Mass Layoffs? In Booming China?
Shu-Ching Jean Chen, 11.13.07, 7:47 AM ET
HONG KONG -
Looking at the latest wave of mass layoffs made by China’s locally owned and multinational corporations alike, you wouldn’t know the country is in the midst of an unprecedented economic boom.
China’s largest telecommunications equipment maker, Huawei Technologies, has proposed dismissing more than 5,000 employees. Last month, Wal-Mart (nyse: WMT - news - people ) laid off 110 staff in its global procurement center in Shanghai. At the same time, mass layoffs were reported from across the country, from angry workers at a kindergarten in Beijing to hundreds of teachers recently dismissed in Shenzhen and many more at local private enterprises. That follows earlier actions taken in August by the nation’s largest television station, China Central Television, which sent home 1,800 of its temporary employees, making up 20% of its workforce, and in July by South Korea’s LG Electronics (other-otc: LGEAF - news - people ), which after a 14-year presence in the country retrenched, lopping off 11% of its China head count.
What’s going on? Earlier, such layoff announcements looked like isolated incidents. As trickles turned into tidal waves, China’s media and analysts started to find a common denominator in these mass layoffs, pinpointing the high-risk groups: certain temporary workers, whom employers now must sign on at a greater cost, and staff that have served long tenures, who will soon receive almost ironclad terms of employment, all thanks to a new national labor law, effective January 1, 2008.
The new law, which threatens to raise the cost structure of many companies operating in China, is also blamed for the decision this week by the world’s fourth-largest digital camera maker, Japan’s Olympus (other-otc: OCPNY - news - people ), to locate a new production plant in Vietnam rather than adding to its existing two in China.
Proponents of the new law, including China’s Premier Wen Jiabao, point to the better protection it offers to the country’s long-disadvantaged low-income workers, whereas corporations and business owners are concentrating on the increased difficulty and higher cost of any future downsizing initiatives.
The new labor law, passed in June after it spent three years in the drafting stage, dictates that employers provide employees that have worked ten consecutive years with the company a contract of permanent employment that would protect them from redundancies except under certain extreme circumstances spelled out in the legislation. Huawei and LG Electronics, not coincidentally, targeted for job cuts staff members who were approaching the ten-year limit.
Another big beneficiary of the new law will be long-term temporary workers, who currently are not covered by formal contracts. They should be hired as formal staff if they have signed temporary contracts with a company more than twice or if the duration of their temporary status exceeds ten years. Recent layoffs at CCTV and the Shenzhen schools involved workers falling under this heading.
The new law also introduces benefits such as mandatory employer-paid insurance for contracted employees, layoff compensation payouts to be pegged to inflation and new compulsory paid holidays to be given to Chinese laborers.
Corporate employers across the country are watching closely how other competitors respond to the new law as a guide as to what wiggle room they might have to protect their bottom lines, while wary employees are waiting to see whether they might be the next to go.
Hence, employees at state-owned or quasi-state companies are particularly pleased by the intervention by the nation’s powerful umbrella labor organization, the All-China Federation of Trade Unions, in the situation at Huawei, a company growing in good part from the support of the People’s Liberation Army. In a dispatch issued on Saturday, the official Xinhua News Agency said Huawei must shelve its current layoff action and to seek approval from its company labor union as part of a compromise reached between the company and the nationwide union federation.
Employees previously dismissed by Wal-Mart and LG Electronics won’t be so lucky. Even though Wal-Mart last year took the unprecedented step of allowing labor unions to function within its China retail operations, its 1,000-member global procurement center in China, which operates as a separate unit, has not been unionized and thus would not be shielded from job dismissals. Former LG workers, though, have been seeking remedy in the form of arbitration from their local government labor bureau.
Find thousands of Bilingual jobs at LatPro.com.
HONG KONG -
Looking at the latest wave of mass layoffs made by China’s locally owned and multinational corporations alike, you wouldn’t know the country is in the midst of an unprecedented economic boom.
China’s largest telecommunications equipment maker, Huawei Technologies, has proposed dismissing more than 5,000 employees. Last month, Wal-Mart (nyse: WMT - news - people ) laid off 110 staff in its global procurement center in Shanghai. At the same time, mass layoffs were reported from across the country, from angry workers at a kindergarten in Beijing to hundreds of teachers recently dismissed in Shenzhen and many more at local private enterprises. That follows earlier actions taken in August by the nation’s largest television station, China Central Television, which sent home 1,800 of its temporary employees, making up 20% of its workforce, and in July by South Korea’s LG Electronics (other-otc: LGEAF - news - people ), which after a 14-year presence in the country retrenched, lopping off 11% of its China head count.
What’s going on? Earlier, such layoff announcements looked like isolated incidents. As trickles turned into tidal waves, China’s media and analysts started to find a common denominator in these mass layoffs, pinpointing the high-risk groups: certain temporary workers, whom employers now must sign on at a greater cost, and staff that have served long tenures, who will soon receive almost ironclad terms of employment, all thanks to a new national labor law, effective January 1, 2008.
The new law, which threatens to raise the cost structure of many companies operating in China, is also blamed for the decision this week by the world’s fourth-largest digital camera maker, Japan’s Olympus (other-otc: OCPNY - news - people ), to locate a new production plant in Vietnam rather than adding to its existing two in China.
Proponents of the new law, including China’s Premier Wen Jiabao, point to the better protection it offers to the country’s long-disadvantaged low-income workers, whereas corporations and business owners are concentrating on the increased difficulty and higher cost of any future downsizing initiatives.
The new labor law, passed in June after it spent three years in the drafting stage, dictates that employers provide employees that have worked ten consecutive years with the company a contract of permanent employment that would protect them from redundancies except under certain extreme circumstances spelled out in the legislation. Huawei and LG Electronics, not coincidentally, targeted for job cuts staff members who were approaching the ten-year limit.
Another big beneficiary of the new law will be long-term temporary workers, who currently are not covered by formal contracts. They should be hired as formal staff if they have signed temporary contracts with a company more than twice or if the duration of their temporary status exceeds ten years. Recent layoffs at CCTV and the Shenzhen schools involved workers falling under this heading.
The new law also introduces benefits such as mandatory employer-paid insurance for contracted employees, layoff compensation payouts to be pegged to inflation and new compulsory paid holidays to be given to Chinese laborers.
Corporate employers across the country are watching closely how other competitors respond to the new law as a guide as to what wiggle room they might have to protect their bottom lines, while wary employees are waiting to see whether they might be the next to go.
Hence, employees at state-owned or quasi-state companies are particularly pleased by the intervention by the nation’s powerful umbrella labor organization, the All-China Federation of Trade Unions, in the situation at Huawei, a company growing in good part from the support of the People’s Liberation Army. In a dispatch issued on Saturday, the official Xinhua News Agency said Huawei must shelve its current layoff action and to seek approval from its company labor union as part of a compromise reached between the company and the nationwide union federation.
Employees previously dismissed by Wal-Mart and LG Electronics won’t be so lucky. Even though Wal-Mart last year took the unprecedented step of allowing labor unions to function within its China retail operations, its 1,000-member global procurement center in China, which operates as a separate unit, has not been unionized and thus would not be shielded from job dismissals. Former LG workers, though, have been seeking remedy in the form of arbitration from their local government labor bureau.
Find thousands of Bilingual jobs at LatPro.com.
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