Seniority is defined as the length of service by an employee in a continuing or temporary job or position. In some employment situations, time in supplemental positions may be added to an employee's seniority as well. Seniority is typically an issue for human resources managers and is important in managing resources, establishing compensation methods and policies, negotiating collective bargaining agreements with labor unions, and determining individual pay in some organizations.
Seniority may be used as a tie-breaker in overtime distribution, in hiring from a previous layoff list, or as a factor in consideration for vacant positions in a company. Seniority may be used to determine pay in organizations instead of or in addition to a merit-based pay system. If organizations do not pay employees on the basis of doing the same work and holding the same level or rank in the organization, they must determine a basis to make a pay distinction or differentiation. In a large organization, compensation specialists within the human resources area may make these determinations and may consider an employee's seniority in the pay decision.
According to a recent article in Fortune , seniority no longer matters in most companies. In the past, when employees were fired, the younger or junior members were the first to be let go. Today this situation tends to be reversed, due to changes in the world and in the work place. Even with a good economy firms no longer respect the hierarchy and may eliminate jobs held by the most senior employees. The Fortune article suggests that companies have less tolerance for employees who are earning in excess of their output, and this is typically a characteristic of the most senior members of an organization. Today an older employee can be replaced by someone younger earning less than half as much salary.
While seniority was valued in the past, for many people today, the longer you have been with a company, the more your job may be in jeopardy. Technology is cited as the reason for the change. Younger workers are perceived as more creative and innovative and may have more relevant educational experiences and training. Just as the product life cycle has shortened, so too has the career cycle of employees. Today job change and diversity of experiences is valued more than seniority.
In the past, the seniority system in organizations was a measure of job security in the employment relationship. Even in Japan, where lifetime employment has long been the norm for large, traditional businesses, many companies are abandoning these plans and no longer offering lifetime employment.
Employment practices in Japan—which were once characterized by seniority, company unions, and lifetime employment—have been undergoing a structural transformation as the nation struggles to correct current economic issues. Since the collapse of the Japanese bubble economy early in the 1990s, Japanese companies, like their American counterparts, have been forced to restructure and have adopted a system of determining promotions and salaries not on seniority but on merit. This has dramatically changed their once-treasured code of seniority, according to Focus Japan .
In addition, the percentage of workers belonging to labor unions has steadily dropped, eroding the influence of the once-powerful Japanese company unions. Today's younger workers and new entrants to the job market are becoming less interested in the prospect of lifetime employment. As a result, many are considering entrepreneurship and self-employment as a more viable career choice.
"The Growing Mobility of Labor." Focus Japan (Tokyo). October 2000.
Munk, Nina. "Finished at Forty." Fortune. February 1, 1999.
Valletta, Robert G. "Declining Job Security." Journal of Labor Economics. October 1999.