New Trends in the the Staffing Services Industry

Transcription

1 New Trends in the the Staffing Services Industry Japanese Economy Division Yusuke Nishizawa Summary Amendments to the Employment Stability Law and the Temporary Staffing Services Law were enacted in March New companies have begun to enter the staffing industry, which includes both job placement and temporary staffing, owing to newly simplified procedures for setting up these businesses and deregulated categories of temporary staffing services. The market in Japan for staffing services, which had been small compared to those in Europe and the United States, is currently exhibiting growth and is expected to undergo greater expansion through ongoing deregulation and the opening up of the public sector to private-sector staffing services. 1. Staffing Services in Japan and Western Countries Companies are increasingly using temporary staffing and job placement services, which include headhunting and other types of recruiting, in order to secure employees. The human resources market in fiscal 2003 registered 2.36 trillion in sales in temporary staffing and billion in job placement. Temporary staffing has continued to expand since 1995 and the job placement industry recorded two consecutive years of growth in 2002 and Due to long-term Figure 1: Laws Relating to Staffing Business Year Law Details 1947 Enactment of Employment Stability Law 1964 Amendment to Provisions of Employment Stability Law 1986 Enactment of Temporary Staffing Services Law Amendment to Temporary Staffing Services Law 1996 Amendment to Temporary Staffing Services Law 1997 Amendment to Provisions of Employment Stability Law Amendment to Employment Stability Law Amendment to Temporary Staffing Services Law Amendment to Employment Stability Law Amendment to Temporary Staffing Services Law Amendment to Employment Stability Law Amendment to Temporary Staffing Services Law Sources: JETRO, Ministry of Health, Labour and Welfare Established public employment agencies, based on view that job placement services are principally the role of the government. Deregulated applicable jobs and introduced fee-based job placement services by private companies. Accepted 13 types of work for temporary staffing due to increased demand for such services. Accepted three more types of work for temporary staffing services. Accepted 10 more types for temporary staffing (raising total to 26). Liberalized market entry by private companies offering feebased job placement services. Liberalized the types of work eligible for temporary staffing and occupations for job placement. Clarified types of work not eligible for temporary staffing (5) or job placement (2). Lifted prohibition on temporary staffing in cases in which personnel are expected to become permanent employees. Simplified approval/notification procedures for service providers. Permitted temporary staffing in manufacturing field, and in medical field in cases in which personnel are expected to become permanent employees.

2 economic stagnation, companies have focused on reducing wages and labor costs while recruiting talented personnel and ensuring employment in line with changing business conditions. In light of greater liquidity in labor markets and diversification of employment conditions, staffing regulations have gradually been eased. These factors have contributed to underlying growth (Fig.1). Japan s temporary staffing market is relatively small compared to those in the U.S. and Europe, but it is expanding (Fig.2). At the institutional level, however, the pace of deregulation has been slow. There are many restrictions on the categories of temporary staffing services that are allowed. Moreover, approval and notification procedures are required to start up these businesses. Restrictions on the scope of job placement services are also stricter than in the U.S. or Europe (Fig.3). Amendments to the Employment Stability Law and the Temporary Staffing Services Law enacted in March 2004, however, eased regulations on the staffing industry and encouraged new companies to enter the marker and existing companies to provide more services. At the same time, international agreements are facilitating the acceptance of skilled foreign workers. Figure 2: Size of Temporary Staffing Market, by Country (billions of yen) Country North America 9,169 7,069 Europe 5,987 9,309 Belgium & Luxembourg Denmark France 1,952 2,388 Germany Italy Netherlands Portugal - 67 Spain Switzerland United Kingdom 3,182 3,858 Japan 1,672 2, Japan figures are for fiscal year : 1 euro= yen. 2003: 1 euro= yen. Based on arbitrated euro-yen exchange rates published by the Bank of Japan. Sources: Randstad Holding NV for North America and Europe, Ministry of Health, Labour and Welfare for Japan.

