3rd Report of the Market Access Ombudsman Council (March 18, 1996)

6-(2) Review of Employment Placement Projects

1. Complainants: French Embassy, American Chamber of Commerce in Japan

2. Ministry concerned: Ministry of Labour

3. Background Information:

(1) Under the Employment Security Law, fee-charge employment placement projects are regulated as follows.

1) Because of the public nature of employment placement projects, the business is allowed to deal with 29 occupations requiring special technique.
2) Taking account of protection of workers and of the ILO Convention No. 96 that Japan ratified, the ceiling of registration fee, 540 yen, is set. Similarly, the ceiling of referral commission, 10.1% of the referred worker's 6-month wages, is set. The commission is collected from those seeking workers.
3) Those who try to engage in employment placement projects must clarify the occupations that they plan to handle and obtain the permission for each business office (the term of validity of one year, conforming to ILO Convention No. 96). Requirements for the permission are the following: appointment of responsible persons with more than a certain years of experience (ten years combined of actual experience in the occupation and/or in the employment placement projects); and more than a certain office space (20m² + (the number of occupations - 1) x 6.6m²). When a company tries to engage in both workers dispatching undertakings and employment placement projects, it must separate the office space and human resources for each business. Financial conditions are checked once a year when the permission needs to be renewed. Whether or not the permission is granted is notified in 80 days of standard processing period, based on the Administrative Procedure Law. If no permission is granted, the reason is stated in the notice.

(2) The Administrative Reform Council deliberated how employment placement projects should be, and compiled a report last December. The Central Employment Security Deliberative Council is also deliberating the matter now.

(3) As for fee-charge employment placement projects overseas, the business needs permission in 43 states (no restriction on occupation handled) and are under fee regulations in 35 states in the United States. In France, the business is, in principle, state-managed and the only artists and housekeepers are permitted. In Germany the business requires permission with no restriction imposed on the occupations handled.

4. Complaint:

The complainant claimed that the current complex regulatory structure is not suitable for business environment. Therefore, the complainant raised the issue that the ministry concerned should relax the following regulations so that the private-sector employment placement projects develop and the foreign businesses secure Japanese employees more easily.

(1) When occupations are becoming more and more specialized the currently designated kinds of occupation does not suit the actual business situations. It is also impossible to keep the designated kinds of occupations up to date. Thus the ministry concerned should liberalize, in principle, the designated kinds of occupations that employment placement projects can handle, otherwise adopt a negative list where occupations they cannot handle are designated.

(2) Permission should not be required for each office as it is now, but for every company. Its term of validity should be extended from one year to five years, and financial and other company conditions should be inspected only when the permission is renewed. All information necessary for obtaining the permission should be promptly supplied by the Ministry of Labour when it is requested. In addition, the application form should be simplified and whether or not permission has been granted should be notified to the applicant in writing within three weeks. Furthermore, if no permission is granted, the reason should be notified as well.

For a small company, the documents required to be submitted and regulations on the layout inside the office are burden that impairs growth of the business. Therefore, the regulations should be eased.

(3) When a company tries to engage in both workers dispatching undertakings and employment placement projects, offices and employees should be separated between them. This imposes inefficiency and costs on the company, so the regulation should be relaxed.

(4) It is unrealistic to mandate the employment of individuals with more than a certain years of experience and to limit their activities to the occupations they experienced. That is, it is questionable to assume that one will be qualified to refer individuals to a certain occupation where the one has on-the-job experience. The required skills can be understood and learned by anyone with the aptitude and experience in a personnel-related field. The current system cannot measure the aptitude of an individual for the post. Therefore, this regulation should be abolished.

(5) The regulation requiring the minimum floor space in the office should be relaxed. In particular, when a company tries to engage in both worker dispatching undertaking and employment placement projects, the company must secure the required space for each business. Therefor the company is imposed a burden.

(6) The present law stipulates the referral fee, which imposes too many burdens on the referred company. The referral fee should be decided by market principles, and those seeking workers should freely select a referral service company in a free and competitive market.

Since the employment placement business is subject to complex and strict regulations as described above, these regulations should be eliminated and workers should be granted as much freedom of choice as possible for their self-fulfillment in free economy.

5. Results of Deliberation:

The deliberation of this case should be based on that the fee-charge employment placement projects system is established and operated to protect workers and to make the adjustment of the demand and supply of workforce, and this case is an important issue from the viewpoint of promoting direct foreign investment into Japan, by foreign companies starting business in Japan for instance.

First, the renewal of the term of validity of the permission should be simplified as much as possible. The related documents required for the permission should be simplified, by eliminating the employees' resumes within fiscal year 1995 for example. And then efforts should be continued to achieve further simplification. While paying attention to the progress of deliberations in revising the ILO Convention No.96, constructive steps should be taken on the following matters, under the current ILO Convention No.96, in the studies concerning the fee-charge employment placement projects in progress at the Central Employment Security Deliberative Council.

