Abstract
This paper examined temporal changes in pay-for-performance systems in present-day Japan. From the 1990s, pay-for-performance systems - which evaluate employees and determine their wages and positions based on individual, short-term and explicit performance and achievement - have been adopted in companies in Japan. However, it remained unclear how such systems have been adopted in recent years, what factors moderated their implementation (e.g., employee rank and company size) and whether changes in the sub-systems constituting pay-for-performance systems have followed different patterns. To objectively capture the historical background and current situation of Japanese companies, and to understand how changes in management/economic systems and psychology/behavior in Japan have mutually influenced, temporal changes in pay-for-performance systems should be investigated in more detail. Therefore, this research analyzed data from two large-scale surveys conducted continuously between 1991 and 2016. Results showed that the rate of companies using seniority systems (which determine employee wages and positions based on age and length of service) decreased between 1996 and 2016. Moreover, both the rate of companies using annual salary systems (which determine employee salary based on individual performance every year) and the rate of employees influenced by them increased between 1991 and 2014. These temporal changes were consistent across employee rank (both management and non-management levels) and company size. Thus, pay-for-performance systems have been adopted in more companies and have increasingly affected employees in Japan over the past 30 years. Additionally, this extent of the trend increased with company size: the larger the company, the larger the rates of decrease in seniority systems and of increase in annual salary systems. Furthermore, the increase in annual salary systems was larger at the management level than at the non-management level. On the one hand, seniority systems continued to decrease linearly from the 1990s to the 2010s. On the other hand, annual salary systems continued to increase linearly from 1990 to around 2005, but after around 2005 they did not increase clearly.