3 Figure 3: Restrictions on Staffing Business, by Country Japan United States United Kingdom France Notification is required for special Notification to local labor bureau is Starting a temporary staffing services and approval is Approval and notification not required. required. Business required for regular temporary staffing Financial guarantee is required. services. Work Subject to Temporary Staffing Harbor transport, construction, security and medical work are prohibited. Temporary staffing for future fulltime employees is allowed in medical field. No special restriction on temporary staffing in either state or federal law. No restriction on occupation type, duration or purpose. Not permitted for dangerous work or work at sites where specified chemical substances are used, gases are emitted or nuclear or radioactive substances are present. Temporary Staffing Duration of Staffing Period Restrictions abolished for 26 types of work stipulated in government ordinances. Deployment to a workplace where the individual had been employed within the previous six months is prohibited. Upper limit is 18 months, renewable one time. Maximum duration is nine months for workers substituting for others and emergency work for ensuring safety. Other Temporary staffing is regulated in some states. Workers staffed temporarily cannot be prohibited from being hired by the company where they are staffed. Temporary staffing for regular work is prohibited. The purpose must be 1) replacing an absent employee, 2) temporary additional work, 3) originally temporary work (seasonal labor, etc.) or 4) a government employment program. Job Placement General Approval required for fee-based job placement services. Job placement is prohibited for harbor transport, construction and occupations stipulated by ordinances in which job protections would be compromised. There is no comprehensive federal law regulating fee-based job placement services. States and some cities independently require approval and other procedures. Fees are returned if employment is terminated without reason during fixed period. Approval not required for fee-based job placement services. Collection of placement fees from the job seeker is prohibited except for some occupations. Records must be kept, stored, etc. Note: Regular temporary staffing services primarily consists of deployment of workers on a registration basis. Special temporary staffing services refers to services that employ individuals on a full-time basis who are then deployed. Source: The Japan Institute for Labour Policy and Training Job placements basically are conducted exclusively by government agencies. Private job placement services are allowed only for artists and housekeepers.

4 2.Growth in the Staffing Market 1) Market Entry and Foreign-Affiliated Firms The human resources industry in Japan can be classified into three categories: 1 1) temporary staffing, 2) job placement and 3) outplacement. 2 The market for temporary staffing services was pioneered in 1966 by Manpower Japan, an affiliate of the U.S.-based firm. Japan was experiencing rapid economic growth and its demand for workers was extremely high. Job placement services began with the establishment of publicly run employment agencies, in accordance with the Employment Stability Law enacted in In 1997, the market was broadly opened to enable private-sector companies to provide job-placement services for a fee. The area had been slow in opening up to the private sector because such services were generally regarded as a government responsibility, a viewpoint that accorded with the conventions of the International Labor Organization. The human resources market was inaugurated by foreign-affiliated staffing firms such as Korn/Ferry Japan (U.S.) in the field of executive search services 3 and DBM Japan (U.S.) in outplacement services. Figure 4: Major Foreign-Affiliated Staffing Firms in Japan Established Company Business 1966 Manpower Japan Temporary staffing 1972 Korn/Ferry Japan Executive search Egon Zehnder International Executive search 1979 Boyden Associates Japan Executive search 1982 DBM Japan Executive search 1984 Stanton Chase International Executive search 1985 Adecco Career Staff Temporary staffing 1986 Spencer Stuart Japan Executive search Russell Reynolds Associates Japan Executive search 1994 Right Management Consultants Japan Outplacement 1996 Coutts Career Consultants Japan Outplacement Challenger, Gray and Christmas Outplacement Fairplace Consulting Japan Outplacement Regular job placement 1999 Future Step Regular job placement Hudson Global Resources Regular job placement and temporary executive staffing Source: JETRO, "Japanese Market Report No. 67," Does not include outsourcing. 2 Helps job seekers find employment after they have been let go by their previous employer. A company only providing consulting services does not require approval under the Employment Stability Law, but in fact there are many firms that integrate outplacement and employment services. 3 Searches for and solicits executive candidates and key personnel at the request of a customer.

