Top 5 contract employment myths

By Casey Wahl

How did the word “contract,” and particularly the Japanese word “haken,” come to have a negative concept in Japan? In the West, the contract employment market is more mature and for many has become the preferred way to work. Contracting offers a freedom of mobility that permanent employment just cannot offer, not to mention a way to avoid the office politics that can make work life tedious.

Unfortunately, contract employment remains largely misunderstood in Japan, making people approach it more hesitantly. And while Japan may not be as mature in its use of contract workers as the West, many of the same benefits exist. People’s hesitancy to work on contract in Japan is simply caused by misunderstandings, or myths, about what contract employment actually is.

Myth 1: Contract employment is unstable

Many people think contracting is limited to working on a short-term project, and that once you complete the project, you’re back on your own to locate that next role. In Japan, this is typically not the case. Of course, there are many projects with fixed durations, as well as contract covers for maternity and sick leave. In general, though, companies approach contractors as a long-term solution. Research shows that 65% of contract positions within foreign firms in Tokyo are for a period of at least one year, if not indefinite.

With head count within companies almost as precious as profits, bringing in a contractor instead of a new permanent hire is one way companies can secure the key workers needed despite tight hiring restrictions.

Myth 2: Contract employment is a dead-end

Another common perception is that working as a contractor limits career opportunities. Inevitably, some “opportunistic” companies do relegate contractors to limited roles and responsibilities, simply accepting the subsequent turnover as “business as usual.” However, the demand by contractors to be given more responsibility is such that we are seeing companies respond by providing increased opportunities.

After seeing the added-value contract employees can offer, companies often reward them with more responsibility and new projects, as they can often prove more valuable than going to the market and hiring an unproven permanent employee. Within 6 to 12 months of starting work, 48% of contractors we place in foreign companies are either taken on as permanent employees, offered pay increases, or given a significant increase in responsibility.

Furthermore, a point that is often overlooked is how many of today’s top executives started their careers as a contractor. A Solutions Delivery Manager at a global Fortune 100 company recalls, “My first real job in the Tokyo market was on a contract, and now I am in a position handling the company’s major account and managing 40 plus people. I wouldn’t have gotten here had I not taken that first contract job opportunity.”

In addition to opportunities for career development, there is also the obvious benefit that working on contract can lead you into a new field or a new industry. For someone with limited experience in Japan, typically the only way to break into an international, top-tier financial firm is to start on a contract basis.

While hiring has tightened significantly with the collapse of Lehman Brothers and the buyout of Merrill Lynch, there are still opportunities to be had in the financial services market for those open to contract employment.

Myth 3: Contract employment is for unskilled workers

This is perhaps the easiest myth to dispel as 40% of roles within Tokyo are considered to be “highly skilled.” While this might not seem a high percentage, if the sheer number of roles across the market is taken into account, then this number is quite significant. Among foreign-owned companies in Tokyo, this percentage is even higher, at around 70%.

Project managers holding PMPs, accountants with CPAs, marketers with MBAs, interim managers with 10+ years of executive level experience, and other highly qualified professionals can all be seen working as contractors, often receiving more pay than their permanent counterparts. There are even more roles in the market demanding these skill sets that remain unfilled.

Myth 4: Contract employment means lower salary

Sadly, in Japan this is true in more cases than we would like to see and is one area in which the local contract market is not nearly as matured as the West. That being said, contractors with specialized skill sets can expect to make earnings on par with, if not more than, their permanently employed counterparts. And why not? They offer their employers flexibility, and should be rewarded.

For those just arriving in the market, looking to change fields or industry, it would be unwise to have high salary expectations. However, as specialized skills are developed, expecting higher pay for contract work would be natural.

Some sectors in the Japanese market have already recognized the value of employing contractors, and we have seen a particularly strong demand for contractors with specialized skill sets in the areas of IT, accounting and operations. Consequently, these industries are helping progress the wage standard for contract employees in Japan. Secretarial and HR positions, however, have generally been slower to adapt.

That said, the general uncertainty affecting the market in the wake of the latest upheavals stemming from the credit crunch may cause companies to be slower to loosen their purse strings for the near future.

