Retirement Of Employees As A Consequence Of Pandemic

Article by : Helen Jan 28, 2021

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Sega Sammy Holdings is an arcade and pachinko operator in Japan that faced serious difficulties during the last year. The worldwide pandemic caused a 33.4% falling sales within the first six months of 2020, which’s why the company was forced to take action to prevent higher revenue loss. For this reason, Sega Sammy came up with a decision to implement a Call for Voluntary Retirement of Employees. Most of the company’s workers positively took up the challenge, retired, and started to receive assistance.

The approximate total number of full-time and contract employees in the company was around 9,051 people. Once Sega Sammy announced the early retirement scheme, it was expected that 650 would become this program’s participants. Every staff member was given a chance to participate in the program, but they had to do it until December 25. Eventually, 729 workers showed their intentions and signed an agreement, meaning they will go home on February 28.

There have been allocated about $96.3 million in Sega Sammy for meeting the extraordinary expenses. The company stated that despite the number of people who desired to retire was more than expected, it will spend $91.5 million. This is because the current fiscal year in Sega Sammy closes in March, and the program starts at the end of February only. “We have incorporated approximately 10 billion yen of expenses associated with this measure as extraordinary losses (structural reform expenses) in the “Notice of Revision of Operating Results Forecast and Determination of Dividends from Retained Earnings (interim dividends)” announced on November 6, 2020. However, the consolidated financial results forecast for the fiscal year ending March 2021, including other factors, is currently under close investigation, and we will promptly announce if there is a need for revisions to our operating results forecast in the future,” stated the company in its Notice of Results.

Not only the number of staff members will be cut off, but the salary of the company’s directors will decrease as well. During four months until the end of the 2020 fiscal year, they receive a lower salary as a means of taking responsibility for the layoffs and operating results.

The gambling market in Japan faced lots of challenges, and tighter regulations by the government and weaker public interest only exacerbate the situation. Anyway, Sega Sammy is sure the drop in sales is a temporary problem, and thanks to new ideas, the company hopes for a full recovery. The casino operator is interested in the Integrated Resort market that is starting to take off in Japan. Perhaps, the program of early retirement is a way of decreasing expenses as it might be required for IR involvement in the near future.

Voluntary retirement is believed necessary to realize cost reductions focusing on fixed costs and building a more efficient system in order to achieve an early recovery of profits and sustainable growth in the future.

Sega Sammy has clearly shown its intentions to be involved in the IR market, but the gambling industry’s future and especially casino resorts in Yokohama, remains uncertain. Not to mention that 85.1% of Sega Entertainment’s shares were sold to Genda in November 2020. While the Sega arcade game centers won’t change the names, the management of Sega-related facilities is transmitted to Genda. To cover losses was the main purpose of the sale to Genda. Sega Sammy will develop its Consumer business segment that includes development studios and console, PC, and mobile games.