Photo/IllutrationJapan Post Holdings Co. head office in Tokyo’s Kasumigaseki district (Asahi Shimbun file photo)

In an unusual move to narrow the pay gap between regular and nonregular employees, Japan Post Group will start phasing out the housing allowance for its regular employees in October, sources revealed.

The decision evoked gloom and bewilderment among regular employees as it is expected to eventually reduce their annual compensation by up to 324,000 yen ($3,031).

One employee said, “I am simply unconvinced by the management's explanation.” Another said, "I will find it difficult to make ends meet.”

Among about 20,000 permanent employees whose work does not involve a transfer requiring relocation, about 5,000 individuals are receiving a housing allowance. Japan Post Group plans to end the allowance for the 5,000 over 10 years.

A housing allowance of up to 27,000 yen a month is paid to those living in a rented house while those who have owned their house are eligible for 6,200 to 7,200 yen a month for only five years or less since they purchased it.

The group is comprised of four companies: Japan Post Holdings Co.; Japan Post Co.; Japan Post Bank Co.; and Japan Post Insurance Co.

The group’s decision to abolish the housing allowance was triggered by a demand raised by the Japan Postal Group Union, Japan’s largest single labor union in the private sector, during this year’s “shunto” spring wage offensive. The union has about 240,000 members.

About half of employees of the group are nonregular employees.

The union demanded the company provide five allowances for nonregular employees, including a family allowance and housing allowance, which have been only paid to regular employees. It pointed to the heightened momentum of the “equal pay for equal work” movement in the aim of rectifying the gap between regular employees and nonregular workers who do the same jobs.

In response to the demand, the company agreed to pay an allowance to nonregular employees who deliver New Year’s cards, showing an understanding of the union’s perspectives.

On the other hand, it proposed scrapping the housing allowance for permanent employees, citing that "labor conditions for regular employees should not be a matter of personal benefit."

The union initially resisted the idea. However, it eventually agreed after the company offered to set up a “transitional measure” by phasing in the abolishment over 10 years.

The current housing allowance is to be reduced by 10 percent annually, according to an official of the group. In addition, the allowance for working in cold climates will also be reduced.

It is unusual to narrow such a pay gap by reducing wages for regular employees, although a move toward equal pay for equal work has been increasingly spreading across Japan.

If a sense of fear that "equal treatment" would exacerbate their treatment spreads among regular employees, it will likely cast a damper on the move toward a better deal for nonregular workers.

“It’s desirable to improve treatment for nonregular employees, however, permanent employees are likely to be forced to accept disadvantageous changes in their treatment in light of the limited labor costs,” said Hisashi Yamada, chief researcher at the Japan Research Institute, who specialized in the labor institution.

As one of the pillars of the Abe administration's work-style reform legislation to be considered during the current Diet session, it would establish an equal pay for equal work standard for nonregular workers.

If the legislation takes effect, more companies are likely to make a similar move as the Japan Post Group, cutting a housing allowance for regular employees.

A draft guideline of the Ministry of Health, Labor and Welfare states that inequal treatment between regular employees and nonregular workers who perform the same tasks is not allowed.

The government aims to carry the momentum of the rise in the income of nonregular employees to the economic growth on the supposition that treatment for nonregular employees is to be upgraded to the same level as permanent employees.

Nevertheless, Japan Post Group’s decision may lead other companies to weaken their treatment of their employees to bridge the gap between regular employees and nonregular workers.