Sony freshmen salaries to diverge from Day One

Linda J. Dodson

TOKYO — Japanese employment is often compared to a membership model. New graduates enter the company not to fill a specific job role, but as if joining a club, where they are trained and molded into members who are only then assigned positions.

In this club, members do not get fired and are assured promotion as the years go by. The trade-off is that they receive relatively low, uniform starting pay.

But faced with the need to attract top talent, Sony has revamped its hiring to focus on job requirements, the more common practice in the West.​​ And last year, the company introduced a pay scale that offers immediate rewards for new hires possessing special skills.

“It’s great to be valued for my work and to get a pay bump,” said a 25-year-old software engineer who joined Sony last April.

With a master’s degree in mechanical engineering and proficiency in several programming languages, the employee was granted the third of nine job grades for workers with exceptional abilities. This meant an annual starting salary of 6.35 million yen ($59,000) — about 1 million yen more than for cohorts starting with no job grade.

Employees previously did not receive a job grade before their second summer at the earliest. But Sony last year began assigning grades to select new hires as soon as they completed their three-month training period, scrapping the custom of offering uniform salaries to the entire hiring class.

The change also encourages those who started lower on the pyramid.

“I may not know as much as someone who went to grad school, but I have unbeatable ideas for new products,” said another engineer, who aims to earn a job grade as soon as possible.

Sony is considered one of Japan’s most desirable employers. But the electronics and entertainment group lacks the pull it once had amid growing competition from U.S. tech giants like Google, Amazon, Facebook and Apple.

“We need to show that the company is ready to reward talent so we can attract high achievers,” a Sony executive said.

In addition to the low starting salaries, Japan’s ubiquitous membership-style approach generally calls for employees to work any job at any location their company sees fit.

Sony began recruiting new graduates for specific roles back in 2012. This laid the groundwork for eliminating the universal starting salary last year, clarifying each new hire’s capabilities and responsibilities.

Sony’s push to reward talent is not new. The group adopted a performance-based approach to compensation in 1968. But it was difficult to evaluate every employee when the company mostly mass-produced electronics and pay was still determined by seniority.

The tide turned in 2015, when then-CEO Kazuo Hirai overhauled the compensation system. He first took aim at the company’s bloated ranks of managers, who at the time made up 40% of the entire workforce, and demoted those who were granted titles only because of their seniority. Sony has since regained momentum, and achieved a record operating profit in 2020.

But even with the changes, Sony’s new employees still are paid half or less what an average new college graduate with a computer science degree earns in the U.S. Japan’s companies may face an uphill battle for technological talent without a greater overhaul of their approach toward pay.

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