Organisations in Japan offer more pay raises in 2024

Organisations in Japan are set to offer more generous pay raises in fiscal year 2024, according to a Ministry of Finance survey.

The survey, encompassing responses from approximately 1,100 organisations nationwide, offered insights into the evolving landscape of remuneration strategies in Japan. According to the findings, around 70% of these organisations are poised to implement pay-scale increases, reflecting a surge compared to previous years.

Particularly striking was the escalation observed among small and medium-sized enterprises (SMEs), with the proportion of such organisations intending to raise pay scales surging by 8.8 percentage points to 63.1%, outpacing the 3.2-point increase recorded among larger organisations.

Of noteworthy significance is the inclination towards substantial pay-scale hikes, with 59.8% of organisations contemplating increases of 3% or more, marking a considerable surge of 23.4 points. Furthermore, organisations envisioning cumulative pay-scale hikes and regular pay increases totalling 5% or more nearly doubled from the previous year, reaching 36.5%.

Drivers behind these salary adjustments are manifold, with the most prevalent rationale cited as “raising employees’ motivation to work, improving working conditions, and preventing employees from quitting.” This was closely trailed by imperatives such as “responding to rising prices” and “securing new employees”.

However, amidst these intentions for remuneration enhancements, challenges persist. Some SMEs, accounting for 50.2%, expressed struggles in passing on rising labour costs to their product and service prices, partly attributing the difficulty to a lack of understanding from their clients.

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Furthermore, approximately 40% of organisations grapple with labour shortages even after instituting wage increases. In the survey, an official within the hotel industry pointed to the continued population decline and low wages as primary drivers behind labour shortages. Echoing similar sentiments, an official at an industrial machinery manufacturer underscored the necessity for flexibility in working hour regulations to address the prevailing challenges, reported The Japan Times.