China Labor Laws & Enforcement: What Happens During a Labor Dispute

Last time we took a look at everything employers need to know about work visas for their foreign staff in China, and this time around I’m going to share some insights into China labor laws and how you should go about managing your expectations about labor disputes.

The following blog is based on excerpts from the whitepaper entitled “Foreign Manufacturer’s Ultimate Guide to Hiring, Training, Managing & Firing Staff in China”which can be downloaded in its entirety right here!

Manage your expectations about the labor bureau and labor disputes in China

China is very business friendly in many ways. There are tax incentives to welcome foreign investment, the Intellectual Property system has come a long way and the rule of law is finally taking hold.

But don’t forget for one second that China is still a communist country. The employer-employee norms and laws from back home don’t apply in China.

Example 1: China IS communist

On the surface it may come as a surprise that China doesn’t allow unions- in the Western sense of the word. Until that day comes when you have a strike at your factory and you suddenly realize the labor bureau is in effect a kind of union boss for every worker in all industries in all parts of China. That can be a good or bad thing, depending on your position.

Example 2: The law is clear- Interpretation isn’t

As foreign investors, factory owners and business people, we tend to rely on the written law to guide our decision making. If you initiate a layoff and the law says the amount of severance owed is X, you probably think you are doing your staff a favor by giving X + 10% as goodwill. But then your staff reports you to the labor bureau and the bureau holds a “consultation” with the involved parties and recommends X + 20%. So you seek clarification in the local court where the judge awards X + 25%!

The two scenarios above don’t happen to everybody but they do happen. Consider yourself warned.

And don’t forget to manage your expectations about these 2 labor issues in China:

1. The employee turnover rate is much higher in China than in the West. As a foreign employer in China, you need to strive to find ways to not only reduce turnover but efficiently train new staff when turnover eventually takes place.

2. Managing a multi-cultural team is a challenge. Language, distance, culture…you name it. Challenges but not roadblocks when handled properly.

That concludes post no. 6 out of 8 in my ‘hiring in China’ series. Stay tuned for the next post in the series where we’ll take a look at the HR best practices your factory would do well to remember!