Bankruptcies due to labor shortages - increasing at a record pace

Teikoku Databank announced the number of "labor shortage bankruptcies" in the first half of 2024: 182, far more than the 110 cases in the first half of 2023, and on pace for a record high.

The term "labor shortage bankruptcy" refers to bankruptcies of companies that went into legal liquidation (bankruptcy) because they were unable to secure labor due to employee turnover or difficulty in hiring.

◆80% of bankruptcies were cases with less than 10 employees.

　Of the 182 "labor shortage bankruptcies" in the first half of 2024, small businesses with "less than 10 employees" accounted for 80%. According to the Ministry of Health, Labor and Welfare's Labor Force Survey (May 2024), the number of workers has increased for 22 consecutive months, and although the sense of labor shortage is subsiding, small businesses, where the damage caused by a single retiree is significant, are still expected to face a high possibility of being forced into "labor shortage bankruptcy.

◆There’s also the impact of the 2024 problem.

  In the logistics and construction industries, the labor shortage caused by the overtime caps imposed by the Workplace Workplace Reform Act, which came into effect in April 2024 (the so-called "2024 problem"), led to 53 bankruptcies in the construction industry and 27 in the logistics industry, the highest numbers ever in the first half of a year for both industries. In particular, the number of bankruptcies in the logistics industry almost doubled from the 15 in the first half of 2023, due to the revision of the overtime work ceiling regulations and the Notice of Standards for Improvement.

　When one employee leaves the company, the remaining employees must fill the vacancy, and in many cases, the workload becomes unbearable and a chain of resignations occurs in a domino-style fashion. It is necessary to consider measures to address labor shortages that suit your company, such as strengthening recruitment and improving working conditions to prevent employee turnover.

Revised Child Care and Family Care Leave Law and Revised Act on Advancement of Measures to Support Raising Next-Generation Children were enacted.

 

To enable both men and women to balance work and childcare/nursing care, the revised law was enacted for the purpose of taking measures as follows: 

* Expansion of measures to provide flexible work arrangements based on the age of the child,

* Expanding the scope of the obligation to publicize the status of childcare leave taken,

* Promote and strengthen measures to support Act on Advancement of Measures to Support Raising Next-Generation Children;

* Reinforcement of support systems for balancing work and nursing care in order to prevent nursing care turnover.

◆Key amendments to the Child Care and Family Care Leave Law, along with the effective date.

(1) Employers will be obligated to take measures, etc. to realize flexible work styles for workers raising children over 3 years old and before entering elementary school. [Effective date: Date specified by Cabinet Order within 1 year and 6 months after promulgation.]

(2) Workers who take care of children before entering elementary school are entitled to restrictions on overtime work (exemption from overtime work) upon request. [Effective date: April 1, 2025]

(3) Employers will be obliged to make efforts to take measures so that workers raising children under 3 years of age can choose to telework. [Effective date: April 1, 2025]

(4) Child nursing care leave will be revised. [Effective date: April 1, 2025]

(5) Employers will be obliged to listen to and give consideration to the individual wishes of workers regarding balancing work and childcare at the time of pregnancy and childbirth notification and before the child turns 3 years old. [Effective date: Date set by government ordinance within 1 year and 6 months after promulgation.]

(6) The obligation to publicize the status of employees taking childcare leave will be extended to companies with more than 300 employees. [Effective date: April 1, 2025]

(7) Employers will be obliged to take measures to prevent employees from leaving their jobs due to nursing care, such as informing employees about the measures, confirming their intentions, and improving the employment environment. [Effective date: April 1, 2025]

◆Points of revision of the Act on Advancement of Measures to Support Raising Next-Generation Children and effective date

The effective date of the law has been extended to March 31, 2035. [Effective date: Date of promulgation (May 31, 2024)]

Companies with more than 100 employees will be required to monitor and set numerical targets for the use of childcare leave. [Effective date: April 1, 2025]

　

Details will be established by government ordinance in the future, so it will be necessary to keep a close eye on the situation.

 "Information on the revised points of the Child Care and Family Care Leave Act and the Act on Advancement of Measures to Support Raising Next-Generation Children".

https://www.mhlw.go.jp/content/11900000/001259367.pdf

The Importance of "Resources at Work"

 

In the trend toward reforming work styles, there is a tendency to place more emphasis on the quality of work, but one research study found that, in fact, there is not much difference in the "quality of work" of Japanese workers between regular and irregular employment, and that the only major difference is the "quality of income.

