TOKYO -- Sony will increase salaries by up to 20% for new recruits with high-tech skills in fields such as artificial intelligence, moving away from the traditional Japanese emphasis on seniority to better compete in a battle for talent that crosses industries and international borders.
Traditionally, new graduates hired by Sony all receive the same entry-level salary, then are assigned a pay grade after more than a year based on their role. Starting this year, grades can be set for standout hires in as little as three months, resulting in annual salaries as much as 20% higher than colleagues'.
Japanese companies have a deep-rooted tendency to pay new employees equally regardless of individual qualifications. But global competition for top talent -- particularly in the tech industry, where big American players like Google and Apple dominate -- has made it increasingly important to offer new graduates compensation in line with their abilities from the time they enter the company.
Sony's system represents a step in this direction. The baseline annual salary this fiscal year for an incoming employee fresh out of graduate school is about 6 million yen ($55,000), while an average second-year employee who has received a pay grade will earn around 6.3 million yen. Strong performers under the new system can rise as high as a rank above this in their first year, earning 7.3 million yen.
Sony expects to apply this to about 5% of its roughly 400 spring 2019 hires. The company will consider assigning pay grades in new employees' first month as early as 2020, using such means as internships to examine their skills in advance.
Employees will have their pay grades reassessed periodically and be promoted or demoted accordingly, to keep motivation high.
Sony has also raised overall starting salaries this fiscal year. New graduates who joined this spring after earning undergraduate degrees will make 250,000 yen a month after a three-month probationary period, while those with graduate degrees will earn 280,000 yen -- up 20,000 yen and 15,000 yen, respectively, from fiscal 2018.
While this is still less than they might make at a major trading house, it is in the top tier among Japanese manufacturers.
Graduates well-versed in such areas as AI and software development are in demand across a wide range of businesses, including automakers, trading companies and banks. They also have the option of joining a startup or foreign tech company, or even launching their own enterprises. Even Sony, a perennially popular employer among students, is finding it harder to attract talent.
A more meritocratic approach to compensation, in contrast with the seniority-based pay structures typical of corporate Japan, should help the company draw the best and brightest. The change is likely to make waves in Japan's labor market.
Companies outside the tech world are re-examining pay for new hires as well. Fast Retailing, operator of the Uniqlo casual-clothing chain, will lift starting salaries about 20% from spring 2020.