TOKYO (Reuters) -- Honda Motor Co. plans to raise the retirement age for employees at its Japan operations to 65 years from the current 60 years in a bid to retain workers for longer periods as the labor force shrinks.
Japan's third largest automaker said that under the planned change, employees working beyond 60 years of age would earn around 80 percent of their base pay at the current retirement age. They would also be eligible for childcare and elderly care.
Currently, Honda rehires employees aged above 60 on short-term contracts and pays them 50 percent of their previous base salary.
Honda said it planned to implement the new system by March 2017, pending approval from the union.
Japanese companies are retooling their labor systems as the country's population is projected to fall around by around a third to 87 million in 2060, the National Institute of Population and Social Security Research says, as the death rate outpaces the birthrate.
Japan's working-age population peaked in the mid-1990s and has been falling ever since, data from the internal affairs ministry shows. Projections show the labor force could shrink to 44 million in 2060, which is half of its peak.