(1) The kinds of the designated works should be increased as many as possible, including the feasibility of employing a so-called 'negative list'.

(2) Concerning the fees, steps should be taken to utilize market mechanism as much as possible within the regulations based on the current ILO Convention.

(3) There are various regulations concerning the permission. The following reviews should be made.

1) The regulation of permission for each office should be relaxed as much as possible.
2) The regulation of running both worker dispatching undertakings and employment placement projects and of office space should be considerably relaxed.
3) The regulation concerning the length of work experience on the occupations appears to be excessive and should be considerably relaxed.

Government decision (March 26, 1996)

6-(2) Review of Employment Placement Projects

The renewal of the term of validity of the permission will be simplified as much as possible and the related documents required for permission will also be simplified within fiscal year 1995. And then effort will be continued to achieve further simplification.

Constructive steps will be taken in the studies concerning the fee-charge employment placement projects in progress at the Central Employment Deliberative Council, under the current ILO No.96 Convention, for increasing the kinds of designated works as many as possible, (including the feasibility of employing the way to allow fee-charge employment placement projects in all occupations but the inappropriate ones), and for considerable relaxation of the regulations concerning fees, permission for each office, running both worker dispatching undertakings and employment placement projects, office space, and the length of work experience on the occupations.

Follow-up (May 12, 1997)

6-(2) Review of Employment Placement Projects

(1)
1) The following measures were taken regarding renewal procedures for the term of permit validity period, under a directive issued by the head of the Employment Security Bureau, dated April 1, 1997:
* Except for renewal every three years, no documents will be required for renewal procedures.
* Applicants will not be required to present an employment placement projects plan or a financial statement.

2) The following measures were taken regarding simplification of documents for permits, under a directive issued by the head of the Employment Security Bureau, dated April 1, 1996:
* Presentation of employees' resumes is no longer required.
* Presentation of financial budget sheets is not required

(2)
1) Range of occupations handled
Based on the December 24, 1996 proposal by the Central Employment Security Council, the range of occupations handled by placement agencies was expanded as a result of changes made to the regulations concerning the Ordinance for the Employment Security Law (see reference below), and the use of a negative list was begun, allowing all jobs other than those mentioned to be handled (implemented April 1, 1997).

Policies concerning further expansion of occupations handled will be decided based on the operation of the negative list and the changes to ILO Convention No. 96 which will be revised made in June 1997, after which the law will be changed and the amended Convention ratified, and will be formulated in more detail. In addition, further study to deciding on a basic direction for revision of the dispatching workers system, will be initiated during FY1997.

2) Fees
Based on the December 24, 1996 proposal by the Central Employment Security Council, nominal placement fees may be set freely after receiving approval, from April 1, 1997, (previously, the maximum allowed had been 10.1% of wages paid in the first six months after employment) as a result of changes made to the regulations concerning the Ordinance for the Employment Security Law.

3) Deregulation of permits
* Simplification of procedures and documents required
As a result of changes made to the regulations concerning the Ordinance for the Employment Security Law, when employer with multiple offices file applications, for changes in the name of the representative officer, etc. which apply to the entire operation, only the main office will be required to apply to make changes to permits or notifications (implemented April 1, 1997).
* Running both worker dispatching undertaking and employment placement project.
By eliminating the requirement for separate entrances to the worker dispatching undertaking and the fee-charging employment projects, it will now be possible to carry out both businesses within the same office (implemented according to a directive issued by the head of the Employment Security Bureau dated April 1, 1997).
* Office space
The minimum office space required, notwithstanding the range of occupations handled, is now "20 square meters or more" (the previous requirement was for an additional 6.6 square meters per additional occupation handled) (implemented according to a directive issued by the head of Employment Security Bureau dated April 1, 1997).
* Employment placement officers
The requirement for experience on the part of employment placement officers has been changed to three years' experience in the employment project (previously 10 years or more) or in occupation for which placement is being handled (previously 10 years or more) (implemented according to a directive issued by the head of the Employment Security Bureau dated April 1, 1997).

(For reference)
1) Manual labourer, except an expert and a technician, engaged in occupations of service.
2) Security guard occupations
3) Manual labourer, except an expert and a technician, engaged in occupations of agriculture, forestry and fisheries.
4) Manual labourer, except an expert and a technician, engaged in occupations of transportation and telecommunications.
5) Skilled worker, except an expert and a technician, and Manual labourer, except an expert and a technician, engaged in occupations of excavation, manufacturing, building and so on.

Note 1:Excluding new graduates who have been graduated one year or less, for clerical and sales jobs.
Note 2: Worker placement will be handled in the previous 29 industries.