Photo/Illutration The signboards of three megabanks in Tokyo (Asahi Shimbun file photo)

In a competitive labor market, megabanks are banking on shifting from seniority-based salary systems and allowing employees more flexibility in transferring to attract new employees. 

They have started a fundamental review of their longstanding wage and personnel systems.

The reason is to increase employees’ job satisfaction and ease of working, amid a sense of crisis in competing against other industries for employees. 

Sumitomo Mitsui Banking Corp. will end its seniority-based wage system, in which employees’ salaries increase with years on the job, and change it to focus more on employees’ roles and achievements, starting from January 2026.

In the new system, employees in their 20s can also take on heavier roles in accordance with their contributions to the company. So, there could be instances where employees in their 20s are earning 20 million yen ($133,100) a year.

The company will also change its transfer system to allow employees in positions with promotion opportunities to decline relocations and choose their preferred job location. The company will also grant additional pay when the employees transfer.

In banks, it was a tradition for new recruits to gain work experience at various branches across the country. In addition, as their length of employment grew or as they grew older, they were paid more. The company intends dramatic changes to this system.

Among other megabanks, Mizuho Financial Group Inc. has started a new personnel system from fiscal 2024 allowing young employees to be chosen for  important roles regardless of age or length of service.

MUFG Bank Ltd. will also allow all employees to decline transfers that involve relocation of residence, and will pay a maximum of 1.8 million yen in the event of transfers that involve relocations, starting from fiscal 2025.

The reason why major banks are rushing to improve “job satisfaction” in rapid succession is the intensifying competition to acquire talent in the labor market. Each bank is increasingly concerned about the loss of young and efficient workers.

The megabanks have also started raising their starting salaries. The three megabanks’ starting salaries for university graduates who joined the companies in the spring of 2022 were the same amount, 205,000 yen a month.

Since then, each bank has raised its starting salary almost annually. Sumitomo Mitsui Banking will increase it from the current 255,000 yen to 300,000 yen a month for those who join the company in the spring of 2026.

The company is raising salaries due to the recovery of the bank's business performance and it is regaining popularity as a place of employment among students.

Takeshi Kitayama, deputy head of human resource department at Sumitomo Mitsui Banking, believes that the company’s review of its personnel system is better late than never. 

“It may still not be an advanced system, but we intended to adjust it to the current standards at the very least," he said. "We need to become a company that people choose to work for.” 

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