Pioneering Labor Market Liquidity: The Future Opened by Concurrent and Side Jobs

2019/11/18

In April 2018, Shinsei Bank became the first major bank to lift the ban on concurrent and side jobs. The predecessor of Shinsei Bank was the Long-Term Credit Bank of Japan (LTCB), which played a role in providing long-term funds to heavy industries. Let's trace the history of how a conservative company, once predicated on simultaneous recruitment of new graduates, lifetime employment, and seniority-based systems, underwent a drastic transformation.

After the collapse of LTCB, the bank underwent nationalization and then transitioned to foreign management and conversion into a commercial bank, during which it actively recruited mid-career professionals who could be immediate assets. At that time, there were many foreigners and individuals from foreign-affiliated companies, and foreigners accounted for half of the management team. Currently, among approximately 2,200 employees on a non-consolidated basis, more than half are mid-career hires, including many specialized professionals from different industries. In an organization that embraces such diverse talent, it is not uncommon for former employees to rejoin the company, and employment practices have become flexible.

Working at a company is no longer about serving an organization, but rather "providing a certain role and results to the organization based on a contract and receiving compensation commensurate with that." As the awareness of employees shifted from "joining a company" to "engaging in work," a culture that naturally accepts side jobs and concurrent work has been fostered.

Against this background, it was in the winter of 2017 that the bank decided to lift the ban on side jobs, which had effectively not been permitted under internal regulations.

In lifting the ban, we did not establish detailed rules, but narrowed the principle down to a single point: "No restrictions shall be imposed unless they violate compliance (competition, conflict of interest, etc.) or safety considerations (dangerous work)." The policy applies to new graduates, fixed-term employees, and part-timers, and allows for both employment by other companies and sole proprietorships.

The risks inherent in such loose principles are organized as follows:

(1) Duty of devotion to business and provision of labor. The duty of devotion is ensured by evaluating the "results" of whether employees are meeting their expected roles, and the duty to provide labor is guaranteed by enforcing compliance with work rules.

(2) Health management and duty of safety. Work at this bank must comply with labor laws, and in the case of concurrent work, upper limits on total working hours are set in accordance with Ministry of Health, Labour and Welfare guidelines.

(3) Management and tracking of working hours. Employees are required to self-report the total hours spent on side jobs on a monthly basis, but there is no strict daily management. The HR department will intervene if problems are found, but there have been no such cases to date.

(4) Non-compete obligations. We believe there is no problem as long as what should be done in the main business is not transferred to a side job for personal gain. Even if it involves a competitor or a client, it may be permitted depending on the nature of the work.

(5) Confidentiality obligations. Information leaks can occur regardless of whether one has a side job, so we do not treat side jobs as a special case. When taking on a side job, employees are asked to agree to a written pledge.

Some may view this as overly lenient, but since the legal system itself is still in the design stage, excessive risk hedging and self-regulation would prevent progress. We achieved early implementation by using a self-reporting system without binding detailed rules, while maintaining a mechanism to discipline violations.

While we do not expect direct management or performance benefits from a short-term perspective, external networking and work experience can be described as "human resource development without cash-out." There may also be cases where skilled seniors find opportunities to be active externally. In the medium to long term, innovation can arise from diverse perspectives. If many companies follow suit, innovation across the entire industry can be expected. Diversification of work styles attracts excellent and versatile talent and contributes to talent acquisition. We also expect to accept highly specialized professionals, such as digital talent for whom supply and demand are tight and who do not necessarily seek long-term employment, as side-job workers.

The "formation of a free labor market," symbolized by the acceptance of side jobs, can be one of the powerful measures against the increasingly serious labor shortage.

Concurrent and side jobs are an inevitability for the future labor market, and our aim is to anticipate this trend and actively draw out its benefits. In the future, we also want to work on mechanisms to promote concurrent and side jobs.

While the labor shortage progresses, changes and diversification in industrial structures are accelerating. Holding onto human resources with fixed role expectations for a long period becomes a risk for an organization. Individual preferences are also diversifying, and fewer people are willing to entrust their entire lives to an organization.

In an environment where diverse values coexist, an era will come when labor liquidity—where the necessary abilities are utilized in the necessary places at the necessary times—will take root throughout Japanese society and even across national borders.

A society where individual value is exchanged in the market is free, but on the other hand, it carries the risk of creating harsh competition and disparity structures. If labor liquidity is an unavoidable choice, how should we sublimate it?

In various fields, regardless of the form of employment, there are opportunities for work—that is, opportunities to provide value—where an individual's diverse abilities can be utilized even partially. By allowing individuals to choose these freely, society as a whole functions as a safety net. Could concurrent and side jobs be the key drivers that open up such a future? The hurdles to be overcome by both organizations and individuals are high, but it is a proposition that must be considered seriously.