Myth 5: Contractors receive no benefits

For all contracts longer than two months, this is untrue, because by law you must be enrolled in the Japanese national health insurance and pension programs. The social health insurance plan in Japan is very extensive and typically you pay 30% of the cost for doctor visits and treatment. With regard to national pension, all residents are required to pay into the scheme. However, foreigners planning to leave Japan can re-claim a portion of their contributions after returning home. Furthermore, if you have already been on the national pension system while working as a permanent employee, your payments are not lost and your contributions as a contractor will continue to build on this foundation.

Contractors also receive paid holidays, typically becoming eligible for 10 days after six months of work with incremental increases in paid holidays received every year. Many contract companies also offer further benefits, such as subsidized training programs, career advice, seminars, and discount membership programs, among others. At more senior levels, bonuses are occasionally part of the package.

What does it mean for you?

Not only can you move more quickly through the hiring process, evaluate a company more thoroughly before committing for the long-term, and gain more skills across diverse projects, but by understanding what contract work is, you can deftly sidestep the myths that cause so many people to hesitate at this employment opportunity. As long as these myths exist within Tokyo’s contract market, fewer people will embark on a career path propelled by contract-based work experience, which means less competition for those in the know.

Casey Wahl is director of the Contract Division at Robert Walters, Japan’s largest foreign-owned specialist recruiter.

© Japan Today

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Sorry Mr.Walters, your 5 busted myths are not busted.

Not busted for the majority of Japanese people.

A recruiter will never say that being on contract worker sucks.

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I believe that any contract lasting more than 6 months, is considered long term employment and fall under the labor standards of long term employment. Even if they want to get rid of you at the end of the year, when the contract comes for renewal, it must be renewed. I was told that only contracts that clearly state "will not be renewed" do not fall under the Japanese employment law. Never accept that a contract will terminate unless it clearly says it will. At the end, things will get ugly, but if you want to continue working in the company, there is little they can do, unless they pay you off.

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Agreed. For the majority, contract work = temporary, no future, lower paid and no benefits. It's just Mr Wahl lives on a completely different planet and has a self interest in promoting this type of work. He should try talking to Mr Average on the street once in a while.

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40% of roles within Tokyo are considered to be “highly skilled.”

And that means 60% are not.

by law you must be enrolled in the Japanese national health insurance and pension programs

And that means you receive no benefits, since all you get is what any self-employed person gets, ie you pay all the premiums yourself. 'Getting benefits' in Japan means the employer pays half of a much more attractive package. (Assuming that they don't fiddle the books, as it has recently come to light some do.)

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if you are a contract worker it is very hard to get a mortgage in Japan, for Japanese as well as foreigners

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it depends. i am a contract worker technically but have been at the same company over 10 years and have been able to get a mortgage.

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I'm glad that Casey Wahl thinks that the situation is so rosy, and I guess it might be for executives or consultants in Tokyo. I am a contract worker (Higher Education) and most of his so-called myths apply to my situation.

Myth 1: Contract employment is unstable

Yes. My employment is unstable. I have a contract for a fixed period (one academic year: 10 months). My contract is not for more than that, certainly not indefinite. In fact, my contract specifically states how many times it can be renewed (2) and after I run out of renewals, I am on my own to find a new job.

Myth 2: Contract employment is a dead-end:

Yes. Recently I had a conversation with my boss, who admitted that my job was a dead-end one. He even went so far as to say that my job was designed to be a dead-end one. They want people work for a while and leave. They want high turn-over in my position.

Myth 3: Contract employment is for unskilled workers:

No. My job is actually high skilled. It requires an advanced education and specific knowledge and skills that most people do not have.

Myth 4: Contract employment means lower salary:

Yes. In comparing my salary to that of non-contract faculty I am paid between 30 and 40 percent less. Again, my boss admits that biggest benefit for the university of hiring me on contract is saving money.

Myth 5: Contractors receive no benefits:

Yes. Just because an employer is legally required to do something doesn't mean that they will. My contract specifically states that I will not be given any benefits. I am on my own. In fact, when you factor in the lack of benefits into the equation, my salary drops by another 10 to 15 percent.

