Uniqlo owner hikes pay by up to 40% in Japan

Asian retail giant, Fast Retailing, has announced plans to adjust compensation policies in its core market of Japan.

Fast Retailing, which owns brands like Uniqlo and Helmut Lang, plans to increase the wages of Japanese employees working in its office and in its stores by up to 40%.

In a statement, the company wrote: “As an example of increased remuneration in Japan, the monthly salary of a newly joining university graduate employee will increase from the current ¥255,000 to ¥300,000 (an annual salary increase of approximately 18%).

“The salary of someone taking on a new role as store manager in their first or second year will increase from ¥290,000 to ¥390,000 (an annual salary increase of approximately 36%).”

These changes will come into effect in March 2023, and are an attempt to correct historical low remuneration in the country.

They also occur in the context of sky rocketing inflation rates in Japan. The country, which is the world’s third largest economy after the China and the US, saw its worst real wage decline in a decade last week.

As reported by CNN, Japanese Prime Minister Fumio Kishida has called on business leaders to increase wages and warned if they don’t the country could fall into stagflation.

A Fast Retailing spokesperson told CNN: “Inflation in Japan is a factor in our considerations.”

But the employer is also more focused on aligning “each employee’s remuneration with global standards, to be able to increase our competitiveness”.

This begs the question, is the war for talent, dubbed the ‘Great Resignation’ playing into this move?

Fast Retailing overhauls HR

The Japanese pay rise decision by Fast Retailing is part of a wider rethink of the employer’s pay system.

As reported by the Financial Times, Fast Retailing is aiming to move away from a seniority-based pay structure, which is the norm in Japan, and instead evaluate employees based on their performance and ability to contribute to the business.

The employer shared: “Going forward, the new remuneration of each employee will be decided by globally aligned grade criteria.

“Factors such as work performance and results, ability to contribute to the business, ambition and growth will be defined once again, and a fair grade evaluation will be realized through meticulous performance evaluation from one’s supervisor, and a thorough evaluation from upper management and the HR Department.”

Ultimately, the employer is using this HR review to rethink and “reform workstyles and the entire organization, so that every employee can work to the best of their ability towards generating results.”

As part of this, CNN reported that the retailer has also looked at its pay outside of Japan and has made hikes of between 5% and 25% in certain markets. The FT stated that Fast Retailing hopes to absorb these payroll costs by the boost in productivity from the other changes.

Japan is far from the only country grappling with sky-high inflation rates – German and British companies have started to embrace pay rises and bonuses to tackle the cost of living crisis.

The big question is whether other employers in Japan (and elsewhere) will follow suit in this cost of living crisis.

UNLEASH has reached out to Fast Retailing and Uniqlo for comment, but is yet to receive a response.

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