Framework for Hiring, Retention, and Compensation

With reference to the various guidelines put forth by the International Labour Organization (ILO) and other bodies, the NEC Group Human Rights Policy acknowledges employees’ three primary labour rights—the right to organize, the right to collective bargaining, and the right to collective action. In addition, the labour agreement that NEC has concluded with NEC labor unions guarantees the right of workers to bargain collectively and stipulates that management must consult with workers if any changes are to be made to important labour conditions, such as wages and work hours. As a forum for such discussions, a central labour and management council meeting is held biannually.

At NEC Corporation, the labour agreement states that all employees are labor union members, except for certain general employees who conduct management duties or designated operations.

NEC’s labor union is called the NEC Workers’ Union, and is a member of the NEC Group Federation of Workers’ Unions, which is a federation of workers unions of certain NEC Group companies (Approx. 44,000 union members as of March 2024).

Furthermore, the NEC Group Federation of Workers’ Unions is a member of an umbrella organization, the Japanese Electrical, Electronic and Information Union.
Labour-management relationships are stable, and there are no particular issues of note.

The NEC Group needs to acquire and retain talented employees in order to develop products, services and solutions that society accepts. In doing so, the Group potentially competes with multinational technology companies possessing extensive resources. Therefore, the NEC Group’s Human Resources Division constantly strives to hire and retain the personnel required by the divisions that drive the NEC Group’s businesses, including the growth areas of Mid-term Management Plan 2025. Given these efforts, hiring and labour costs may increase. In addition, as technology and industry trends evolve, there could be an increasing need to hire diverse, socially sensitive personnel who have various values, abilities, backgrounds, and unconventional skills. Specifically, recent advancements in digitalization and automation have increased demand for personnel with skills in AI, machine learning, data science and statistical analysis. Competition to acquire such personnel is therefore expected to become more intense. To attract personnel with these skills it will be necessary to complement traditional recruiting methods with diverse methods such as referrals (employee introductions) and scouting.

Consequently, if a large number of talented employees leaves the Company, if the NEC Group is unable to hire new talented personnel, or if it is unable to ensure diversity in its workforce, it may be difficult for the Group to achieve its business objectives and it may fail as a Social Value Innovator to provide products, services and solutions that society accepts.

NEC has taken harassment incidents very seriously during its 2025 new graduate recruitment activities. We are working to prevent any recurrence and are striving to ensure greater transparency in our hiring practices.

To ensure that students can feel secure in their job-hunting process, we have all employees involved in new graduate hiring sign a pledge to follow our recruitment activity guidelines, and we are thoroughly reinforcing adherence to these rules. We have thoroughly communicated the rules for meetings between students and employees. When meeting with students, employees are required to submit prior notice and post-meeting reports to their direct supervisors and the HR recruitment team.

Hiring Indicators and Goals

The Company plans to hire 800 new graduates in fiscal year 2027 and 600 mid-career personnel in fiscal year 2026.

Hiring

Initiatives to Hire New Graduates

NEC conducts initiatives to secure diverse human resources through job-matching hiring.
Starting with the new graduate hires who joined in April 2024, the Company has been implementing job-matching hiring consisting of division- and job-specific hiring¹ in which the division and job type to which a prospective employee will be assigned are determined at the time of employment offer, as well as open-division hiring in which only the job type is determined at the time of employment offer.

We are also expanding our Division-Based Internship Program, where various NEC divisions set themes and accept students by role or division. In fiscal year 2025 (combining summer and winter sessions), more than 1,000 students participated across approximately 150 themes.

Initiatives for Mid-Career Hires

To realize “the right person at the right job and the right time,” NEC has conducted a wide-ranging review of the way it utilizes human resources. We are promoting mid-career recruitment (662 hires in fiscal year 2025) to enable immediate execution of our business strategy and accelerate job-based human resources management, including the use of external talent.

Inclusion of Mid-career Hires

In light of the increasing number of mid-career hires, the following initiatives are being implemented.

Mid-career hires have diverse approaches and perspectives based on their experience working at other companies outside NEC. These employees serve as the catalyst for cultural transformation by putting forth ideas to improve existing operations in their assigned places of work.

Attrition

NEC’s employee turnover rate, presented at right, is calculated by dividing the number of employee resignations by the number of employees at the end of the relevant fiscal year (employees who join or resign during the fiscal year each count as one employee).

Resignations also include retirement at mandatory retirement age and transfers to affiliated companies.

Employee Evaluations

Evaluations that Lead to Individual Growth

NEC has implemented an evaluation system which is based on dialogue between employees and their managers to promote individual growth. All employees hold one-on-one meetings with their managers to confirm whether their goals are aligned with the organizational strategy and their individual roles, and also to discuss plans for individual growth and career development. We require one-on-one meetings quarterly to discuss goals, their progress, and career development, and encourage holding them monthly.

NEC is also implementing the following initiatives to promote individual growth.

