Toyota to Pay Factory Workers Based on Performance Not Seniority

Jan 27, 2015 08:00 AM EST | Matt Mercuro

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Toyota is planning on changing the way it pays factory workers by focusing more on their performance instead of their seniority.

The automaker's new plan, which is designed to attract younger workers, will apply to some 40,000 employees, or 60 percent of its workers, aged between 18 and 65, according to the Nikkei.

Toyota has introduced the proposal to its labor union and is looking to introduce its new arrangement sometime next January. Company employees will now be evaluated twice a year, with wages adjusted every six months.

The new arrangement will also mix up allowances for dependents in order to provide greater benefits to those who are raising children, according to Nikkei. It couldn't hurt, especially since Toyota projected to drop in annual vehicle sales last week for the first time since 2000 as slow demands in key markets continue to hurt the company.

Nikkei reports that the average Toyota factory worker is around 40. But because of the decrease in the younger population, the percentage of employees 50 and older and is expected to increase from the 20 percent to more than 30 percent by 2035.

In order to promote the transfer of skills to younger employees, Toyota might rehire those who have reached the retirement age of 60 but are considered "exceptionally valuable," according Nikkei.

Toyota would rehire those employees at ay and workloads similar to their pre-retirement terms, instead of the current system, where both workloads and wages are halved.

Factory workers that work in teams are mainly paid based on seniority, according to Kiichi Toko, chief researcher at Japan Productivity Center. 

If Toyota's efforts work, other major Japanese companies could consider changing their own wage systems.

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