Revolution in the labor market, prompted by the Revised Worker Dispatch Law, will trigger the next turning point for Japan’s economy.
On September 11, 2015, the bill to amend the Worker Dispatch bill, seen as the key first step in labor market deregulation under Prime Minister Shinzo Abe’s strategy, passed the Lower House and became law. The revised law will be effective as early as September 30.
This Revised Worker Dispatch Law (WDL) is likely to promote a large-scale restructuring in the worker dispatch industry and moreover trigger change that deserves to be called the most significant post-WWII “labor market revolution” in Japan, and which inevitably represents a major event for companies that assign importance to using dispatch workers. It must be a matter of concern not only to those in the dispatch industry but also to dispatch workers.
Osamu Miyashita, Senior Executive Officer of UT Group, summarized the gist of the revised WDL in the following three points. We hope this is interesting and informative to you:
- What are the key points of the revised WDL?
- How will this revision change the worker dispatch industry?
- How will the revision impact companies who use dispatch workers?
What are the key points of the revised WDL?
The revised WDL is currently of huge interest at the workplaces of non-regular workers. The key points can be summarized in six points.
All labor dispatch businesses now must obtain a license.
In order to promote career advancement, including becoming a regular employee, and to assure continued employment of dispatch workers, 1) Dispatch companies are obliged to provide systematic training programs for dispatch workers and career consulting (note 1) if a dispatch worker requests it, and 2) Dispatch companies are obliged to take measures to stabilize employment of dispatch workers at the end of their dispatch period.
The so-called “26 specified job categories” were abolished, and a three-year limit is now created for a dispatch worker to work in the same section of the client company (host employer).
Dispatch workers now are to receive treatment comparable to direct-hire employees of the client company in terms of wages, training, and benefits at the dispatched company and the client company.
As this revision is closely related to administrative regulation and oversight of labor it has broad implications for the economy and maintenance of international competitiveness, so I believe that the revised WDL was not merely a set of token measures but that it was based on a profound review of worker dispatch and its industry, leading to a de facto decision to enable a drastic industry consolidation and reform of dispatch work.
How will this revision change the worker dispatch industry?
The points 1 and 2, stated above, should be most significant for the industry, in my view.
As all dispatch companies will be required to have a license and provide career advancement support to dispatch workers, operators specialized in the 26 professional types of jobs will be under pressure to make drastic changes including in particular changes in their line of business.
Companies with weak management infrastructure may find it difficult to respond to such changes and continue the dispatch business.Moreover, regarding career development support, the revised WDL incorporates the philosophy of the Human Resources Development Promotion Act, by saying to “provide stepwise systematic training courses to enable workers to effectively improve ability throughout the entire period of their career.”
This means that the dispatch company is obliged to support its workers’ career development for all areas during the period they are registered with the company. This is no easy task, as the company must have the know-how, knowledge, and personnel needed for career development support, and must absorb an increase in cost.
Against such a background, the smaller-sized dispatchers are likely to be forced to merge or even drop out, and stronger operators will become more dominant.
Any company that o responds to the revised WDL only casually may quickly lose competitiveness and get eliminated.
How will the revision impact client companies?
The revised WDL is also expected to have profound impact on client companies. As the 26 specified types of jobs were abolished, client companies can no longer keep using the same dispatch workers for any type of job for more than three years. Therefore, aside from dispatch of regular employees of the dispatch company, client companies will find it more difficult to expect veteran high-skill performance from dispatch workers.
Companies which heavily rely on the dispatch company for manpower should determine whether their outsourcing supplier can properly respond to the revised law and continue to supply stable manpower, and how it would specifically do it.
Another point they will have to be aware of is how the dispatch company will support career development of workers it provides. This is because if the dispatch company fails to adequately cope with the revised law, the client company may also be liable for an administrative penalty, and the risk of litigation by dispatch workers may also increase.
