In Japan the Labour Ministry has set up a working group to examine the possibility of introducing a system of dismissal with monetary compensation. The introduction of such a system would be a positive change for employers as the current rules make it very difficult to dismiss employees.
Currently the Labour Contracts Act states that if a dismissal lacks ‘objectively reasonable grounds’ and is not appropriate on ‘social terms’ it will be invalid and the employee will be entitled to reinstatement. Although there is no option at present for an employee to be dismissed with financial compensation where the relevant criteria for a fair dismissal are lacking, employees unhappy with a decision to dismiss often seek financial compensation as an alternative to returning to their previous employment.
The Labour Ministry would be looking to set a minimum level of compensation that is high enough not to encourage employers to dismiss their staff too easily.