5 2) Temporary Staffing Expands, Job Placements Level Off The market for temporary staffing soared following deregulation under the Temporary Staffing Services Law, reaching 2.36 trillion in fiscal 2003 (Fig.5). Thereafter, however, the growth rate slowed and the market became saturated due to increased competition, but new growth was anticipated owing to deregulation under the amended Temporary Staffing Services Law enacted in March According to a report by the Ministry of Health, Labour and Welfare in fiscal 2003, 4 the number of offices providing temporary staffing services that year was 16,804 5 (Fig.6). Preliminary figures indicated that the number in Tokyo in fiscal 2004 increased 21.9% to 8,593, suggesting that growth was also achieved nationwide. (billion yen) 2,500 2,000 1,500 1, Figure 5: Scale of Staffing Services Market Temporary Staffing Job Placement YoY (Staffing, right axis) YoY (Placement, right axis) (%) FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 Source: Ministry of Health, Labour and Welfare 20.0 Providers 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Figure 6: Staffing Service Providers Nationwide (Staffing) Tokyo (Staffing) Nationwide (Placement) Tokyo (Placement) YoY (Nationwide, Staffing) YoY (Tokyo, Staffing) YoY (Total, Placement) YoY (Tokyo, Placement) FY00 FY01 FY02 FY03 FY04 (%) Source: Ministry of Health, Labour and Welfare 4 Results for fiscal 2004 scheduled to be released in Total of regular temporary staffing services and special temporary staffing services.

6 The market for job placement services has remained nearly unchanged. Due to Japan s long-term economic stagnation, companies had to reduce personnel expenses, which resulted in lackluster employment conditions for permanent employees. Signs of a rebound in permanent employment emerged, however, as the economy entered a recovery phase in 2002, so the rising demand for permanent employees with flexible and competitive skills was expected to expand the job placement market. The number of offices providing job placement services has been increasing. According to the Ministry of Health, Labour and Welfare, 7,774 offices were providing services at the end of fiscal Preliminary figures for Tokyo in fiscal 2004 came to 3,186 companies, up 15.3% from the previous year. 3. Increasing Deregulation 1) Amendments to Employment Stability and Temporary Staffing Services Laws Operations and procedures for temporary staffing are defined by the Temporary Staffing Services Law and for job placement by the Employment Stability Law. Since enactment of the Temporary Staffing Services Law in 1986, these matters have been deregulated significantly, including most recently on March 1, 2004 (Fig.7). The main thrust of deregulation has been the lifting of prohibitions on temporary staffing at manufacturing companies and medical institutions (doctors, nurses, etc. who expected to become permanent employees 6 ). Amendments to the Employment Stability Law also enacted on March 1, 2004 simplified procedures for starting a business. 6 See Figure 10 for details.

