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 labour 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 labour union members, except for certain general employees who conduct management duties or designated operations.

NEC’s labour 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.

Policy for Hiring, Retention, and Compensation

To realize corporate growth and personal growth and happiness in accordance with its Human Resources (HR) Policy, NEC develops and fairly evaluates personnel, who drive the growth of its businesses. It also works to create an environment where employees can work with ease and comfort and thereby display a high level of performance.

Aiming to realize fair assessments, NEC has established a system that evaluates employees based on their contributions to businesses, regardless of such attributes as age or gender.

At NEC, labour and management are working together to implement flexible workstyles, prevent overwork, and encourage employees to take leave in compliance with the relevant legal systems of each country. In addition to these systems, the Company is creating a rewarding work environment through discussions and by cooperating with the workers union and management on issues covering the personnel system, benefits programs, the realization of work-life balance, and promotion of workstyles whereby all employees have the opportunity to reach their full potential. In particular, the Company has childcare and nursing care systems that exceed statutory levels and has led other companies in the establishment of a teleworking system, which was introduced as early as 2000. Through these and other initiatives, NEC is creating an environment where diverse personnel can play a part.

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.

Initiatives to Hire New Graduates

NEC conducts initiatives to secure diverse human resources through job-matching hiring.

Increase in Mid-career Hiring

To assign personnel to appropriate positions in a timely manner, NEC has conducted a wide-ranging review of the way it utilizes human resources. The Company is hiring more mid-career personnel, enabling it to implement business strategies immediately. This includes the utilization of external human resources. As a result of these initiatives, in fiscal 2024 the Company hired 643 such personnel, which is roughly a 1:1 ratio with new graduate hires, helping speed up job-specific human resource management.

Inclusion of Mid-career Hires

The Company hired 643 mid-career personnel in fiscal 2024, around the same number as new graduate 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 Promote Personal Growth

NEC conducts dialogues between employees and their supervisors as the basis for personnel evaluation and development. These one-on-one meetings help align the goals of individual employees in their roles with the goals of the Company’s business strategy. Currently, about half of NEC employees have these one-on-one meetings at least once a month.

The following initiatives are being implemented to achieve business goals.

In cases other than employee preference, where there is an operational requirement, workplaces and workstyles may be changed or employees may be transferred or seconded to another company. However, in these cases, the labour agreement stipulates that the labour union must be notified at least seven days in advance.

Retirement Benefits System and Stock Ownership Plan

For regular employees, there is a retirement benefits system and an employee stock ownership plan (introduced for NEC Corporation and a part of the NEC Group). Furthermore, bearing in mind the import of laws pertaining to equal pay for equal work, temporary employees are also able to use some of the systems established for regular employees.

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. In April 2024, these systems were revised so that benefits are consistently granted (contributed) based on annual salary and position from the time the employee joins the Company until retirement, regardless of age or years of service. This ensures fair treatment based on the Pay for Job / Pay for Performance approach of the compensation system.

In addition, the support that the Company has provided for asset formation to date, such as maintaining and enhancing the DC pension program foundation, enhancing continuous investment education, and setting up an individual consultation desk, improves the financial well-being of employees and further enriches their work and private lives. This motivates employees to pursue long-term career development from a broad perspective, both inside and outside the Company, without limiting the range of career options open to them.

Stock Ownership Plan

The NEC Employee Stock Ownership Plan (ESOP) is open to all employees except directors and executive officers. Employees can join the program at their discretion and can contribute a fixed amount from their monthly salary and bonus to purchase NEC Corporation stock. The Company also incentivizes participation in the ESOP by offering a fixed-percentage bonus contribution. Setting aside a fixed amount each month enables asset formation for plan members over the medium to long term. Employees of NEC Group companies can also become ESOP members.

This stock ownership plan helps to increase employee participation in Company management. The resulting improvement in corporate value leads to higher stock prices and growth in ESOP members’ assets.

As of March 31, 2024, the ratio of ESOP shareholdings to total NEC shares issued and outstanding (excluding treasury stock) is 1.41%.

Benefits and Welfare System

In April 2020, NEC Corporation launched a new “cafeteria-style” benefits and welfare system called “Will be.” It allows regular employees and temporary employees to select and design their own benefits (rather than following a benefits and welfare system prepared by the Company) based on an assumed model life plan. Under this benefits and welfare system, employees are granted a certain number of points, and they can select various benefits and welfare services within the scope of their points, according to their needs. Starting in fiscal 2025, the value of points for self-investment for growth and health improvement service assistance will be increased, which will provide strong support for realizing the Company’s employee benefit concept of Growth & Well-Being.

Furthermore, separate from basic earned points, the Company provides employees engaged in childcare and nursing care with special points for each of those activities to support work-life balance.

In fiscal 2025, the eligibility for using nursing care points will expand from family members (spouses, parents, grandparents) who have been certified as “requiring nursing care” or “requiring support” to include family members with disabilities, and the scope of family members will expand to include those within the second degree of kinship.

Hiring and Retention Indicators and Goals

Data Related to Hiring

The Company plans to hire 700 new graduates in fiscal 2026 and 600 mid-career personnel in fiscal 2025.

Indicators for Compensation

NEC Corporation pays bonuses twice annually, calculated based on the Company’s performance and individual evaluations. Moreover, starting salaries for new graduate hires have been increased with the expectation of further participation of young employees and with a view to strengthening the Company’s competitiveness in hiring. In addition, the starting salary for new graduate hires was higher than the minimum wage in Tokyo as of October 2023 (1,113 yen per hour).

Wage Disparity between Men and Women (Female to Male Ratio)²

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.

Wage Disparity between Men and Women (Female to Male Ratio)³