Companies are increasing effort to hire elderly workers as a measure to cope with labor shortage. Such companies are also facing the need to reexamine their wage rules for workers rehired after reaching a retirement age. This article looks into recent trends regarding employment of senior workers.
[1] Abolition of a transitional measure of continued employment
Companies whose mandatory retirement age is under 65 are required to implement measures to secure employment of workers up to age 65 if they desire to continue working. However, by satisfying certain conditions, companies are allowed to limit applicable workers to those above a certain age by signing a labor-management agreement until March 31, 2025.
Companies adopting this transitional measure are required to conclude a labor-management agreement and include the description about an applicable age in their employment rules as below.
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This transitional measure is due to be ended on March 31, 2025. After April 1, 2025, companies need to retain workers until they turn 65 if they so desire, unless there are reasonable grounds for dismissal or severance.
[2] Securing of job opportunities until 70
Companies are not allowed to set a retirement age under 60. Even in the case the retirement age is under 65, companies are required to keep workers who wish to continue working in employment until 65 (Measures to secure employment of elderly workers). Since April 2021, companies have also become required to make efforts to secure employment opportunities for workers up to 70.
Companies are encouraged to consider diverse attributes and needs of workers and adopt appropriate measures from various options. With the measure for securing employment of workers up to 65 means, elderly workers will have to be actually employed. Meanwhile, for workers up to 70, companies may use other options, such as “introduction of a system to sign business entrustment agreements” or “assignment to social contribution businesses by an organization entrusted or financed by the company.”
Since companies are expected to boost hiring of workers beyond the age of 65, it is crucial to establish a feasible system to make good use of the workforce, although they are only required to “make efforts” at this moment.
[3] Review of continuous employment benefit for the elderly
Continuous employment benefit for the elderly is provided when the salary of a worker aged 60 or older has declined by a certain amount from the level when the worker was 60 years old. The upper limit to the benefit rate is 15% of the declined amount. The rate will be reduced to 10% from April 1, 2025.
Since this change applies to workers who will turn 60 on April 1, 2025, or after. If there are multiple workers eligible to the benefit in a company, it is possible that the limit to the benefit rate is 15% for some workers, while the others are applied the 10% limit.
When companies determine wages for workers reemployed after retirement, they might take continued employment benefit into account. In such case, the companies should pay attention to the reduction in the benefit ratio. It is also advisable to consider whether wages for reemployed workers after retirement should be set at levels making them eligible to employment insurance.
[4] Subsidies for senior workers
According to the FY2023 report on the status of employment of workers aged 60 or older based on a survey of companies with more than 20 employees, among 35.2 million regularly employed workers, 4.86 million are aged 60 or older, making up 13.8% of the total number. This means one out of eight worker is aged 60 or older.
With the number of elderly workers expected to increase further, the government provides various financial support, such as “the subsidy to promote employment of workers aged 65 or older” offered to companies that have raised the retirement age above 65 or abolish the retirement age altogether, or “the age-friendly subsidy” for companies that have implemented measures to prevent work-related accidents of elderly workers. Companies increasing efforts to hire senior workers should check if there are subsidies they can apply.
If you have any concern about employment of workers beyond 60 or how to make use of workers aged 65 or older, please feel free to contact us.
