How companies are addressing workforce shortages and employee satisfaction with senior employment in Japan

As Japan’s population ages, senior employment in Japan (aged 60 and above) is steadily increasing. According to a report by the Japan Business Federation, the employment rate for individuals aged 65 and older in Japan reached 25.2% in 2022, notably higher than that of other countries, such as the United States (18.6%) and the United Kingdom (10.9%).

Surveys indicate that approximately 80% of Japanese workers want to continue working after retirement. Of these, around 70% prefer staying with their previous employer. This trend has thus seen senior employment in Japan significantly rise, especially over the past decade.

Challenges remain, however. By law, pensions are reduced once a person reaches the age of 60 when their combined pension and salary exceeds a threshold. Many companies set wages to ensure pension payments are unaffected but this inevitably results in a reduced salary for seniors, even when they are doing the same work. As a result, motivation among senior workers has taken a dip.

Senior workers now make up the second highest percentage of worker cohorts changing jobs, following those in their 30s, according to research by PERSOL RESEARCH AND CONSULTING. A growing number of those in the category cite “dissatisfaction with salary” as their primary reason for seeking new employment.

At the same time, Japan is grappling with a rapidly declining birthrate, which has exacerbated the challenge for many companies in securing adequate human resources. In response, efforts are underway to improve the working environment for experienced senior employees.

The following initiatives aim to link senior employment with workforce shortages, increase job satisfaction among seniors and help meet employers’ demands.

The Japanese government, through the Revised Law Concerning Stabilization of Employment of Older Persons and various subsidy programmes, is actively encouraging companies to improve senior employment in Japan by enabling secure employment opportunities for workers until the age of 70. More companies are now introducing systems that allow employees to extend their retirement age, allowing them to work longer without sacrificing benefits.

For example, air conditioning manufacturer Daikin rehires over 100 employees annually under a system that extends the retirement age from 60 to 65 for those who want to continue working.

Daikin also allows workers in highly specialized fields to work beyond the age of 65, with veteran employees remaining active on the front lines even after 70. To support these changes, Daikin has revised its personnel and wage systems, introducing a structure that enables employees to receive promotions and salary increases after age 60, provided they are appropriately evaluated.

Daikin’s business has grown rapidly over the past decade, which led to a significant shortage of human resources. In response, the company has decided to implement reforms that motivate experienced veterans to continue working, even if it means increasing costs by billions of yen.

Similarly, the skincare manufacturer FANCL introduced a new employment category, “active senior employees” in 2017, allowing employees aged 65 and older to continue working. The goal is to provide seniors a platform to remain active while passing on their accumulated skills and expertise to younger generations.

The Ministry of Health, Labour and Welfare offers subsidies to employers who convert senior fixed-term contract workers to permanent employment to support such initiatives. This includes raising the retirement age to 65 or older and developing employment management systems tailored to senior workers.

The ministry also supports private-sector efforts by providing consultation services from experts on reviewing personnel management systems, developing and enhancing vocational skills, creating job opportunities and improving workplace environments.

As people age, having a clear vision of their future career paths becomes increasingly important. Facilitating this vision means acquiring the necessary skills and information to secure a job and work environment that meets their needs.

Konica Minolta, an information systems specialist, and Canon, a leader in imaging equipment manufacturing, address this need by providing career design training for employees in their 50s. These programmes help employees identify the skills and abilities they will need to thrive in the future, allowing them to plan their careers accordingly.

In his 2022 policy speech, Prime Minister Fumio Kishida announced a significant investment of JYP 1 trillion over five years to support reskilling efforts. This has led to the expansion of subsidy programmes, particularly in the digital sector, aimed at enhancing workforce skills.

Additionally, local governments have established facilities and systems that offer free professional development opportunities for seniors. These initiatives increase the availability of knowledge and skills training, ensuring that seniors can continue to contribute effectively in their roles, regardless of age.

Research has shown that a “sense of growth through work” is closely linked to the happiness and satisfaction that seniors experience in the workplace. As a result, reskilling opportunities improve employment prospects and contribute to greater job satisfaction and fulfilment among older employees.

To help seniors find new employment, the Ministry of Health, Labour and Welfare operates 300 “Lifetime Employment Support Offices” across Japan through Hello Work (public employment security offices). These offices are dedicated to assisting senior job seekers in securing new opportunities.

At the local level, initiatives have succeeded, including the senior human resources matching system in Obihiro City in Hokkaido. Within around six months, it registered 317 companies and 278 people and matched 251 people with new employment.

Private companies are also helping to encourage employment among older individuals. Mynavi Middle Senior, for example, specializes in job information for people in their 40s, 50s, 60s and beyond, helping to facilitate job searches for senior workers.

The World Economic Forum’s Longevity Economy Principles: The Foundation for a Financially Resilient Future highlights the importance of evolving work and lifelong skills for a multi-generational workforce and designing systems and environments that foster social connection and purpose.

As societies age, collaboration between the public and private sectors will be essential in advancing senior employment in Japan and creating fulfilling work environments for people of all ages.