Hitachi Ltd. will introduce a merit-based pay system for all employees in April, company officials said Wednesday.
Hitachi's 30,000 nonmanagerial workers will be covered by the new system, which already applies to managerial staff, following a labor-management agreement on the shift from seniority-based wages, they said.
The new system abolishes the practice of awarding annual and uniform pay hikes in accordance with employees' age and their length of company service.
Hitachi follows Canon Inc. and Seiko Epson Corp. in abolishing these regular pay raises.
Under the new system, Hitachi will divide career-track positions into seven grades and other types of jobs, mostly factory posts, into five categories.
Only employees who score 3 or better on a 5-point scale -- the top being 1 -- will receive pay increases. Those rated at 4 will have their pay left unchanged, while a rating of 5 will result in a pay cut, the officials said.
Exceptionally high performance may lead to a two-grade leap, though any employee who scores a 5 for two consecutive years will be demoted by one grade.
Individual workers' performance and skills will be assessed annually through interviews with their superiors, in line with written guidelines and standards drawn up to ensure fair evaluations, the officials said.