Employers Now Obligated to Employ Workers up to Age 65

In April 2006, a revised Law concerning Stabilization of Employment of Older Persons took effect, and employers are now obligated to continue hiring workers up to the age of 65. The mainstay of the latest revision concerns the obligation of employers to take measures to secure employment of elderly workers: they must either (i) raise the mandatory retirement age from the current age of 60; (ii) adopt a continued employment - i.e. re-employment or employment extension - scheme while eaving the mandatory retirement age at 60; or (iii) abolish the mandatory retirement age itself. This revision aims to fill the gap in income between retirement and commencement of pension payments caused by the rise in the pensionable age of the Employees' Pension Fund.

Benefits of the Employees' Pension Fund consist of a fixed portion whose amount is determined according to the enrollment period, and a portion linked to the level of remuneration participants received while still working. At the moment, the eligible age for payment of the latter is 60, but it has already been determined that the pensionable age for the former will be raised: to age 62 from April 2006, and, in stages, to 65 by fiscal year 2013. From fiscal year 2025, payment of the remuneration-linked pension benefits will commence at age 65. Accordingly, the statutory upper age subject to the obligation of continued employment will be set at 62 for fiscal year 2006, 63 for fiscal year 2007-09, 64 for fiscal year 2010-12, and 65 for fiscal year 2013 and afterwards.

Although employers who have been keen on reducing labor costs raised objections to the latest revision of the law; in a survey by Nippon Keidanren (the Japan Business Federation), 80.4 percent of the firms surveyed replied that they would adopt or expand their continued employment system, and 11.9 percent replied that they would take no particular steps to implement the revised law because they had already satisfied the new requirements. Continued employment will be, in principle, available for all those who wish to continue working after their retirement age, but it is possible for firms, in labor-management agreements, to limit the range of eligible workers to, for example, "those who have held posts in three or more branches across the country." The revised law was launched together with a temporary measure to buffer any sudden changes generated: thus, until 2009, large firms with more than 300 employees will be allowed to limit workers eligible for continued employment at the discretion of the employers by stipulating conditions in working rules, and small and medium-sized firms with 300 or fewer employees will be allowed to do so until 2011.

The revised law also stipulates that, "in cases where persons aged 45 and older but under 65 are separated from their jobs due to dismissal, and when said older persons desire re employment, their employers shall endeavor at all times to take necessary measures to assist in re-employment of said older persons, such as develop job offers." Despite all this, the latest revision has left the statutory mandatory age (60) unchanged. Nor is there any provision on penalties to be imposed on employers who have violated the revised law.