The study also showed that many workers, regardless of gender or employment status (full-time, non-full-time, part-time, etc.), are exposed to excessive work demands and have only inadequate "work resources" to do quality work.

Things that enhance the quality of work

The study states that what enhances the quality of work is the availability of the following "work resources," all of which must be sufficient

[Discretion and learning opportunities]

Given discretion in the order and method of work. Opportunities to learn new things from superiors and colleagues, etc.

[Good management]

There is order and planning in the work. The supervisor treats employees with kindness and compassion. A reliable and trusted superior. Opportunities to obtain feedback and advice on one's work from superiors and colleagues, etc.

[Good relationships]

The department has a willingness to work together. Work-related information has been shared. They are cooperating with each other to think of new ideas and implement them, etc.

Create an organization that is not dented by high-demanding work

It is not advisable to attempt to reduce long working hours without a clear plan of action. Behind the creation of long working hours are numerous problems related to "work resources," such as unclear work goals, inadequate work planning and arrangements, and lack of necessary communication.

In order to create an organization and workplace that is not dented by overloaded or high-demanding work, it is necessary to prepare "work resources" and increase employees' sense of wellness, job satisfaction, mental health, and work engagement.

It's a good idea to take a look at your company's work resources once in a while.

Treatment of Telework Allowance in the Calculation of Premium Wages

On April 5, 2024, the Ministry of Health, Labor and Welfare issued a notice regarding the exclusion of telework allowances from the calculation of premium wages.

◆Wages as the basis for premium wages

The premium wage is calculated by multiplying the hourly wage by the premium rate. However, family allowances, commuting allowances, living apart allowances, child education allowances, housing allowances, temporary wages, and wages paid for a period exceeding one month are not included in the wage base, as stipulated by law.

So-called telework allowances are generally included in the base wages for premium wages if the telework allowance falls under wages under the Labor Standards Law.

◆Cases in which telework allowances are not included in the premium wage base

However, if the telework allowance is considered as reimbursement for actual expenses necessary for business management, the telework allowance does not constitute wages and is not required to be included in the wages as the basis for premium wages.

According to this notice, in order for a telework allowance to be treated as reimbursement for actual expenses, it must be clear from its external appearance that the telework allowance is intended to identify and reimburse the amount of expenses actually incurred by the worker for the work.

◆A method of reimbursement of actual expenses

Among telework allowances, those that could be considered as reimbursement of actual expenses include the cost of purchasing office supplies, etc., communication expenses (telephone charges, communication charges for Internet connection), electricity charges, and charges for using rental office space. For the method of reimbursement of these business use portions, please refer to the method indicated in the National Tax Agency's "FAQ on Cost Sharing for Telework (related to withholding income tax)".

Excluding telework allowances from the calculation of premium wages constitutes a disadvantageous change in working conditions, and should be discussed carefully between labor and management in accordance with the law.

Recognizing Unusual Worker's Accidents for Teleworkers

A woman in her 50s working for Yokohama-based Starkey Japan, a manufacturer of hearing aids, developed an adjustment disorder because of the long hours she worked as a teleworker, according to the Yokohama North Labor Standards Inspection Office. The lawyer representing the woman announced this at a press conference held in Tokyo on April 3. The certification was dated March 8, and is unusual in that it is the first time that a worker's compensation for teleworking has been approved.

According to the certification by the Labor Standards Inspection Office, the woman was in charge of accounting at the company and began teleworking at home in 2020, the year of the Corona disaster. Her supervisor began to frequently contact her early in the morning and late at night for work-related communications and reminders, and she was often forced to work on her days off.

In March 2022, the woman developed an adjustment disorder. In the month immediately prior to her onset of the disorder, she had worked 112 hours of overtime, exceeding the overwork death line (100 hours per month).

At a press conference, a lawyer representing the woman said, "Appropriate management of working hours is necessary even for telework, which leads to more flexible work styles for workers." Starkey Japan stated in an interview, "We take this matter very seriously and will respond to it in good faith."

Guidance on providing workplace information to help eliminate mismatches between job seekers will be developed

◆The key to eliminating mismatches is to provide information

　As work needs become more diverse, it is important to provide information sought by job seekers to eliminate mismatches.

　On the other hand, the Ministry of Health, Labour and Welfare (MHLW) is now formulating guidelines for providing workplace information to job seekers, based on the view that it is appropriate to provide information flexibly in response to the requests of job seekers, since it was confirmed through hearings that job seekers may find it complicated if the amount of information presented at a time is too large.