In sum, the dispatch company that is most beneficial for a client company will be the company which provides dispatch workers with no term limit, have its own career development support capability, and provide that support on its own. An important challenge for the client company which heavily relies on dispatch manpower will be how promptly it selects the appropriate dispatch company which can satisfy all requirements.
Making the dispatch industry a driving force of Japan’s economy
Why does the revised WDL make profound changes on how the dispatch law should be? I think this is due to ever-increasing needs in Japan for the dispatch staffing industry.
According to Prime Minister Abe’s "Japan Revitalisation Strategy -Japan is Back- #1” (note 2), “policy change from excessive employment stability to labor fluidity,” in other words, to enable labor to be mobilized in growth sectors, is said to be critical for Japan to raise competitiveness.
I think this is exactly the role that the dispatch staffing industry must play.
In that sense, the dispatch industry should not allow itself to be like a niche industry which merely offers a solution to a shortage of manpower in the client’s workplace. What is needed in Japan, I believe, is dispatch companies which can function as a human resource department outside the company where employees actually work, and do so across many industries and job categories. This means addressing the challenge of total optimization of manpower, jointly with client companies.
If such companies emerge, the dispatch industry will grow into an important industry that plays a part in leading Japan’s economy.
The UT Group has accumulated experience by dispatching our regular employees in keeping with our unique policy
Finally, let me address how the UT Group is responding to the revised WDL.
We have been intimately involved in non-regular employment issues for over 20 years. This has made us quick to realize importance of the intention behind this revised law and we have accordingly implemented the following three measures:
First, we have realized stable employment of dispatch workers by dispatching men and women who are our own regular employees. We can hence dispatch workers with no term limit to our client companies.
Second, we have been actively promoting career development support, based on the Human Resources Development Promotion Act Ministry of Health, Labour, and Welfare (notes 3 and 4). Specifically, we are using the Japan Vocational Ability Development Association’s standardized method for various industries. This association, a special private institution under the control of the Ministry, was established to evaluate vocational ability and support career development of people.
Third, the UT Group mostly provides a unique service on behalf of the outsourced work for an entire process by making our employees work at the client worksite as a team with a leader.
As a result of these three measures, the client company can
- Use experienced, proven-quality workers on a long-term stable basis;
- Entrust the UT Group to do career development and advancement support of workers;
- Eliminate the need to assign employees as managers, as UT Group dispatches a leader for its team; and
- Eliminate the need for labor management.
UT Group thus can provide comprehensive benefits, including compliance to the WDL, reduction in personnel cost, reduction of the need for labor management, and high productivity.
In the meantime, UT Group employees can
- Learn skills and aim for higher income;
- Develop a career and get promoted within the UT Group
(i.e., use of our Entry System to advance from leader to maner and to general manager);
- Change their job to another one (One UT);
- Work in a pleasant environment that allows them to achieve a balance of work and private life; and
- Make a change to become employed by the client company if it requests (also recommended by the UT Group).
We thus allow our people to select from various working styles.
Nowadays, some of our competitors have come to feel empathy with UT Group initiatives and have shown interest in being acquired or integrated by us so as to grow with us.
I think that the UT Group needs to become bigger in scale in order to contribute to Japan’s industries and help develop the dispatch service industry. If we can find dispatch companies of potential synergies, we would like to form alliances with those which have strength in certain businesses or certain industries.
Triggered by the revised WDL, the dispatch service industry is in the midst of an era of big change. At this unusual time, we are looking forward to meeting many people who can grow together with the UT Group, so that the worker dispatch service business becomes more attractive and rewarding.
Materials for downloading
Reference materials on the Revision of Worker Dispatch Law are available.
* The link site is only available in Japanese text.
Companies who are thinking about termless dispatch (regular employee dispatch) and companies who are considering corporate transfers or sales should please feel free to contact the Business Development Department of UT Group.
Available from 9:00 to 18:00,
except Saturdays, Sundays, and holidays
* The link site is only available in Japanese text.