JILPT Research Report No.166
Mechanism of Employment Portfolio Formation:
Empirical study through qualitative analysis

May 30, 2014

Summary

Research Objective

The objective of this Research is to elucidate the realities behind the formation of employment portfolios (combinations of several different employment formats) in companies, business establishments and workplaces.

Research Method

The Research method used here is case study. Between FY2012 and FY2013, interview surveys were conducted with staff in charge of human resources, business site managers, labor union officials and others in 8 Japanese companies. Moreover, since this is positioned as the final report in the employment portfolio survey, we finally analyzed 15 cases, including those analyzed in other related survey Researches.

Major Findings

In the companies targeted by the survey, Head Office HR departments mainly manage regular employees, while other non-regular workers are managed by business sites and workplaces. When forming employment portfolios, moreover, the important point is which employment format these workers are positioned in, because workers are managed by type of employment format. This positioning is determined by the number of employees (quota) in each employment format, and the number of employees (quota) in each employment format is decided by responsibility centers (Fig. 1). Responsibility centers indicate what the responsible persons in an organization are responsible for.

Fig. 1 Types of responsibility center

Figure.1

Source: Nakamura & Ishida, eds. (2005) and Nakamura (2006) p.196, partly amended.

Note: In this Research, investment centers are taken as part of profit centers, as they are seen as special forms of profit centers. The same applies below.

The method (approach) of deciding staff numbers and payroll budgets depends on the responsibility center. Fig. 2 shows the correspondence relation between types of responsibility center and methods of deciding staff numbers and payroll budgets. In profit centers, staff numbers and payroll budgets are mainly decided on the premise of securing profit (within the range of securable profits). This is called the financial approach. In designed cost centers and revenue centers, the work volume in the following fiscal year is projected from sales forecast, and staff numbers and payroll budgets are decided on this basis. This is the work volume approach. In discretionary cost centers, staff numbers and payroll budgets are decided by management judgment. This is the strategic approach.

Fig. 2 Correspondence between responsibility centers and methods of deciding staff numbers and payroll budgets

Figure.2

Source: Takahara (2012) and survey results.

In the process of relaying the decided staff numbers and payroll budgets down to business sites and workplaces, the use of non-regular workers is considered, and the organization’s employment portfolio is formed, which develops characteristics of employment portfolio formation for each responsibility center.

In revenue centers, the work volume is projected from sales forecast, and staff numbers needed to execute this work volume are calculated. Payroll budgets are calculated either by multiplying sales turnover by a personnel cost ratio, or by multiplying staff numbers by a different unit cost for each employment format. However, since work volume may sometimes fluctuate, the employment portfolios are formed ad hoc depending on the situation.

In designed cost centers, the necessary work volume and budget amounts are decided at the stage of receiving work orders. For this reason, in designed cost centers, employment portfolios are formed on the premise that work operations are executed as scheduled and the costs specified in the operational plan are observed.

In discretionary cost centers, the necessary costs cannot rationally be calculated, and decisions on staff numbers and payroll budgets are based on management judgments. Specifically, they are decided on the basis of the personnel structure in the previous fiscal year. Therefore, cost cuts are rarely required in a form corresponding to short-term fluctuation in business performance, and there is basically no modification in the formation of employment portfolios.

In profit centers, the emphasis is on financial indicators (especially profit targets), and staff numbers and payroll budgets are decided so as to attain those targets. As a result, in business sites and workplaces, the use of non-regular workers is considered within the range of the allocated budget and the employment portfolio is formed.

Policy Implications

The policy implications of this report are threefold.

The first is the possibility of promotion (conversion) to regular employees. The employment portfolios of Japanese companies are mainly formed from any one of finance (e.g. profit), work volume, and strategy. As a result, even when making efforts to train human resources with the aim of promoting non-regular workers to regular employees, this does not necessarily lead to their promotion to regular employees. This is because the quota for regular employees is decided by logic (finance, work volume, strategy) other than skills. To expand the potential for promotion to regular employees (full employee quota), the use of limited regular employees may be considered as the goal for promotion of non-regular workers.

The second point is the realization of equal treatment. Until now, there has been correspondence between employment formats, work content and levels of treatment, which has created order within organizations. As a result, the differences in treatment depending on types of employment formats have been persuasive. However, as the use of non-regular workers progresses and their field of work expand, assuming part of regular employees' work, it is possible that the sense of fairness will be lost. To prevent this kind of problem in advance, non-regular workers should be given opportunities to make their voices heard, and companies or labor unions should periodically check working situations in the workplace.

The third is human resource development of non-regular workers. The importance of human resource development of non-regular workers lies in enhancing their careers within or outside their organizations. However, human resource development of non-regular workers is carried out in accordance with a company's need. To secure education and training opportunities for non-regular workers and promote the formation of macro human resources, public and private sectors will need to cooperate with each other and seriously address human resource development of non-regular workers, while respecting the education and training conducted inside companies.

Policy Contribution

Formation of employment portfolios is a theme related to the nature of employment, job content, skills, wages and other aspects of all workers. Findings obtained by clarifying their reality will be useful in resolving various problems affecting non-regular workers, such as achieving employment stability (potential for promotion to regular employees), equal treatment, and human resource development.

Contents

  1. Cover – Preface – Authors – Contents

  2. Part 1  Summary
  3. Part 2  Retail
  4. Part 3  Manufacturing
  5. Part 4  Accommodations, eating and drinking services
  6. Part 5  Finance and insurance
  7. Part 6  Conclusion, reference bibliography, interview lists (FY2009-2013)

Research Categories

Project Research "Research on Strategic Labor/Employment Policies for Non-regular Workers"

Subtheme "Survey Research on diverse ways of working in regular and non-regular employment"

Research Period

FY2012-2013

Authors

Hodaka MAEURA
Researcher, Japan Institute for Labour Policy and Training
Kasumi NOMURA
Senior Research Officer, Japan Institute for Labour Policy and Training

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