Image Credits : Live Mint
Major Japanese banks, including Sumitomo Mitsui Financial Group and Mizuho Financial Group, are abandoning traditional seniority-based salary systems. The move reflects intensifying competition for talent as the banking sector diversifies amid digitalization and evolving economic demands.
Historically, Japanese banks have adhered to a rigid seniority-based structure, where employees were rewarded with promotions and salary increases based on their length of service rather than performance. However, as the need for specialized skills increases, these banks are turning to a merit-based approach to attract and retain talent, especially among younger professionals.
Sumitomo Mitsui, one of Japan’s three mega-banks, has announced plans to overhaul its pay structure within two years. The new system will focus on recognizing and rewarding employees based on their contributions, regardless of age. Under the revised scheme, even employees in their 20s could earn annual salaries as high as 20 million yen if they demonstrate exceptional performance.
Mizuho Financial Group has already implemented similar changes, introducing “role-based pay” in July, where salaries are determined by the roles and responsibilities of employees rather than their tenure. The company has also eliminated disparities in pay across its banking and securities units to foster career development opportunities.
The shift is not without controversy. Some employees, particularly middle-aged workers, express concern about the uncertainty these changes bring, fearing the loss of predictable salary increases. Others, especially younger workers, welcome the new system, seeing it as an opportunity to advance their careers more quickly.
Business leaders and experts view this change as a potential catalyst for broader corporate reforms in Japan. Smaller firms, particularly those struggling to attract skilled workers, are likely to follow the lead of these major banks in revising their compensation structures.