How did the word “contract,” and particularly the Japanese word “haken,” come to have a negative concept in Japan? In the West, the contract employment market is more mature and for many has become the preferred way to work. Contracting offers a freedom of mobility that permanent employment just cannot offer, not to mention a way to avoid the office politics that can make work life tedious.
Unfortunately, contract employment remains largely misunderstood in Japan, making people approach it more hesitantly. And while Japan may not be as mature in its use of contract workers as the West, many of the same benefits exist. People’s hesitancy to work on contract in Japan is simply caused by misunderstandings, or myths, about what contract employment actually is.
Myth 1: Contract employment is unstable
Many people think contracting is limited to working on a short-term project, and that once you complete the project, you’re back on your own to locate that next role. In Japan, this is typically not the case. Of course, there are many projects with fixed durations, as well as contract covers for maternity and sick leave. In general, though, companies approach contractors as a long-term solution. Research shows that 65% of contract positions within foreign firms in Tokyo are for a period of at least one year, if not indefinite.
With head count within companies almost as precious as profits, bringing in a contractor instead of a new permanent hire is one way companies can secure the key workers needed despite tight hiring restrictions.
Myth 2: Contract employment is a dead-end
Another common perception is that working as a contractor limits career opportunities. Inevitably, some “opportunistic” companies do relegate contractors to limited roles and responsibilities, simply accepting the subsequent turnover as “business as usual.” However, the demand by contractors to be given more responsibility is such that we are seeing companies respond by providing increased opportunities.
After seeing the added-value contract employees can offer, companies often reward them with more responsibility and new projects, as they can often prove more valuable than going to the market and hiring an unproven permanent employee. Within 6 to 12 months of starting work, 48% of contractors we place in foreign companies are either taken on as permanent employees, offered pay increases, or given a significant increase in responsibility.
Furthermore, a point that is often overlooked is how many of today’s top executives started their careers as a contractor. A Solutions Delivery Manager at a global Fortune 100 company recalls, “My first real job in the Tokyo market was on a contract, and now I am in a position handling the company’s major account and managing 40 plus people. I wouldn’t have gotten here had I not taken that first contract job opportunity.”
In addition to opportunities for career development, there is also the obvious benefit that working on contract can lead you into a new field or a new industry. For someone with limited experience in Japan, typically the only way to break into an international, top-tier financial firm is to start on a contract basis.
While hiring has tightened significantly with the collapse of Lehman Brothers and the buyout of Merrill Lynch, there are still opportunities to be had in the financial services market for those open to contract employment.
Myth 3: Contract employment is for unskilled workers
This is perhaps the easiest myth to dispel as 40% of roles within Tokyo are considered to be “highly skilled.” While this might not seem a high percentage, if the sheer number of roles across the market is taken into account, then this number is quite significant. Among foreign-owned companies in Tokyo, this percentage is even higher, at around 70%.
Project managers holding PMPs, accountants with CPAs, marketers with MBAs, interim managers with 10+ years of executive level experience, and other highly qualified professionals can all be seen working as contractors, often receiving more pay than their permanent counterparts. There are even more roles in the market demanding these skill sets that remain unfilled.
Myth 4: Contract employment means lower salary
Sadly, in Japan this is true in more cases than we would like to see and is one area in which the local contract market is not nearly as matured as the West. That being said, contractors with specialized skill sets can expect to make earnings on par with, if not more than, their permanently employed counterparts. And why not? They offer their employers flexibility, and should be rewarded.
For those just arriving in the market, looking to change fields or industry, it would be unwise to have high salary expectations. However, as specialized skills are developed, expecting higher pay for contract work would be natural.
Some sectors in the Japanese market have already recognized the value of employing contractors, and we have seen a particularly strong demand for contractors with specialized skill sets in the areas of IT, accounting and operations. Consequently, these industries are helping progress the wage standard for contract employees in Japan. Secretarial and HR positions, however, have generally been slower to adapt.
That said, the general uncertainty affecting the market in the wake of the latest upheavals stemming from the credit crunch may cause companies to be slower to loosen their purse strings for the near future.
Myth 5: Contractors receive no benefits
For all contracts longer than two months, this is untrue, because by law you must be enrolled in the Japanese national health insurance and pension programs. The social health insurance plan in Japan is very extensive and typically you pay 30% of the cost for doctor visits and treatment. With regard to national pension, all residents are required to pay into the scheme. However, foreigners planning to leave Japan can re-claim a portion of their contributions after returning home. Furthermore, if you have already been on the national pension system while working as a permanent employee, your payments are not lost and your contributions as a contractor will continue to build on this foundation.
Contractors also receive paid holidays, typically becoming eligible for 10 days after six months of work with incremental increases in paid holidays received every year. Many contract companies also offer further benefits, such as subsidized training programs, career advice, seminars, and discount membership programs, among others. At more senior levels, bonuses are occasionally part of the package.
What does it mean for you?
Not only can you move more quickly through the hiring process, evaluate a company more thoroughly before committing for the long-term, and gain more skills across diverse projects, but by understanding what contract work is, you can deftly sidestep the myths that cause so many people to hesitate at this employment opportunity. As long as these myths exist within Tokyo’s contract market, fewer people will embark on a career path propelled by contract-based work experience, which means less competition for those in the know.
Writer – casey wahl
Casey Wahl is director of the Contract Division at Robert Walters, Japan’s largest foreign-owned specialist recruiter.