Terrie's Job Tips -- Negotiating Initial Terms and Conditions - Part Three: The High End – Local Hires

Now let’s look at the types of “benefits” that you would want to negotiate as a senior manager, say director level, CxO, or President and above. You are likely to want benefits that go well outside the usual employee’s experience, based usually on the fact that you also have significantly more responsibilities and in some cases, as the company’s official face, you have to project an image for the company.

Let’s split senior positions into two scenarios: those being employed from within Japan and those being employed from overseas.

Lets start with local hires first.

Your Contract - As a senior manager, you will probably be asked to take on more risk than a regular employee. Indeed, if you are a director, you will have legal risks that can land you in jail if you don’t execute your responsibilities properly. Thus the first thing you should be asking for is some form of indemnification from the company concerning any actions taken against the local entity or the parent company in the home country that are beyond your control or caused by actions other than your own.

Secondly, you need to have a solid job contract that in return for the risks you are taking causes the company to offer you some consideration if they have to let you go. Such contractual clauses are known as “golden parachutes”, and typically allow for director level and CEO candidates to get paid well beyond their termination date. The thinking behind this is that it is significantly harder for a CEO or director to go find another job at a similar level on the open job market.

Most contracts I have seen allow for 18 to 24 months pay and benefits continuation for a termination “without cause” (meaning you were fired through no fault of your own – such as a reorganization, merger, company-wide law suit, etc.) If you were let go for poor performance, a term that is often used to scapegoat a CEO, the termination period is typically 6-12 months.

A “for cause” termination is serious, will probably involve legal proceedings, and the termination is usually instant – however, you may have the right to continue getting paid while any law suit is proceeding and since this can be expensive, many firms will in fact make a pay-off for convenience to get the issue behind them. The amount is typically 6-12 months. Clearly, you need to carefully define in your contract negotiation just what ‘for cause” means. It would be a good idea to get a professional lawyer to take a look at your contract.

Your Rights - At director level, some of the standard labor law rights that apply to a salaried or wage employee no longer apply, other than as stated in your contract. For example, you can be made to adhere to a non-compete agreement – something that isn’t normally legal for regular employees. Also, you can be made to restrict your personal investments in other companies – an important consideration if you have been diligently building a portfolio over the years. You also don’t get pay adjustments unless the board approves them – requiring you to bring each request to a very public discussion forum.

Your Privileges -As a local hire, you most likely will not be on an investor visa, and thus if you want to hire a foreign maid or get paid partially overseas, you don’t have the same rights/allowances that a freshly arrived foreign-hired executive would have.

At present as a local hire you can still send your kids to an international school, however, there apparently is a new law being considered by the Diet next year that proposes to limit international school access only to the children of foreigners who have been in Japan for less than 10 years. Something to consider for the future!

There are a bunch of other benefits such as tax equalization and partial off-shore remuneration that is available to foreign executives but not to a local hire person – mainly by virtue of the fact that you have been in Japan long enough for the tax man to consider you a permanent resident (5 years or more). This isn’t to be confused with your actual visa status, which may be a spouse visa or something other than permanent.

However, one thing that you can ask for as a local hire, if the company will allow it, is to come in as a private consultant rather than employee. This way, you can still write off your home office and second job expenses and thus become more tax efficient. Also, not many people know it, but Shakai Hoken is only paid on one’s primary income, not the secondary income. Thus, if you decide to have two jobs, and if your employer will allow it, this can be very efficient financially.