Boss arrested for underpaying wages

Not paying or underpaying wages is a widespread management practice in Japan. Normally managers get round the law by paying up if they are found cheating staff. But in what is reported as the first case of its kind, a nursing home manager has been arrested for underpaying staff.

He is said to have withheld around 100 million yen (US$833,359 at today’s exchange rate) from about 40 workers in the home. He managed to do this by changing information on time sheets and in computers.
This was a small business, but some of the biggest companies in Japan also withhold or underpay employees’ wages. The press widely reported that Japan’s largest car producer, Toyota Motors, had not paid some of its technical staff due wages. This was not a first offence – in 2000 the company had not paid out overtime wages totalling 10 million yen to 83 sales staff.

An April 2002 government survey revealed a staggering 84.8 percent of Japanese firms fiddled overtime payments.
In December 2002 the Health, Labour, and Welfare Ministry revealed that 16,059 companies failed to compensate workers for overtime in 2001, an increase of 150 percent since 1991.

Government departments are rife with the practice, by limiting overtime payments, but no hours worked!
Human resource management (HRM) is much to blame for the situation. Workers are often aware of underpayment, but are effectively blackmailed into accepting non-payment by having to show commitment to the company, an important detail when promotion is considered. They also frequently claim less hours than they actually work to ‘prove’ their efficiency, according to Keiichi Ito, research head at the National Confederation of Trade Unions.
Companies are increasingly adopting methods that originate with HRM systems, for example by installing performance-related pay, which can actually lead to reductions in wages when performance does not outstrip the previous years’. Honda Motors adopted performance-related pay for its 40,000 rank-and-file workers in October 2002, however if performance based pay calculations lead to wage cuts, Honda says it will not implement them until 2007.

Other firms for example Matsushita Electric Industrial (MEI) will also make the switch from seniority-based wages. MEI president Kunio Nakamura said that seniority-based pay was detrimental to global competition, and Japanese companies could no longer afford it.

The Straits Times, 5 February 2003; The Japan Times, 26 January 2003