As the energy market changes and grows, the talent shortage is clearly apparent. For firms new to Japan and uncertain about project volume and staffing needs, as well as companies with a fluctuating workload, employing temporary contract workers can be an attractive solution. Like many things in Japan, however, contract employment is not quite the same as in many other countries.
The image of contract workers
Japanese society places a high value on stability. This directly impacts one’s ability to borrow money, gain access to higher class rental apartments, and approval from fathers for their daughter’s hand in marriage!
Working in a reputable, stable, well-known firm typically holds more weight than the individual’s income. For example, a lender will assess both the individual and their employer, and possibly refuse credit based on the latter’s reputation and status, or the length of employment and overall work conditions.
Compared to countries such as the UK or the U.S. that have a robust market for freelancers who choose projects that satisfy their interest or pay over permanent work, Japan has a rather tepid freelancer community. There are exceptions, in particular in the tech space, where software developers, SAP experts, etc, have increasingly turned to freelancing due to project-based work. In general, however, visa challenges make it difficult for Japan to build a strong base of foreign highly-skilled freelancers.
Non-Japanese citizens that wish to work either require visa sponsorship from an employer or a spouse, both of which require permanent commitments. The other option is to set up your own firm in Japan and apply for a business visa, the requirements of which include sinking a sizable amount of capital into the entity or hiring two full-time staff.
Temporary recruitment agencies, however, are very active in Japan. Adecco, Recruit and other major players have large pools of talent who are outsourced as contract (haken) staff. This cadre is good for operational roles in organizations, where lower degrees of training are required and where staff can be replaced quickly and relatively easily. Administration, customer service, order management, and bookkeeping are examples of functions that can be outsourced in Japan without much trouble .
When highly specialized skills are required, whether it be a particular path of engineering, financial modeling, commercial negotiations, etc, then the contract worker option tends to fall short. Though some candidates are available, they’re rarely the best in the market.
Employers in Japan can be quite critical of those who have taken contract work in the past. In the eyes of many human resource departments, those who took a contract position must have done so because they couldn’t secure permanent employment. Often, contractors are seen as ‘job hoppers’ by companies, and therefore struggle to transition from contractor status to a permanent employee.
When to use contractors
Senior hires
Most Japanese companies cease full-time employment at 60 years old, and even start winding down their career at 55. A select few progress to the highest echelons of the business and compete for C-suite roles, but for most of the older employees, the last few years will see them take on roles of lower responsibility and remuneration to make way for the next wave. This is a product of the seniority system embedded in Japanese business culture, leaving veteran staff that either didn’t wish to or could not secure top management positions declining rather than gaining social status around retirement age.
As many smaller or multinational companies recognise, many of these experienced talents have a wealth of value. Their depth of knowledge and network can bring credibility to a foreign firm when it engages with local stakeholders, business partners, financiers, etc. Often, these professionals are motivated by the contribution they can make, and therefore can be hired on direct, fixed-term or rolling contracts as (keiyakushain). These are somewhat different from outsourced contract workers (hakenshain).
In lieu of a probationary period
Your permanent employment contract likely has a probation period, usually 3 or 6 months that allows you to assess performance and let the worker go if needed. The problem is that all employment contracts are superseded by Japanese labor law, which gives full protection to the employee after two weeks. Offering an initial contract with an option to full-time employment gives you security to assess performance, and either extend the contract, let the employee leave, or switch to full-time employment without getting caught in a legal bind.
The catch is that you are offloading the risk onto the shoulders of the employee, and in a stability valued market such as Japan, this can put your offer at a competitive disadvantage if that candidate is in demand from multiple organizations.
Times are changing, slowly
Though not as far advanced as European or U.S. markets, diversity and inclusion initiatives are on the rise in Japan, which has traditionally been male-dominated in upper management and highly technical areas. In the past, it was common for women to give up their careers in favor of bearing children and shifting into family life. These days however, an increasing number of female professionals take on contract work during the early years of raising a family. This allows them to diversify and broaden their skill sets, and then jump back into full-time employment as home responsibilities change. Work-from-home and hybrid setups precipitated by Covid have certainly been a factor in accelerating this.
Secondarily, there’s an increasing number of professionals taking on post-graduate studies mid-career and paying for them from their own pocket so as not to be tied to company clawback schemes that can extend for years after graduation. Many of these aspiring young professionals will take on contract work during their study to build up experience and increase their market value upon graduation. Often, these more ambitiously minded individuals are open to fixed-term commitments that pay well and offer more flexibility to utilize their newfound knowledge.
Will Japan soon see a numerous, highly-skilled, flexible and mobile freelance workforce that’s willing to work on a project-by-project basis? Probably not, but the current generation of younger workers are certainly breaking free from the shackles of societal and company expectations that have been deeply ingrained for decades.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.