Toyota Plans Overhaul to Seniority-Based Pay

A factory worker welds forklift components together on the assembly line at the Toyota Industrial Equipment Manufacturing Inc. facility in Columbus, Indiana, U.S., on Thursday, Jan. 22, 2015. The U.S. Census Bureau is scheduled to release durable goods figures on Jan. 27.

Luke Sharrett/Bloomberg

Toyota Motor Corp. plans to change its seniority-based pay structure for workers in Japan that would erase salary gaps between age groups, the company’s human resources chief said.

The carmaker will consider introducing performance pay for younger employees and wants to tie compensation more closely to talent rather than rank and tenure, Tatsuro Ueda said today in Tokyo at an event hosted by Keidanren, the nation’s biggest business lobby. He said Toyota also aims to revise its pay structure to better support child-raising.

As they enter annual spring negotiations with labor unions, Japanese companies are under pressure from Prime Minister Shinzo Abe to boost wages and help revive the world’s third-biggest economy. Toyota is forecasting a second consecutive year of record profit as a weaker yen boosts the value of earnings from cars and trucks sold outside Japan.

Japanese companies have in turn called on Abe to follow through on pledges to reduce business regulations and free companies from five-decade-old practices, including lifetime employment and the seniority system.

The average age of Toyota’s employees has steadily risen to 38.8 years as of the fiscal year ending in March 2014, according to the company’s most recent annual report. The average worker employed by the parent company was less than 37 years old a decade ago.

Toyota’s plans are aimed at attracting younger workers, the Nikkei newspaper reported today. The company expects the share of its employees who are 50 and older to rise to 30 percent by 2035 from 20 percent now, the Nikkei reported.

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