◆Interest is information about the department to which job seekers plan to belong

　The draft includes information that job seekers are interested in, such as teleworking, an active role for female employees, the percentage of male employees taking childcare leave, childcare leave, shortened working hours, and wages (including mid- to long-term prospects for salary increases), overtime hours, and paid leave utilization rate.

　Based on the results of the hearings, it is also desirable to present information related to the department to which the applicant plans to belong, in addition to information on a company-by-company basis.

◆To make the text easier to read, devise a publication method

　The amount of information to be posted on recruitment websites and job postings should be limited to the information necessary for recruitment, and information on human capital should be posted on a separate page with links for job seekers to view according to their own interests.

◆Methods suitable for small and medium enterprises

　For small and medium-sized enterprises worried about the responsibility of maintaining and updating their website, the use of 'Shokuba-rabo' (https://shokuba.mhlw.go.jp/) is recommended. This service is advantageous because the website is linked to the Hello Work Internet service and information can be viewed free of charge.

What is Mommy Track?

Mommy Track refers to a situation in which a woman returns to work after childbirth, but is assigned to supportive duties or is otherwise removed from the career path. This is not only a source of concern for women who are eager to continue working after childbirth, but also a major disadvantage for companies, as it creates lost opportunities due to the inability to assign excellent human resources to the right places at the right time.

Problems with Mommy Tracks

What are some of the problems caused by Mommy Tracks? Understanding more specifically the problems associated with Mommy Track will facilitate understanding of its causes and how to control it. Let's use this as a hint to understand the problems that actually occur and how to take countermeasures.

Out of the fast track to success

Mommy Track occurs when you cannot work the same way you used to due to childcare or other reasons. This is a case where a person wants to work the same way as before, but is forced off the career track due to restrictions such as not being able to work overtime or business trip. This is a problem where a person's career path changes regardless of his or her own will.

Lower evaluations and salaries

Japan still has a culture of strong time evaluation, despite environmental changes. In some cases, it is determined that important projects cannot be entrusted to those who have shorter or more limited hours than other employees. In these cases, it may be difficult to obtain opportunities for promotion or advancement by being assigned simple tasks. In addition, If the salary is based on the number of hours worked, then working fewer hours could result in a lower salary.

Decrease in motivation occurs

Lack of opportunities for promotion and advancement and lower salaries are major causes of low motivation. In addition, shortened working hours can cause a combination of guilt and other factors that can be a major stressor, further reducing motivation. If employees cannot produce better results than their colleagues or communicate effectively within the company, it can contribute to a decline in motivation and hinder productivity in the workplace.

Increased turnover

Lack of opportunities for promotions and advancement, lower salaries, and reduced motivation are factors that ultimately increase turnover. It is a significant loss for any company to lose a talented person who can work as hard as he or she used to in a few years' time. To prevent this from happening, it is the company's responsibility to take good care of its employees before they leave.

Causes of Mommy Tracks

What are some of the causes of Mommy Track? Knowing the causes is always necessary in order to take countermeasures. Let's understand the causes and make use of them to develop countermeasures.

Shorter working hours

The most common cause is shorter work hours due to child drop-offs and pick-ups, sudden illnesses, etc. Shorter working hours can make it harder to finish tasks and decrease productivity. This can lead to a lower evaluation when compared to other employees, or a lower salary, causing a Mommy Track.

Lack of understanding in the workplace

Lack of understanding in the workplace can also cause Mommy Tracks. Women suffering from Mommy Tracks want to "balance childcare, work, and career advancement. However, this may be due to assumptions or statements that childcare should be a priority, actions that encourage employees to leave early, assigning them to jobs that do not bother them to take care of children suddenly, or other corporate or departmental responses. A company has a responsibility to adopt a system that does not inconvenience its customers, so it cannot give priority only to the wishes of its employees. However, it is also necessary to build a rewarding work environment for female staff members, who are excellent human resources.

Inadequate environment

When taking care of children, there will be times when sudden illness or injury forces a change in schedule. In such cases, repeated absences from work or early departures from work can affect personnel evaluations. If an environment that allows diverse work styles, such as remote work, is not in place, it can cause Mommy Tracks. Balancing work and childcare can be challenging, especially when there is a lack of family support and facilities for sick children. It is important to avoid falling into 'Mommy Track.' Therefore, there is an urgent need to improve the environment.

Lack of day care centers

The issue of children on waiting lists for day care centers is one that we see in the daily news. Lack of day care centers is a major problem when raising children. When care of sick children and extended daycare are not available, workers are forced to work shorter hours. The resulting shorter working hours and reduced throughput lead to lower evaluations of female staff.