Permanent employment, or Shūshin koyō, was a huge thing in Japan. It was widespread in major Japanese businesses from the 1920s through the early 1990s. Is permanent employment good? Would it work in today’s global economy? The chances are scarce. Let’s find out why.

What we’ll detail in this article:

What is Shūshin koyō?

Shūshin koyō is the term that defines permanent employment in Japan. Shūshin koyō implies that one employee starts working for a company after finishing his studies and remains in that company until he reaches retirement age. The practice was commonly used in Japan in the last century and ensured the stability of jobs for a large part of the Japanese population.

Employees begin with a fixed base salary and receive advance each service year. When a person transfers to another firm, they start at the bottom of that company’s pay scale, and their wages may be lower than those of other workers of the same age in the same company. Workers are discouraged from changing employment because they enjoy a level of income that they cannot obtain if they go to another firm after a few years of service. The seniority-based compensation system underpays young employees while lavishly rewarding them later in their careers, even if their performance deteriorates.

Permanent employment meant that promotions were made strictly from within the company. Employees were motivated to stay in the same company by different yearly bonuses and other benefits. If a company failed, so did the employees, so everyone was pretty loyal and tried to do their best for their company to meet their objectives and targets.

Shūshin koyō gave Japanese employees the feeling of job security and generated a high level of  loyalty towards the company. The collapse of the Japanese asset price bubble and the subsequent crisis in neoliberal economic policies would result in the firing of inefficient workers, the rise of part-time jobs, and privatization. Due to the financial crisis of 2007-2010, a massive number of companies discontinued the practice of permanent employment (Shūshin koyō).

Is lifetime employment still a ‘thing’ in Japan?

Lifetime employment isn’t really a significant kind of employment in Japan now. Many people now view it as old-fashioned. In reality, only 8.8 percent of Japanese companies offer lifetime employment.

What do we understand by permanent employment now?

Permanent employment definition
A person in a permanent employment relationship works for and is paid directly by an employer. There is no set expiration date for this form of work contract. A permanent employee can work either part-time or full-time. Permanent employees frequently get benefits from their employers, which may differ depending on whether they work full-time or part-time.

What is a fixed-term employment contract?
A fixed-term employment contract is a contract by which a company or business hires an employee for a specified period of time. In most cases, it is for one year but can be renewed if necessary after the period has expired. The employee is not on the company’s payroll in a fixed-term contract.

Fixed-term contract vs. permanent contract
What is the difference between temporary and permanent employment?

Fixed-term contracts provide businesses with a flexible approach to acquiring new personnel. When an employee goes on maternity leave, a firm may need to fill a job for a limited period. Or they have a project that will take a few months and need specialized assistance.

There are several fixed-term contracts, but they are all distinguished because they have an expiration date, either on a specific day or after accomplishing a specified assignment.

On the other hand, permanent workers are employed for a specific role inside a corporation and have no end date.

What are the advantages of being in a permanent job? (for the employee)

    • Steady income
    • Professional relationships
    • Job advancement opportunities
    • Insurance
    • Paid time off
    • Retirement plans
    •  Fixed schedule
    • Training opportunities

What are the advantages of permanent contract employees (for the employer)?

Longevity
A certain level of entrepreneurial competence, which a short-term stay cannot achieve, results from the length of time in an organization. The importance of this factor varies by function. For example, in a highly technical process, only a tiny amount of in-depth business knowledge may be required to meet the job’s demands. In marketing or human resources, on the other hand, a high level of business expertise is needed, including insight into the company’s past and future goals, which can only be achieved and maintained by hiring permanent employees.

Growth
Contractors and temporary workers are frequently employed for specialized abilities required for a given job or project. Permanent workers have a considerably better chance of investing in training and growth. These team members may advance in their department hierarchy, take on future leadership roles, and contribute significantly to the company’s success.

Company culture
Permanent workers develop relationships in your company and usually embrace the company’s goals and perspectives. Over time, they will be more devoted to the business and their colleagues.

Why lifetime employment isn’t sustainable?

Lifetime employment isn’t sustainable because it limits both the employee and the employer. The employee is too dependent on the business’s success.

What will happen if the company fails? Will the employee have to start somewhere else with a much lower salary? In this case, his years of experience don’t really matter. As an employer, lifetime employment isn’t sustainable because employees can’t guarantee that they will maintain the same level of performance for all their lives.

A lot of things can change during the lifetime of someone. Lifetime employment isn’t sustainable because every business is influenced by a large number of different factors that can change very many aspects of that specific company and the work there.

Enlivy Editorial Team

The Enlivy Editorial Team consists of experts and professionals with years of experience building, managing, and growing a business.

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