The bonus that isn’t

One of the more insidious economic practices in Japan is the bonus system. Bonuses are regularly handed out to workers and management twice a year, whether you work in the private or the public sector. Traditionally, they are almost never considered merit-based or, for that matter, even performance-based (performance in terms of company profits, that is). The bonus amount depends on seniority and position, and in practical terms is looked upon not as a “bonus” in the Western sense, but simply as an integral part of the annual salary. However, calling it a bonus gives the employer a lot of leeway and a kind of safety valve when times are tough. It can also be disastrous for people with mortgages.Because bonuses are integral to payrolls, they are factored into housing loan payments. Twice a year, mortgage holders pay larger than their usual monthly payments in line with the presumed bonus they receive. Not surprisingly, many employers during this worldwide recession have cut bonuses first, thus leaving many homeowners delinquent on their biannual bonus payments. Newspapers today ran stories about increased foreclosures during these troubled times, and more than a few mentioned this bonus system as one of the main problems. Of course, there wouldn’t be a problem if the bonuses were simply incorporated into an employee’s annual pay and distributed over 12 months, but if employers did that they’d lose their advantage.

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