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Forget These Best Practices for Hiring Staff in China at Your Peril

This series of 8 blog posts is designed to offer both a general framework for how to structure your dealings with the employees in China (both Chinese and Foreign) as well as provide practical tools, tips and best practices for your day-to-day interactions with staff…

Last time we took a look at China labor laws and how you should go about managing your expectations about labor disputes, and this time around I’m going to introduce some of the best practices for hiring staff in China your factory should be following!

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!

Labor Contracts in China

In addition to the usual items you would find in a labor contract back home, extra emphasis should be put on the following items in a China labor contract:

  1. Jurisdiction & Enforceability

Many companies make the mistake of having a labor contract between the Chinese employee and the parent company in HK or overseas rather than directly between the Chinese employee and the WFOE.

Even if you put the jurisdiction of that contract in China, it won’t be binding because the WFOE is not a signatory to the document. The WFOE can also get hit with penalties for illegally hiring staff who don’t have a contract.

  1. NNN

If the staff will have access to any sensitive information, you’ll want to make sure your contract has good terms for non-disclosure, non-complete & non-circumvention.

  1. Penalties

It’s fairly rare in the West to have pre-agreed penalties in a labor contract. But in the West there is a mature legal system and the law of the land provides employers with certain protection. In China, if you and the employee pre-agree on reasonable penalties for breaking certain aspects of the labor contract, you will be happy to learn that the courts will generally enforce those penalties. The key is “reasonable” penalty. If you say the employee needs to pay 1 million USD if they go an work for a competitor within 2 years of termination of employment, that wouldn’t be considered “reasonable”.

  1. Due Diligence

Fake job experience. Fake diplomas. Even fake identities!

Those items are much more common in China than in the West. So do your due diligence on new employees and make sure that the employee is signing the contract with their real name and real identification card.

When onboarding new staff or trying to retain current staff, here are some tips to help ensure a smooth relationship: 

Tips to Help Ensure a Smooth Relationship

  1. Grass is greener right here

If your company is paying wages, OT and/or bonuses above or equal to industry averages, share the data with your staff. Show staff they are better off staying with you!

  1. Don’t make staff beg

Salaries should be paid on time with clear documentation of hours worked and vacation days left.

  1. No side jobs

You are legal responsible for the actions of your staff during work hours. For example, there is a case where an employee of a company was running an online taobao store during office hours. That Taobao store sold fake medicine. The police penalized both the employee and the employer even though the employer was not aware, let along supporting these activities. So monitor the actions of your staff and make it clear from day 1 in the labor contract that moonlighting is not allowed. You also want to confirm the employee has officially left his/her old job.

  1. Pay close attention during probation

Once the probation period is up, it’s difficult and expensive to let staff go. So make sure you found a winner before you end the probation period.

That concludes post no. 7 out of 8 in my ‘hiring in China’ series. Stay tuned for the final post which shares a survey of salaries, taxes and benefits for Shenzhen, Guangdong and Hunan to give you a bit of an inside look at compensation benchmarks in China.

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

China Labor Laws How to Handle Labor Disputes and Stay Out of Court

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

China Labor Laws Enforcement What Happens During a Labor Dispute_

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.
  1. 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!

Labor law in China: Setting up office hours for Chinese staff

Labor law in China Setting up office hours for Chinese staff

As this question gets asked a lot, here are some basic points for your reference:

Just wondering if I could borrow your brains and experience and get some advice on a decision that’s been on my mind for a long time now.

We currently work every alternate Saturday (so a 5.5. day work week) like a lot of other sourcing companies in China. I have been seriously thinking about cutting it down to 5 days instead. What are your thoughts on this? How are you dealing with this now? I feel, in order to attract the best people and to compete with “large companies” (outside of sourcing industry too) it is critical to offer something more than what a lot of Chinese companies offer and this seems to be one of those things, especially in terms of hiring married employees. However, at the same time, as we are in an industry with such tight margins, I wonder if this would be make us less competitive/productive.

Excerpts on navigating labor law in China:

If you need your people to be flexible and come in on evening and weekends when clients are in town or heavy workload, then you can’t be too pushy with set work hours or you will end up paying a lot of over time. If your business is such that people can do their jobs during normal work hours, then a more structured format like the current one you have it sound.

In the other email you mentioned your business is slow at the moment. Know that another option is get out from under all those HR/ Admin headaches to focus on marketing and outsource the project mgmt. to a 3rd party like this one.

As you have AsiaBridge on retainer, they would be happy to come over to your office to review your HR policies and make some practical suggestions on how to optimize your office hours while staying compliant with local labor rules.

 Related Content:

Chinese laws and regulations: Is hiring a freelancer legal in China?

Child labor

I read with interest the recent articles (couple of them here and here) about Apple’s announcement that some of their suppliers had used child labor in the past.

What I found most interesting was the “child” part – when I was 15 I would have slugged anyone who called me a child. During the summer of my 15th year, I was working in our metal stamping plant where the highest temperature reached 103 F (40 C). I had my first factory job when I was 14 turning wheels on a lathe. My Father never read child-labor laws, and thank God for that. It was an invaluable experience that I am sad to say I won’t be able to give to my son.

I can remember in 1998 visiting a factory for a major automotive supplier in Taiwan. There were 14 year old boys working on the lines making seat belt assemblies. I asked about it and found that they were students at the local technical school. They worked half a shift on the line and spent the rest of the day in class studying engineering. Today, 12 years later, they would be around 26 with degrees in mechanical engineering and over a decade of hands-on experience. I imagine some of them are running plants in China now.

I’ve written about The Wiffle Ball Life before, a term coined by P.J. O’Rourke to denote the rather pathetic American obsession with safety, self-esteem, and never doing anything the slightest bit risky – especially if it might also be fun.

I understand that Apple is worried about its image, and I acknowledge that those eleven 15 year olds may not have wanted to be there. But there is a big difference between a 15 year old farm kid fibbing about his age to get a good factory job to help support his family and using 6 year old slave labor in an illegal fireworks factory in Sichuan. It would be nice if the amazingly flexible English language had a concise way of stating the difference. I think “under-aged labor” is more reflective of the reality of the situation.

Should you need to verify that your suppliers are not using “under-aged labor”, our friends at China Quality Focus can perform a Corporate Social Audit for €376 + travel expenses, a small price to pay to avoid the kind of (undeserved) bad publicity Apple is experiencing.PassageMaker can also help our clients, under the auspices of a Vendor Coordination contract, draft supplier agreements to reflect the social norms of their home country or industry.

A better solution would be to have PassageMaker perform the Assembly-Inspection-Packaging functions in our 100% US-owned and -operated Assembly Center. We will warrant that we meet the necessary social compliance metrics.

Give us a call before you write the press release or talk to the New York Times.