A sweeping new labor law enacted recently by the Chinese government aimed at protecting workers' rights and correcting unfair compensation practices and other abusive practices will make matters more complex for the HR function.
The law was approved despite the efforts of foreign investors to halt the legislation, claiming it would deter companies from setting up business there. Investors fear the country will lose its appeal as a low-wage, business-friendly nation.
Enacted by the Standing Committee of the National People's Congress, the law requires companies to provide all workers with written labor contracts, restrict their use of temporary workers and deter layoffs. It also allows for collective bargaining for wages and benefits and enhances the role of the Communist Party's monopoly union.
Some have concerns that the implementation of this law will increase the complexity, compliance and administration requirements of companies doing business in China. For example, the law has given unions more influence on formulation and adjustments of HR policies related to employee pay and fringe benefits. Companies are required to consult with employees or union representatives on any related HR policies changes before their implementation. HR should be very prudent in designing and recommending any related HR policy changes that are specific to one segment of the employee population. Employees have been given incentives to form unions. and companies should start preparing for their inevitability.
The new law poses a new challenge to HR in its administration of terms of employment contracts as it explicitly specifies the rate of monetary compensation and the associated maximum amount when employees are laid off. This means HR has to develop differentiated severance packages for employees with different compensation levels. There are still other requirements that companies should pay special attention to, such as contract renewals of temporarily transferred employees, probation periods, etc.
Passage of the law comes as the communist government tries to update its legal and political structures to keep pace with a rapidly changing society and market-oriented economic reforms. Given the rate that the China economy is developing, this new labor law is aimed to ensure that the welfare of its workers continues to improve in tandem. Businesses that have always practiced fair treatment of their workers should have little to fear. It is inevitable that, as the workforce becomes more skilled, the employment conditions would also have to improve accordingly, without which social unrest or turnover of workers in search of better working conditions might result.
The regulatory change marks the most significant in Chinese labor law in more than a decade. Prior to its approval, lawmakers and members of the business community went through 18 months of deliberation, public debate and outspoken complaints by employee activists claiming foreign businesses were trying to erode workers' rights.
"The law is meant to protect workers and their rights," said Xin Chunying, deputy chairwoman of the legislature's law committee, at a press conference following the law's enactment. "This concern of foreign investors is totally unnecessary."
Though James Zimmerman, chairman of the American Chamber of Commerce in China, said he had yet to see the final version of the law, he did issue a statement thanking the government for seeking public comment on the proposed law, something rarely done in China.
"Our members appreciate the Chinese government's openness in seeking comment from a broad range of stakeholders, including the foreign business community," Zimmerman said.
Despite concerns, the positive side is that this new labor law may lead to a different mind-set among Chinese employers, who may soon be viewing workers more as key assets crucial to the long-term success of a company instead of mere "components of production."
Source(s): HR Executive