Sony plans to introduce merit-based pay system

Sony Corp. plans to shift to a completely performance-based pay system in April by abolishing family, housing and other salary-linked allowances, company sources said Saturday.

The move, on which management and the labor union have agreed, will affect about 12,000 domestic nonmanagerial employees, including section chiefs, they said.

Under the current system, salaries for Sony employees consist of basic pay that reflects a traditional seniority-based scale and a range of allowances that account for about 5 percent of the total.

The company introduced a performance-based system for some 6,000 managerial employees in 2000.

Sony is the first major Japanese electronics company to abolish all salary-linked allowances.

Hitachi Ltd. and Matsushita Electric Industrial Co. have already decided to move to a performance-based pay system in the next business year, beginning in April, but they will not abolish family, housing and other allowances.

The sources said Sony's new pay system grades employees on a three-point scale every year in accordance with their performance. The highest grade is 1 and the lowest is 3.

The system will allow employees to develop their careers more quickly, Sony sources said.

If an employee hired straight after graduation performs particularly well, he or she could receive the highest grade in a few years, compared with the nearly 10 years that it takes under the existing system, they said.