Honda Motor Co. will lift its retirement age to 65 from 60, making it one of the biggest companies in Japan to address the country's aging population.

According to Bloomberg Honda spokesman Ben Nakamura announced Monday that the company also proposed to shift 40,000 of its workers from family allowance to child care and nursing allowance. The car manufacturer also wants to create a new work system, which includes work-from-home and partial-workday. The company also wants to impose a salary and bonus feature to increase the pay gap between lower and higher performers.

"Tapping into and mobilizing existing talent is imperative if we are to address the demographic time bomb that Japan is facing," said Hays Plc managing director Marc Burrage. "We are very encouraged to hear that one of Japan's preeminent companies has taken action."

Automotive News reported that it would start to implement the new work system by March 2017. The new work system is still waiting for approval from the union. The National Institute of Population and Social Security Research said that the death rate in the country is faster than the birthrate. Its population is expected to drop to only 87 million by 2060, which is why Japanese companies are revamping their labor system.

According to data from the internal affairs ministry, Japan's working-age demographic hit its highest in the mid-1990s, but has been declining ever since. The labor force is expected to dwindle down to only 44 million by 2060, which is half the number during its peak.

Article Basis wrote that the company's stock increased 0.03% or $0.01 after news on the labor system changes broke, at $32.64 per share. Honda Motor Co Ltd went down 9.91% since April this year and has been steadily declining. It has dropped by 9.02% the S&P500.

The Retirement age systems are followed by 92 percent of the companies in the nation with at least 1,000 workers.