It seems to me that these are not myths, but truths.

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"Myth 4: Contract employment means lower salary:

Yes. In comparing my salary to that of non-contract faculty I am paid between 30 and 40 percent less. Again, my boss admits that biggest benefit for the university of hiring me on contract is saving money."

Really ? Companies using dispatch agencies have to pay for the services of the dispatching company as well as your salary. The mark-up is usually double and includes a variety of fees for transportation, equipment, or even special material. I for one have seen some of the contracts handed over to companys wishing to use a dispatched worker, trust me, hiring the person direct would be much cheaper ! But as you said before, by doing this many of Japans largest companies would have to do something they don't want to, hire a foreigner. And that is the truth of the matter. Major companies in Japan would still rather pay more for just the ability to get rid of any foreign worker they deem to have "worn out his/her welcome". It happens all the time and I see it everyday. Mcuh like those thousands of Japanese inns that don't want foreigners, neither does Japan's business industry. To that I say fine ! With the understanding that all nations around the world will stop doing business with such a backwards nation. Time to seriously consider boycottingb Jaspanese goods till they deal with the nations rampant racist attitudes. Haken kaishas do nothing more than encourage this shameful behaviour. I say shut em down and go to direct contracts !

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Cleo and Also seem to have summed things up well.

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>Contracting offers a freedom of mobility that permanent employment just cannot offer, not to mention a way to avoid the office politics that can make work life tedious.

Only one reason folk turn contractor in UK skilled sectors and that is spondoolies - usually double if not pushing three times as much.

Oh, and you get to sod off at 5.30 on the dot. I'm amazed the pay is less in Japan though, why on earth would anyone do it!?!?

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I'm surprised at all the cynicism. I thought recruitment consultants were skilled, principled professionals who only acted in the best interests of their candidates.

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Ah yaa - Robert Walters - these guys tried to convince me I'm worth far less than what offers I already got by having interviews directly with the employers. Now they come trying to convince everybody it's far better to work as a contractor and have them as intermediators (so that they can take the lion's share and leave you with a much lower salary). Trust me - never work as a contractor and NEVER use companies like Robert Walters and others - try to find your job by yourself by directly contacting the employing companies as this is benefical for both sides... it worked wonderfully for me. After 5 years of working as a full employee I am now entitled to receive almost one year worth of salary if I retire (and the value increases year by year) - now what does one get as a contractor again?!

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Myth 4: "Sadly, in Japan this is true..."

Not really much of a myth then, is it?

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myth 5; I have hardly ever heard of English teachers being enrolled into the health and pensions schemes, ever recently my company goes out of it's way to keep teachers of it...

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My girlfriend has been working through a haken gaisha for quite a while, and I can check out all myths except possibly #4

1 - She once lost 3 jobs in a 2 month period (one of those was because her haken gaisha violated some laws regarding dispatch work and got busted.

2 - Yeah, she got offered increased responsibilities after she had spent a couple years in the same haken company (not on the same job note) - because 2 years is a huge time in the haken world, most people drop out within months.

3 - She has some skill in IT and design, but never got any job that came even close to that line of work. Skill or preference didnt seem to be a factor in her haken gaisha's dispatching policy. I have to add an exception to that because our haken worker at my office is oustandingly skilled and sharp. But then it's a woman who could have had a great career if she hadn't chosen to marry and go part time.

4 - OK, hourly wages were a bit better than entry-level regular employees (about 20%), but were still damn cheap, and the only way for her to save any money was to work night shifts or overtime 6-7 days a week. Considering she had to pay for her own health insurance and would frequently find herself out of a job and with no pay for weeks at a time, I'm pretty sure she didnt come winning out of the situation.

5 - See above. Sure National health scheme is mandatory. That just means she had to pay for it out of her own bucks. Of course she never qualified for unemployment insurance.

oh, and paid holidays.?. HA HA HA, good one!