7 Figure 7: March 2004 Amendments to Temporary Staffing Services and Employment Stability Laws Increased Scope of Temporary Staffing Manufacturing work and medical work leading to permanent employment at medical institutions added to the scope of temporary staffing. However, temporary staffing is still not allowed for: -- Harbor transport, construction and security -- Attorneys, foreign attorneys, judicial clerks, land and building investigators, certified public accountants, tax accountants, certified social insurance and labor consultants, notary publics, and managing architects at architecture firms -- Personnel and labor management work conducted as a direct provider for the user at group negotiations at the client company or labor and management negotiations for concluding agreements pursuant to the Labour Standards Law. Extended Duration of Temporary Staffing Type of Work Work stipulated by cabinet order, such as software 1. development (26 types) Before Amendment Three years for the same deployed worker After Amendment No restriction 2. Projects with a fixed duration of less than three years No restriction within project period Same 3. Work for a limited number of days One year No restriction Replacing employees who take maternity or childcare 4. Two years No restriction leave 5. Replacing employees who take family care leave One year No restriction 6. Manufacturing work - 7. Work done only by temporary staffers of age 45 or greater Three years *Exception until March 2005 Same One year until March Three years thereafter. 8. Work other than 7. Above One year Three years maximum Types of work stipulated by cabinet order: 1. Software development; 2. Mechanical design; 3. Operation of broadcasting equipment; 4. Direction of broadcasting programs; 5. Operation of office equipment; 6. Interpretation, translation, stenography; 7. Secretarial work; 8. Filing; 9. Surveys; 10. Financial processing; 11. Creation of transaction documents; 12. Demonstrations; 13. Escorting; 14. Janitorial work; 15. Building and facilities management, inspection and maintenance; 16. Information and reception, parking lot management, etc.; 17. Research and development; 18. Development of business execution plans; 19. Creation and editing of documents, etc.; 20. Advertising design; 21. Interior design; 22. Announcing; 23. Office equipment training; 24. Telemarketing; 25. Sales engineering; and 26. Construction of broadcasting stages, props, etc. Simplification of procedures Approval for regular temporary staffing and notification for special temporary staffing amended from office-by-office to company-by-company basis. Employment Stability Law Simplification of procedures Approval for fee-based and free job placement services amended from an office-by-office to company-by-company basis. Others Local governments, public bodies, schools and other bodies permitted to provide free job placement services. Monetary guarantee requirement abolished. Concurrent conduct of other types of business permitted. Source: Ministry of Health, Labour and Welfare

8 2) Temporary Staffing for Manufacturing Previously, the categories of non-permanent workers for manufacturing companies consisted of contract laborers, part-time workers, contract employees and seasonal laborers. With the amendments to the law in March 2004, temporary staffing in the manufacturing field became possible. In the case of contract laborers, who had occupied a large percentage of non-permanent workers, these people have been dispatched to factories by companies contracted to undertake a given part of the manufacturing process. Companies accepting the workers, however, cannot supervise them or give them orders. Employment contracts are handled by the contracted company (supplier) and there is no limit to the duration of the contract. With temporary staffing, however, laborers are dispatched and the accepting company is allowed to supervise them and give orders. Another advantage is that the temp staffers can be deployed on production lines where permanent employees are also working. Temporary and short-term staffing adjustments are possible, but the term of contract is limited to just one year. According to the Japan Staffing Services Association, 7 the number of workers staffed temporarily for manufacturing jobs has been increasing slowly since April 2004 (Fig.8). This is thought to be due to the relatively short limit on the term of contract. When the limit is extended to three years in March 2007, however, greater use of these temp staffers is anticipated. According to a follow-up survey on the use of contract laborers by the electrical machinery industry, 8 which was conducted in April 2004 by the JEIU Research Center, many respondents indicated that they use temporary staffing to fill needs for temporary and short-term work and to augment labor on production lines (Fig. 9). (People) 3,500 Figure 8: Numbers of Temporary Staffers in Manufacturing 3,000 2,500 2,000 1,500 1, / / Source: Japan Staffing Services Association 7 Based on reports from 109 member companies. Results of the Ministry of Health, Labour and Welfare report on temporary staffing in fiscal 2004 is scheduled to be released in 2006, so this survey is the only available statistical data as of the present. 8 The survey targeted labor unions at 303 plants in the electrical machinery industry.

9 (%) Temporary & short-term work Figure 9: Reasons for Utilizing Temporary Staffing for Manufacturing Work Can give direct instructions Reasons for Utilizing Can deploy on parts of lines Supports cost management Source: JEIU Research Center No problem with contract work One year limit on temp staffing Increased safety and health expenses Reasons for Not Utilizing Increased managerial responsibilities Dissatisfied with staffing firms 3) Temporary Staffing for Medical Work Temporary placement of doctors, nurses and other medical professionals at medical institutions is now possible, provided that the placement is intended to lead to permanent employment. This practice is still not common for doctors, but in the case of nurses some companies are securing such personnel and working to develop the market for regular temporary staffing services. Companies are also launching a variety of related businesses, including recruiting magazines for medical professionals and recruitment websites. Figure 10: Temporary Staffing Leading to Permanent Employment Employment commences with contract related to future Period of temporary staffing contract ends Temporary work lasts less than six months Company where worker is deployed evaluates the worker's abilities Confirmation by both sides Client Company Deployed Worker Agreement by both sides Formal hiring Confirm hiring conditions and intentions Confirm employment conditions and intentions Enter company Staffing Company Source: Ministry of Economy, Trade and Industry

