Foreign enterprises in China need to have a very clear understanding about Chinese labour law and cultural misconceptions if they want to avoid run ins with the law writes Cecilia Fan from Beijing.
Back in the old communist era in China, there was no clear concept of employees versus employers. Everyone was a comrade (until they were denounced as public enemies, something that could happen overnight to pretty much anyone). The party provided all comrades with a secure iron rice bowl which kept everyone alive somewhere just above or below the poverty line.
Ensuring the whole population was employed was the compulsory job of the government and being employed was an unavoidable duty for all citizens. The giant state machine driven exclusively by the glorious party was the ultimate sole employer. There was no labour law and, indeed, there was no need.
Karl Marx’s theory of the “surplus value” – exploiting surplus value created by employees was the fundamental means by which capitalists could accelerate the rate at which they accumulated wealth – is today, still deeply embedded in the minds of many Chinese people and still sheds light on how much of Chinese society looks at labour-relations in terms of private and foreign-owned enterprises.
State-owned enterprises, and some privately-owned Chinese businesses with strong government connections still enjoy different standards from their private and foreign counterparts. For example, taxi companies do not have to give their drivers one day of paid leave in an entire 365-day year. Airline companies can expect their pilots to work for them for life once it has paid for their license. In one pilot’s words “…worse than prostitutes working for a brothel.”
In many local cities and regions, certain employers have such powerful monopolies as a source of jobs and such powerful contacts with the local government and legal institutions, that their employees have no avenue for re-dressing their grievances.
The first Chinese Labour Law didn’t appear until 1994. And the year 2008 was a landmark year for labour disputes cases in China when the figure doubled in many regions. In Beijing, over 33,000 labour disputes were handled by arbitration and one-third went to court. This figure has been on the rise ever since.
The development of the general awareness of the need to protect the rights of the workforce is a positive development overall in China – it undercuts unfair competition. However, despite on average, all employers tending to provide better pay and better working conditions, foreign enterprises continue to face labour issues with their staff, sometimes leading to court.
Here are a few theories as to why that is:
• Chinese people traditionally have not been brought up with a firm belief in equality. The widespread sentiment that employees are always “exploited” by their “employers” leads to an easy justification for penalizing employers whenever the opportunity arises. If the employer is foreign, then they probably “deserve” it more.
• Reference checking in China is often a mere formality. This creates a favorable environment for employees who don’t care about professionalism or reputation because they can always find new employers who won’t be able to uncover their shady career pasts.
• Foreign operators tend to have less of a safety net in China compared to local employers. This includes the arbitration / legal system as well as administrative and other methods of redressing wayward employees that are open to local employers.
• Due to weaknesses in their understanding of labor practices and realities in China, many foreign employers have created loopholes in their systems that Chinese employees can exploit.
For foreign operators in China, here are a few basic tips to help over come some problems:
• Establish and execute a suitable HR policy for your China branch. Your HR policy must be consistent with Chinese law, and regulations and the practicalities. Do not give in to individuals who push the limits.
• Ask a LOCAL lawyer or other knowledgeable advisors with front line experience of labour relations in China to assist you with employment contracts and negotiations. Don’t just rely on your headquarters’ legal and HR resources.
• Ensure your HR department and senior managers are aware of all the potential liabilities and disruptions that can arise when they do not follow the correct procedure and obtain the right documentation, even if they approach employee relations with good will and the right heart.
• If you have a clear procedure in place, make sure it is the right procedure and the implementation is monitored. If you don’t yet have a procedure, then make sure that you are aware of where the mines have potentially been planted and tiptoe around these areas to avoid conflict.
• Establish a social credit system with your industry peers, including your competitors. ■