Toyota Switches To Merit Pay For Mechanics

NAGOYA, Japan December 13, 2003; Dow Jones reported that Toyota Motor Corp. and its labor union have agreed to switch from age-linked wages for mechanics and other skilled workers to a system of performance-based pay, company officials said Saturday, Kyodo News reported.

The auto maker and the union will discuss further details of the agreement and initiate the new system in April, according to Kyodo. Age-linked wages increase automatically as an employee gets older, thus serving as the backbone of the seniority-based promotion system.

Once the new system is in place, Toyota will have eliminated all its age-based wage practices, Kyodo reported. It has already ended age-based wages for other workers, including executives and clerical employees.

In October, the company will also introduce a new retirement pay scheme emphasizing an employee's qualifications and performance, according to Kyodo.

Toyota has been one of the major symbols of Japan's seniority-based system and its change is expected to spur the move toward switching to the merit-system, Kyodo reported.

Among other major Japanese companies, Hitachi Ltd. has decided to end seniority-based wages.