recession-proof, and continue to expand both organically and through joint ventures with Japanese firms.

Recently, some firms even have changed their policies for female employees, in order to adapt to the demographic changes.

Most women enter the workforce on completing their tertiary education but, until recently, tradition and long working hours have caused nearly three-quarters of these women to cease working outside the home either once they marry or after having had children.

But this, too, is changing, as many firms address the labour shortage by adjusting their policies concerning working mothers. Thus, by providing equal opportunities for women, foreign multinationals have been able to retain their female staff, even after the latter have started a family.

By adjusting traditional Japanese practices and promoting new policies, firms are better able to deal with the challenge of demographic changes that Japan is experiencing. There is no doubt that in the coming years the demand for young talented professionals will become even greater as the need for these workers within multinational organisations increases.