10 Column: Acceptance of Skilled Foreign Workers Although many countries around the world are working to acquire talented personnel from foreign countries, the number of workers accepted in Japan is relatively low for the following reasons: 1) the period of stay, which is approved for each visa, is short, 2) immigration criteria are unclear and 3) recent deregulations have not been publicized. Trials involving the acceptance of foreign workers through bilateral agreements are underway in some sectors. In negotiations for an economic partnership agreement between Japan and the Philippines, both sides agreed to approve the employment of Filipino nurses and licensed caregivers who meet certain requirements. There are many uncertainties regarding the degree of involvement that private-sector companies will be granted. But interest is mounting and temporary staffing firms are considering expanding their services to offer Filipino nurses and licensed caregivers to clients. Local governments are also considering joint programs with private-sector firms. Medical Associa, a temporary staffing company in Tokyo, together with Mitsui & Co. and other partners, will offering courses to Filipino nurses to train them in Japanese and nursing skills. The city of Asahikawa in Hokkaido, along with Mitsui & Co. and other partners, will establish a facility in an industrial park to train skilled Filipino nurses and licensed caregivers in how to acquire Japanese certification. 4. Future Outlook Although the employment situation in Japan is improving, the number of unemployed young people is still rising, so private-sector staffing companies and public employment agencies have important roles to play. The Cabinet Office, based on an employment survey by the Ministry of Internal Affairs and Communications, estimates the number of unemployed young people 9 rose from 1.3 million in 1992 to 2.1 million in Young people who either want a job but are not actively searching or simply do not want a job are both increasing (Figure 11). 9 An unmarried individual between the ages of 15 and 34 who does not have a job that provides regular income and who does not attend high school, college, a preparatory school, vocational school, or other type of educational institution.

11 Figure 11: Breakdown of Unemployed Young People (million people) Unemployed Seeking Employment Not Seeking Employment No Desire for Employment Not Seeking Employment + No Desire for Employment Source: Cabinet Office Support for unemployed young people is generally provided by public employment agencies, but some such services are now open to private-sector providers. Under an experimental program, companies bid on equal footing with public agencies for services formerly provided exclusively by public agencies. A private company, for example, won a bid for a career counseling facility for unemployed young people. The test program is intended to improve the quality and efficiency of public services by introducing market principles. Three staffing industry groups (Association of Job Information of Japan, Japan Executive Search and Recruitment Association, and Japan Staffing Services Association), proposed in March 2002 that it would be possible to further privatize employment services that are conventionally monopolized by public employment agencies. Staffing services will grow if regulations are eased and public services are opened more widely to private-sector providers. At the same time, market competition will intensify due to expanded deregulation and the mounting need for talented professionals in fields like IT, accounting, law and medicine.

12 Reference Materials not Cited 2004 White Paper on Health and Labor, Ministry of Health, Labour and Welfare 2004 White Paper on the Labor Economy, Ministry of Health, Labour and Welfare Monthly Survey of Industry Trends: Growth in the Temporary Staffing Market, The Sumitomo Trust & Banking Co., June 2005 LDI Report: LDI Watching The Complex Process of Training Nurses, Daiichi Mutual Life Insurance Economic Research Center, July 2002 Management Information Research: Trends in the Temporary Staffing Industry in the U.S. and Europe, Daiwa Institute of Research, September 2001 Research Symposium on Labor Market Services Utilizing the Vitality and Creativity of the Private Sector; Proposal for Vitalizing Labor Market Services; Association of Job Information of Japan, Japan Executive Search and Recruitment Association, and Japan Staffing Services Association ( Works Institute website, Works University (