Not only the legal protection for part-time and contract workers is extremely weak in japan, but most haken kaisha are operated by real sharks who can and do bend every rule in the system in order to make a buck. Considering how hard it is nowadays to raise kids on a single income, our new birth minister Ms Oguchi might want to try making that sector a bit more attractive.

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I see a number of comments from educators or English teachers, which misses the point, as the article is clearly written with a focus on working in business, particularly with foreign capital firms operating in Japan. As a manager in a global firm operating in Tokyo, I have to agree with most of what Mr. Wahl has said. In particular, for foreigners trying to break the rice paper ceiling and actually secure rewarding work in Tokyo, a contract is an excellent way to enter a firm. A firm can take a lot more risk on a candidate if that person is coming in on a contract, and that gives the candidate a chance to prove themselves on the job. Virtually all of the folks we hire on contract end up in permanent roles with us.

Looking more broadly, the foreign working population in Japan is not statistically significant compared to the entire workforce. This begs the question of whether or not the five myths outlined in the article apply to the broader group--in fact, we're seeing a radical shift in how Japanese people work, with the end of lifetime employment and an explosion in the recruitment industry (remember how many recruitment ads where not on the subway cars 5 years ago?). It will be interesting to see how things develop but given the economic fundamentals the labor force must become more flexible and adaptable, and contract employment may allow both firms and employees to survive in the evolving times ahead.

A recruitment firm, wether permanent or contract, is only as good as its reputation. Those that make enough people happy without disappointing too many is bound to survive. Robert Walters seems to be thriving in Japan. Unfortunately in life people talk about bad experiences in service more than good experiences; it would be interesting to see if any readers out there have had some good recruitment experiences with agencies, whether Robert Walters or others. I ask because I actually had a quite a good experience a few years ago with Robert Walters, and secured a job that otherwise I might never have known about.

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ChicagoGSB - I am near certain you cannot get a working visa for a short term contract assignment as a foreigner (with some exceptions - say, IT project work).

There is a huge distinction between administrative temp work and value-add consulting work - this distinction is not made in the article, presumably to bolster the fanciful claims made by the writer.

And... is it at all possible for JT to have articles written by people who aren't phenomenally biaised towards the subject?? How about a counter-point article written by an actual temp worker?

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I am so much disappointed by all that negative comments about Contract & Haken. I am a 34 yr-old Japanese female and I chose haken working style to improve my skills as well as to gain new experiences.

Myth 1 - I stayed with the previous company for 3 years as Executive Secretary on haken. The reason I left the company was because my boss went back home in England. There were many haken co-workers especially secretarial positions, and the longest haken staff was in her 6th year in the Procurement section of the company.

Myth 2 - I don't think so. Contract employment provides you with more options. You can improve your skill-set, gain knowledge and experiences in a new field to bring you up to the next step.

Myth 3 - Some jobs require high-skilled people, others are just OK with entry level. It really depends what kind of people company needs.

Myth 4 - This is again, it depends on what type of job you have. It is usually lower than permanent staff, however, you may expect your salary raise if you are committed to your job for a long-time. In my case, it was only '100yen' during my haken period though. (Ouch!)

Myth 5 - I was qualified for 'Social Insurance Scheme' which included 'Health Insurance', 'Unemployment Insurance' and 'Welfare Pension'. As Mr. Wahl says this is a mandatory if you work regular hours (over 30 hrs/wk). Also I was able to use welfare provisions at discount rates.

I appreciate my agent for finding me a job and their continuous support after starting my work. I believe Robert Walters does provide the same support and efforts. After total of 5 years of haken experience I became a permanent staff, and without the haken times I wouldn't have had this permanent opportunity.

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This is ABSURD!!! He doesn't even understand the difference of 'haken' and 'cotract'!

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A foreigner I know well is going to take a position with a Japanese company to manage their global marketing. They were in a rush to hire someone with his skills and he offered them the choice of paying 9M for permanent or 9.5M for contract.

He's a gambler and a risk taker, so he took the latter choice. He knows he's going to have to always watch his back and maintain a sizable buffer of savings in case they decide to cut him. There is no severance payment in his case (6-month contract to start with).

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