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Human Resources Issues in China


Compensation:

The overall compensation package should be structured to be competitive with the local area for the given skill set the business needs. If you have no previous experience in the particular area of China that your new endeavor is located, you will want to survey local rates and benefits.


Labor Rates:

Labor rates will vary significantly from region to region and even within a given region. In the southeastern area of China, unskilled direct labor may cost 400RMB a month($50USD) per person. In Shanghai, that same position may be 800 - 1000RMB a month($150USD) per person. by moving 20 or 30 miles outside of Shanghai, you may experience rates similar to southern China.


Diversity:

Diversity in the workforce is an interesting topic, especially for american businesses. American business often comes armed in the latest diversity training. What they find is the culture and issues are entirely different. In an effort to impose their company's's moral views and diversity standards in the new Chinese endeavor, they confuse and perplex the local work force and especially the local human resources staff. One company asked the local HR manager to advertise for assembly workers for the new plant. The U.S. manager reviewed the ad and was shocked to see it read "...looking for women with fine motor skills for assembly job...." . When asked, the local Human Resources Manager said " but only woman will apply as it is a woman's job". With patience the U.S. manager explained his company's diversity policy and stated that the ad would produce the same results by simply excluding the gender. With a little patience and understanding of the local culture, a reasonable working solution will result.

First, the population, despite 1.2 billion people, is far less diverse than most areas of the world. The vast majority of the population is ethnic Cchinese.

Second, this communist country does not share the same views or concerns. Therefore, its laws do not protect and promote diversity.

The largest area of diversity for China is based upon sex. The chinese, right, wrong or indifferent, openly discriminate against women. There culture views certain jobs as a males' job and others as a women's. In the major cities you will see far less discrimination. Equality is more is a problem in less developed, more remote areas. In remote areas you may see and hear stories, like women being coerced into sex to keep a job or for advancement.

There is also a diversity concern over religious beliefs, with christians, especially catholics, openly discriminated against and even persecuted in some extreme circumstances.


Work Hours: Shifts and Overtime:

There should be no problem installing multiple shift operations in any area of China that you are investigating. If the need of the operations is for 24 hour operation, such as molding machines, you should experience no unusual problem. Creative shifts and swing shifts are also possible.

Recent regulations put in place limit the number of hours of overtime allowed for factory and other hourly workers. Generally, a 40 hour work week is standard. Up to 5 hours of overtime a week is allowed and no more than 4 hours on Saturday. As with many things in China, it is subject to local interpretation and as a friend of mine once said "everything is negotiable in China". You should check the rules and regulations for the local area you are locating to. As for professionals, you can anticipate them being salaried and available to work overtime hours as necessary. But, significant "non-declared" overtime is not a normal event.


Payroll Taxes and Employee Benefits:

Payroll taxes and employee benefits are a major add on to payroll costs in China. Payroll taxes may vary from one area to the next. For a representative look at the types of taxes and rates, see Payroll Taxes.

Employee Benefits will also vary by site and to some degree by company. For planning and business case purposes, use 40% t 50% of payroll. As your project progresses and is approved, you will acquire rates more specific to the area and for your business. If your company requires higher skilled labor or professional services, workforce demand may be higher than anticipated, and cause you to offer higher benefits to attract a more limited supply. An example of this may be qualified engineers fluid in English.

Acquiring skilled and professional labor carries and additional complexity. Engineers for example, abound in the major cities and supply may be sufficient to meet demand in those cities. You may be enticed by even lower labor cost in less developed areas. But, you need to take into consideration that you may need to provide significant incentives to encourage a professional such as an english speaking manufacturing engineer, to leave the comforts of the big city to live and work in a much more remote and impoverished area.


Turnover:

Plan a certain amount of turnover into your hiring and staffing plans. There is turnover in the professional ranks providing support to international companies. Many professionals look to move from one international company to another every two to three years. Competition for limited western trained and english fluent personnel plays a role. The individual is are of this and looks for higher pay, position and title as a result.


Training:

A dilemma exists in training local professionals. To best serve the business, the professionals are provided major training. This usually includes one or more expensive trips back to the home office for training there. A two to three week training trip back to the U.S. for home office training will cost $8,000 to 10,000. Once training is invested, thousands of dollars have been spent. The current employer thinks of the training as a benefit and compensation to the employee which should translate to loyalty. Now, however, the local professional has become very marketable. He then looks for significant pay increase and perhaps a higher position. Loyalty is not an issue that will hold the young professional back in seeking higher pay and position. He applies to another international firms who sees a candidate who is already trained and the upfront training cost does not need to be spent. This firm can easily rationalize a higher pay offer. The final outcome is the departure of the employee to another company and turnover.

Some firms are requiring commitment letters be signed. The professional agrees to work a certain minimum number of years prior to taking he training. If an employee leaves prematurely, he is required to return a portion or all of the training expense.

A wide range of training should be considered. A partial list includes:

  • English Language, a common and popular training program usually provided on site.

  • Quality

  • Corporate values and culture

  • Home Office training and orientation

  • Corporate and local systems

  • MRP, Class A


Vacations and Holidays:

Generally, Chinese companies offer employees two weeks vacation per year and ten paid holidays. Foreign enterprises are the most generous, sometimes providing a few additional holidays celebrated in their home country. The actual number is subject to the typical offerings locally and the individual firms.

In the case of holidays for the foreign enterprise, there may be some where the local staff is also afforded the day off and others where only the EXPATs take off. In this situation, the need exists to have local managers trained to manage the shop while the EXPATs are away.


Other Benefits:

There are other benefits you may want to consider and include in your cost planning. Some are largely unique to operating in China and especially in a manufacturing or assembly environment. They include:

  • Showers- Access to shower facilities is limited for laborers and is greatly appreciated as a benefit of working for foreign companies.

  • Shuttle Buses- In large cities, shuttle buses are common.

  • Housing- An alternative source of low cost labor is to bring workers to the factory on a contract basis from impoverished areas. This results in the need to provide housing or dormitories.

  • Uniforms- A common requirement is uniforms for the labor force.


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