Compensation

NEC aims to be an “Employer of Choice,” striving for global business growth by establishing a mutual relationship where both the Company and employees choose each other. As a continued act of “investment in people,” we aim to attract, engage, and retain highly marketable talent and strengthen our global competitiveness by implementing market-competitive compensation based on job-based human resources management and differentiated rewards aligned with each individual’s expected role and contributions. Based on this approach, we plan to implement a salary increase of approximately 7% in fiscal year 2026 and significantly raise total compensation, including stock-based incentives, for strategic positions. We will also raise the starting salary for new university graduates² to 294,000 yen and strengthen investment in the next generation of talent (approximately 9,000 young employees) to ensure sustainable growth. In addition, to better utilize the deep expertise of our senior employees (about 6,600), we plan to increase compensation levels under the re-employment system based on the principles of “Pay for Performance / Pay for Job.”

Compensation for non-managerial personnel is determined based on consultations with the labor union and requests raised during the annual spring labour-management negotiations. Bonuses, which are calculated based on the Company’s performance and individual evaluations, are paid once annually for managers and twice annually for non-managerial personnel. Both groups are also eligible for overtime pay at premium rates.

Wage Disparity Between Men and Women (Female to Male Ratio)

The disparity between wages of male and female workers at the Company and at many consolidated subsidiaries is in the 70th percentile. The different numbers of men and women in management positions, which have relatively high wages, is likely to have an impact on the overall disparity. The wage disparity by position for officers of the Company is around the mid-90th percentile, which is considered small.

For initiatives to close the gender pay gap, please refer to the following.

Retirement Benefit System and Stock Compensation Program (NEC Value Shares)

In addition to offering a retirement benefit system for regular employees, we are introducing a new employee stock compensation program called “NEC Value Shares” starting in fiscal year 2026, including enhancements to the existing NEC Employee Stock Ownership Plan (ESOP). This system also applies to certain contract employees in line with the principle of “equal pay for equal work.”

Retirement Benefits System (Retirement Allowance System and Pension Plan)

NEC’s retirement benefits system has two components: a retirement allowance system that accumulates funds during employment and pays them at retirement, and a corporate defined contribution pension (DC pension) plan. A fixed percentage of annual income is contributed monthly as a part of the retirement benefit to create a compensationlinked and market-competitive retirement benefit system. In light of workforce diversity, we have eliminated the traditional Japanese practice of basing retirement benefits on years of service or age.

We have built a DC pension governance framework through constructive collaboration between the workers union and management within the NEC Group. This has enabled us to create a competitive investment lineup, enhance ongoing investment education, offer free consultations with financial experts, and disclose DC pension utilization status to employees in comparison with competitors. These initiatives support employees’ career ownership while strengthening the mutual relationship between NEC and its people as they choose each other.

Stock Compensation Program (NEC Value Shares)

As part of efforts to build a highly engaged workforce and continuously strengthen global competitiveness, we are introducing the NEC Value Shares stock compensation program for employees starting in fiscal year 2026. Through this program, we aim to share NEC Group’s core values with employees and enhance awareness of our business performance and stock value, thereby driving sustainable growth and corporate value over the medium to long term.

Specifically, beginning in fiscal year 2026, the program will cover around 400 employees in strategic positions such as executive managers. The program will be expanded to include more than 6,000 employees of NEC Corporation and select NEC Group companies who are expected to make significant medium- to long-term contributions, with stock compensation awarded strategically. We also plan to expand the ESOP system starting in fiscal year 2027. About 60,000 employees (roughly 80% of the total workforce including consolidated subsidiaries in Japan) at NEC Corporation and select Group companies will be eligible to receive free company shares upon joining the plan.

The ESOP is open to employees of NEC and select subsidiaries. Employees may voluntarily join and purchase NEC shares by contributing a set amount from their monthly salary or bonuses. The ESOP encourages participation by offering a matching incentive based on the contribution amount. Setting aside a fixed amount each month enables asset formation for plan members over the medium to long term.

The ESOP fosters a greater sense of employee participation in company management. In addition, these initiatives help enhance corporate value, leading to higher stock prices and growth in ESOP members’ assets.

Benefits and Welfare System

“Cafeteria-Style” System (Will be)

In April 2020, NEC Corporation introduced a new “cafeteria-style” benefits and welfare system called “Will be” for employees and contract employees. Unlike traditional benefit and welfare systems designed around fixed models, this program provides employees with a set amount of points they can use to choose from a wide variety of services tailored to their individual needs.

In fiscal year 2025, we expanded subsidies for self-investment in growth and health promotion services to more powerfully support employee actions aligned with the benefits program’s concept of Growth & Well-being.

Furthermore, separate from basic earned points, the Company provides employees engaged in childcare and nursing care with special points that can be used for each of those activities to support work-life balance. Starting in fiscal year 2026, we have introduced “Challenge Points” for employees with disabilities to support improvements in their daily lives and work efficiency.

Asset Formation Service “Shines” for Employees

NEC has introduced the “Shines” service for NEC Group companies. “Shines” is an asset formation service that combines the independent financial advisory (IFA) business of our Group company Japan Asset Management Co., Ltd. with NEC’s digital finance technologies. Financial professionals provide optimal asset formation and investment advice to NEC Group employees, tailored to NEC’s human resources and retirement benefit systems. As of February 2025, over 16,000 employees attended seminars, and nearly 3,300 used the consultation services. We are also expanding the service to clients based on our in-house success.

Please see below for more details.