The casualwear brand announced that it would raise the annual salary of its 8,400 or so employees in Japan by up to around 40%, a rare move in a country where companies are generally reluctant to raise wages.
Yanai mused that employees have learned simply to read the room and refrain from challenging their bosses – a result of the company becoming one of Japan’s largest businesses, with annual revenue of ¥2 trillion.
Although Fast Retailing has a common personnel evaluation system in place globally, it has kept its unique remuneration system for its business in Japan, where pay varies depending on each employee’s post and job location.
Yanai said the company will abolish these variables.
He also said he fails to see any relevance in determining wages based on age, another hallmark of corporate Japan.
“All workers are equal when they are 25 years old or older,” he said.
The remark comes as the company aims to grow beyond being a traditional retailer by introducing digital technologies to boost product planning, logistics and sales at brick-and-mortar stores.
In this regard, it is becoming crucial to hire and retain digitally inclined talent, Yanai said.
As US tech giants such as Amazon.com and Alphabet, parent of Google and YouTube, lay off employees, Yanai said he intends to poach some of the talents from these companies.
He also hopes the fatter pay packages Fast Retailing is now dangling will help the company lure more young talent, who will eventually encourage the whole company to further develop.
“If we have more good talent,” Yanai said, “we can make better products,” as it battles global retail rivals such as Amazon.com and Zara’s owner, Inditex of Spain.
The retail industry is relatively labor intensive and has faced worker shortages.
The casualwear brand has for years struggled to find and retain talent, especially since its high turnover rate among younger employees attracted negative attention in the past.
The company has tried to improve working conditions since then, but difficulties with talent retention are expected to remain even after the wage increases.
Last autumn, Fast Retailing raised hourly wages for part-timers by an average of 20%.
The company is forecasting a 15% increase in domestic labour costs.
Yanai said Japan’s wage level remains relatively lower than that of overseas countries, and a further rise in worker pay “could be possible”.
The labour cost increases could weigh on Fast Retailing’s profit.
In the September to November quarter, the company posted a 14% rise in consolidated revenue, but a 23% jump in labour costs, which contributed to a decline in operating profit.
The company will have to enhance productivity to offset rising wage costs.
Ahead of spring wage negotiations, the government is asking companies to raise wages by more than the rate of inflation.
“Wage is a reward for work,” said Yanai.
“Unless one achieves results that deserves a reward, there will be no increase in base salary.”
Large Japanese companies have traditionally maintained a lifetime employment system, with people spending their entire careers at a single company.
Yanai believes this system prevents employees and companies from growing.
“Top management should encourage their employees to grow,” Yanai said.