If you must get sacked, try to do it in Japan

If you must get sacked, try to do it in Japan

By Jonathan Soble

Published: October 16 2008 02:51 | Last updated: October 16 2008 02:51

The e-mail from human resources looks harmless enough. After a couple of years trading Nikkei futures or hawking Samurai bonds, the bank has decided it’s time for you to bid Tokyo good-bye and head home to London, or take your act over to Asia headquarters in Hong Kong.

Sure, you’ll miss the bar scene in Roppongi. But given the state of the finance industry, you’re lucky to have a job at all.

But do you really have one?

Increasingly, Tokyo-based brokers, traders and bankers fear such messages have a more sinister meaning: you’re sacked.

Getting rid of workers is famously difficult in Japan. Labour laws were designed for an era that favoured lifetime employment and judges tend to favour all but the most miscreant employees over their corporate bosses.

They also don’t care if the plaintiff was on loan from New York, Singapore or a phantom corporate base on the Isle of Man – anyone working in Japan is entitled to the protection of Japanese law.

Relocating workers to slacker jurisdictions, even taking high transfer costs into account, can thus be the cheapest and easiest way to cut them loose.

“Japan, alongside France, is probably the most employee-friendly labour market in the world,” says Peter Godwin, head of the dispute resolution practice at Herbert Smith in Tokyo.

Cash-strapped global banks are looking to shrink their Tokyo headcounts by up to 15 per cent, insiders say, which translates to anywhere from 150 to 300 jobs per institution.

It is possible for companies to cull staff in hard times, of course – even the most benevolent Japanese groups learned to do it in the recession-spotted 1990s. But society – not to say the courts – expects them to pay for what is still viewed as a fundamental betrayal of their raison d’être.

Even in today’s market, a still-solvent employer is expected to offer six to nine months’ salary as severance pay. In good times the pay-off can be equal to a year’s wages or more.

Unlike the UK or Hong Kong, where minimum severance pay is set by law (one to one and a half weeks’ salary per year of service in the former, a measly 18 days’ pay in the latter), there is no official formula in Japan.

Instead, judges expect companies to offer “socially acceptable” terms, says Kazuki Okada, labour law specialist at Freshfields Bruckhaus Deringer. Most will err on the side of generosity to avoid an embarrassing and often futile trial. “Eighty to 90 per cent of cases are settled,” he says.

Disciplinary problems, if painstakingly documented, can force a sacking, but shoddy performance is rarely considered sufficient grounds. Companies thus prefer voluntary buy-out schemes that are open to everyone, at least on paper.

Slackers can be called in for evaluations, but bosses must be careful not to fall foul of rules against coercive or arbitrary dismissal. “We give them a script,” says one lawyer who advises global banks.

Long-term futures might be discussed, the joys of alternative careers extolled ... Perhaps HR could set you up with an apprenticeship in, say, organic ice-cream making?

Sacking local staff has cultural perils of its own. Tom Nevins, president of TMT, a Tokyo-based consultancy that advises companies on redundancies, counsels against confrontations that might risk humiliating the sackee.

“It’s a good idea not to tell people what’s wrong with them, and, even if you have a paper trail, not to use it,” he says.

Although Japanese workers are less likely to sue than foreign ones, a good way to get them calling their lawyers is to make them lose face.

It is also important, he says, to explain the company’s plight in detail to workers before beginning the cull, to create a consensus that lay-offs are needed. That way, those who leave “are fighting the collective will of their colleagues and not just some capitalist”.

Japanese banks have weathered the credit crisis in relatively decent shape – some, such as Nomura and Mitsubishi UFJ, are even buying pieces of weakened foreign rivals. But US and European institutions who must meet global redundancy targets might be tempted to use the tricks they developed when Japan’s financial sector was on its knees a decade ago.

Most involved abusing their still-unchallenged authority over transfers: if a casual hint that the company would be better off without you didn’t do the trick, a move to a tiny office with no working phone usually would.

Ultimately, though, employees who get the boot in Japan can be thankful they were there when it happened. Kevin Gibson, managing director in Robert Walters, a recruiting firm, says there are even a few finance jobs available in Tokyo, albeit mostly less glamourous ones such as accounting.

“Some banks are taking it as an opportunity to hire,” he says. “There are a lot of good people around right now.”

A bit of Japanese language ability can help a sacked expat pick up work at a resurgent local bank, avoiding the ugly prospect of returning home to face the job market on Wall Street or the City.

According to Mr Gibson, “No matter how bad it gets in the rest of the world, you’re still better off here.”

Copyright The Financial Times Limited 2008