Job Protection??



Job protection scares China's workers
By Candy Zeng
November 29, 2007
http://www.atimes.com/atimes/China_Business/IK29Cb01.html

SHENZHEN - Even as the Chinese economy expands, the rights of workers
in many enterprises, including some industry leaders, are often
sacrificed in the name of profitability and efficiency.

The country's National People's Congress (NPC), or Parliament, has
passed a Labor Contract Law aimed at better protecting job security of
the employed. However, many businesses attempting to evade their
responsibilities stipulated in the law before it takes effect on
January 1, 2008 are maneuvering to change the status of their current
permanent employees.

Huawei Technologies, one of the country's leading technology companies
and with an increasing worldwide influence, was ordered by China's
Labor Ministry recently to halt its practice of encouraging some 7,000
of its permanent employees who had worked for more than eight years to
resign then be re-employed on contract. The company claimed it was a
bold strategic move to boost employees' morale.

The abrupt change in employment terms, though not new in the short
history of Shenzhen-based Huawei, is seen by some observers as an
attempt to evade its responsibilities before the new Labor Contract
Law takes effect. Under the law, employers have to sign open-ended
labor contracts with employees who have worked for the same company
for 10 or more successive years. The revision is meant to bring more
protection to workers in an increasingly privatized economy that
before its recent opening more or less guaranteed work for life.

In late October, rumors that Huawei was encouraging long-time
employees to resign "voluntarily" turned out to be true when some
staff received an email detailing the new policy. The company asked
workers of eight years standing to apply for voluntary resignation
before January 1. They could then compete for a new job and sign a
contract valid for a term varying from one up to three years.

All the "voluntarily" resigned staff would be well compensated for the
departure, with sums based on the years they had worked with the
company, their monthly salary and the average annual bonus last year.
These offers are considered better than the standards stipulated by
the effective Labor Law. Besides cash reimbursement, they could also
retain their qualifications for any stock options they had been
granted.

People affected by the new policy include the company founder, Ren
Zhengfei. Staff interviewed by 21st Century Business Herald generally
showed their understanding or even satisfaction with the new policy.
After all, the company is renowned for good human resources management
and the compensation terms are generous.

It is not the first time that Huawei, which was set up in 1988 and had
US$11 billion in sales last year, has shaken its staff upside down to
boost competitiveness. In 1996, all middle and top managerial
personnel at its marketing department resigned before competing for
new posts, with some losers downgraded to ordinary staff. In 2002,
senior managers applied for a salary cut of 10% when the industry was
hit by the bursting of the information technology bubble.

The company, which ranks itself among the world's top three vendors of
telecommunications network equipment in emerging markets, said the
voluntary resignation policy was just another normal adjustment to its
human resources management rather than an attempt to evade obligations
under the new labor law. It was coincidental that its new policy was
introduced right before the law came into effect, Huawei said.

The Huawei resignation policy echoes moves by other companies to
terminate permanent employees before the new law takes effect. LG
Electronics (China) was reported to have fired workers of more than
five years' standing, at subsidiaries as well as at its headquarters,
right before the Labor Contract Law was passed on June 29. The company
denied any intention to bypass the law, claiming it was just a policy
adjustment.

In August, some "on contract" teachers in Shenzhen who had been with
their employers for more than or close to 10 years were dismissed.
These contracted teachers, as opposed to those that are "officially
employed" and whose employment is more secure being endorsed by the
government, signed annual contracts with their schools. In another
case, about 600 cleaning workers in Shenzhen who had worked for the
same company for nearly 10 years also lost their jobs.

Some overseas companies appear to be reacting in a similar manner.
US-based retailer Wal-Mart began to cut the number of its staff at its
Chinese purchasing center by 15% in the second half of October. It is
reported that about 200 people will be fired worldwide, half of whom
will be from its China operations in Shenzhen, Shanghai, Putian and
Dongguan. The company claimed the cuts were part of a restructuring of
its global procurement operations and didn't specially target China.

Employers' explanations are not easing anxieties among the country's
workers. According to a recent online survey by China Youth Daily,
14.5% of the 2,212 respondents said their employers intended to
rearrange contracts with long-time workers, and 87.4% disagreed that
the new Labor Contract Law would give protection to employees.

Expressions of concern in the media and from the public have provoked
investigations into Huawei and Wal-Mart by the labor authorities of
Shenzhen municipality and Guangdong province, and by the All-China
Federation of Labor Unions. Even so, the Guangdong Provincial Labor
Department told the media recently that it had so far received no
complaints from workers at either Huawei or Wal-Mart .

Lu Min, a Beijing labor-capital relations lawyer, said more
enterprises were coming to consult her before the new legislation
comes into effect. "The new law contains more detailed definitions of
the rights and obligations of the enterprises and employees. Some came
to draw up labor contracts as they didn't have any before, while
others wanted us to remedy contracts according to the new law," she
said.

Some lawyers argued that Huawei could have misunderstood the new
regulation. According to the Labor Contract Law, employers can
discontinue open-ended contracts under some circumstances, including
severe defaults by employees and for economic reasons.

Labor Minister Yan Baoqing said at a November 8 seminar in Shanghai on
the theory and practice of the Labor Contract Law that the resignation
of the 7,000 staff of Huawei didn't mean discontinuity of employment.
An elaboration on the Labor Contract Law to be worked out by the year
end will carry definitions on the calculation of working time within
one company, he said.

Chang Kai, a professor and labor law expert with the Renmin University
of China in Beijing, said the new labor regulations aimed at balancing
the relationship between the employer and the employee against a
background that has seen labor disputes increase 30% annually in
recent years. Labor Ministry figures show that the number of labor
disputes increased 13.5 fold from 1995 to 2006.

An NPC survey on implementation of the labor law found that fewer than
20% of small-and-medium-sized private companies had signed contracts
with their workers, while 60% of the contracts used by those that had
them were short term, lasting one year or less.

Chang believes that the competitiveness of a country or enterprise
based on low labor costs cannot last long and advises enterprises to
comply with the law while improving management and operation abilities
against benchmarks of international practices.

Candy Zeng is a freelance journalist based in Shenzhen, China.

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