Seniority, defined broadly, means the length of service with an employer. Historically, those who had more experience with a task or in a job position managed those with less experience. Formal seniority policies grew out of this natural state of affairs. Based on an employee's seniority, preference can be accorded him or her in such areas as promotion, transfer, shift assignment, scheduling, vacation accrual, layoff, and recall after temporary layoff. Seniority is used as a means of gauging the relative status of one employee with respect to another based on length of service. As an employee's seniority grows, he or she accrues certain rights and privileges.
How exactly seniority is defined will differ from company to company. Some will track longevity without concern for the position worked while others will restart the clock every time an employee changes positions within the company. For some companies, seniority measurement is indifferent to whether an employee holds a part-time position or a full-time job. Other companies only measure seniority based on time worked in a full-time position. What all seniority calculations have in common is that they measure, in some fashion, an employee's longevity with a company. Collective bargaining agreements usually calculate seniority by total length of service, sometimes with consideration for length of service within a particular craft or department.
The rights that accrue to senior employees also differ from company to company. Seniority may be used in making determinations about the order in which to hire back from a layoff list. It is often used to allocate vacation time providing those with more seniority a greater number of vacation days. It may also 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.
SENIORITY'S DECLINING ROLE
As the economy has changed over the past 40 to 60 years—shifting from a manufacturing economy to an economy based on services, absorbing large numbers of women into the workforce, and becoming more globally interdependent—expectations of work have changed. In the past it was far more likely that a person would work much, if not all, of his or her career with a single employer. This in no longer the case. As mobility has increased in the workforce, the role of seniority has diminished. Declining union membership as a percentage of the workforce has also contributed to the reduced role of seniority as an important factor in employment decisions.
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 a primary reason for this 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. Companies are under great competitive pressure and have less tolerance for employees who are earning in excess of their output, a situation more common among the most senior members of an organization. Today an older employee can be replaced by someone younger earning less than half as much salary.
But will that always be the case? As the influential baby boom generation begins to depart the workforce, most observers see a shortage of skills and a potentially serious shortfall in the supply of labor looming in the very near future. The conclusion of a report on a human resource director's survey, conducted by IBM and reported on in the Economist, states the situation this way: "When the baby-boom generation retires, many companies will find out too late that a career's worth of experience has walked out the door, leaving insufficient talent to fill the void."
In anticipation of this demographic shift, efforts are being made by some foresighted firms to maintain those with seniority and experience. Employees who are reaching retirement age are being encouraged to consider a phased withdrawal from the labor force. The use of job-sharing arrangements and part-time work schedules are two ways that are becoming more common for senior personnel in the stage a phased retirement. These flexible work arrangements allow an employee to ease out of the work habit while providing the company with an opportunity to use the senior employee's skills to train newer employees before the departure of senior employees.
SENIORITY IN JAPAN
Japan has long been known for its cradle-to-grave employment relationship. But, even in Japan things are changing. In the past, the seniority system in organizations was a measure of job security in the employment relationship. Many companies are abandoning traditional employment relationships 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 cope with an ever more competitive economy. 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 based not on seniority but on merit. This has dramatically changed their once-treasured code of seniority, according to Focus Japan.
In addition, just as this happened in the United States, 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 October 2000.
Munk, Nina. "Finished at Forty." Fortune. 1 February 1999.
"Turning Boomers into Boomerangs—The Ageing Workforce." The Economist. 18 February 2006.
Wyss, David. "The Gathering Pension Storm: Boomers Will Soon Find Their Retirement Kitty Has Been Underfunded. Making up the shortfall with buffet corporations—and the economy." The Economist. 18 February 2006.