Recruiting in China

BMW, the world's largest premium carmaker, will cut more than 8,000 jobs as it attempts to make radical savings.

The German carmaker also held up the threat of more job cuts in the future if the euro continued to strengthen above $1.50.

The majority of the job losses will come in Germany, in what is a shock at the company that has been an enduring success story. About 2,500 permanent jobs and 5,000 temporary positions will go there.

BMW wants to cut a further 600 permanent jobs overseas as it tries to make annual cost savings of €500 milion (£381 million) immediately and €6 billion by 2012. In December BMW said that it would need to restructure to turn around its profitability. BMW has a total workforce of 80,000.

The IG Metall union called the announcement unnecessary. Werner Neugebauer, the union's chief in Bavaria and a member of BMW's supervisory board, said that Ernst Baumann, the carmaker's head of personnel, “appears to think he has to play the agitator in order to be able to push up the share price by leaving the work force in a state of permanent insecurity”.

Of BMW's 28,000 overseas employees, the 600 job cuts are likely to fall at its sales subsidiaries. Mini, BMW's successful operation at Oxford, and its Hams Hall engine plant near Birmingham are not thought likely to be affected.

BMW has increased its use of temporary workers in order to scale its workforce up and down. The company will increase flexible working across its operations, including partial retirement, so that it can boost employment in busy periods and scale it back when production needs subside. The group said that it needed to boost its productivity per worker.

BMW has been hit by the weakness of the dollar in its exports, although it has a factory in South Carolina making SUVs and its Z4 Roadster. BMW unveils its annual profits on March 18. Last year pre-tax profit excluding exceptional items increased 3 per cent to €4.12 billion.

New Chinese employment legislation, the Labor Contract Law (LCL), is due to be promulgated on January 1st 2008.

The response to the law so far has been a kind of fearful anticipation but all of this hand wringing is not going to change the fact of the law’s promulgation. The best way to deal with any new issue is to make decisions about responses, and start implementing now. The key question centres on the specific things HR should be doing to keep itself on the right side of the new law.

Here are a few suggestions:

Employee Handbook or Policy Manual - Regardless of your company size, this needs to be set up now, as it is mandated in the new law. It should set out the internal rules and regulations that deal with employee relations, and specify procedures for dealing with conflict situations like termination. Under the new law you would be best advised to have a paper trail to deal with difficult situations, such as firing staff, and the end of the line for this paper trail is your Employee Handbook.

Salary Ranges - If your policy is to specify salary ranges to job applicants then review your advertising and make sure to state the range very clearly in advertisements. In addition to the new labor law, there is also the Employment Promotion Law which also takes effect on January 1st. It specifies that recruitment information in advertisements published by employers should be the same as that mentioned in job interviews. Again you have the paper trail issue.

Overtime - As an exercise, calculate the cost of overtime to your company. The logic is that you may be required to pay amounts that you had not considered before. Under the new law employees in China cannot work longer than forty hours a week. Any time worked over that is liable for overtime pay and the new law makes this enforceable.

Discrimination - Look for a new trap: discrimination. The new Employment Promotion Law says that applicants for employment will be entitled to sue employers for discrimination. This is based on ethnicity, age, gender, race, religious belief or physical disability. Although multinational companies have tended to be on the right side of this issue for a long time, it is still worth reviewing your current advertising and hiring procedure. You don’t know what lurks under rocks until you turn them over. (Oddly, the government will issue a list of ‘jobs unsuitable for women’ to assist companies stay on the right side of the law.)

Job Descriptions - Review your process, if you have one, for creating Job Descriptions. If you don’t have one, create one. The new law says that employees cannot be sacked at will anymore. You have to have well-defined reasons with a paper trail back to documents that the employee has signed, along with measures that support your claim that they are incompetent.

Documentation - Review every document that you sign with an employee, including NDAs and non-compete agreements. The new law makes you liable for any negative outcome because the assumption (mine) is that you hold all the cards, and have superior power within the employer/employee relationship. Any slip-ups will cost your company money, not the employee or the job candidate. (Note: Under the new law employees cannot be forced to sign non-competitive agreements. This belongs only to the realm of senior management.)

Temporary Staff - Deal with all and any temporaray staff that you have in your office or factory. You need to either hire them on a contract or let them go. You may have some leeway on this but any delay is at your own risk. Employees, backed by willing and well-prepared employment lawyers, will be able to claim double salary for months worked without a contract. The limit is 12 months’ salary but that’s not much comfort.

Permanent Staff - The use of employment contracts in China has been the norm for multinationals in China. At the end of the contract they have often been renewed without much thought because the impact of that decision was low.

Under the new law the employer is permitted to enter into only two employment contracts with the employee. After that they are on an open-term contract, which means they leave or stay largely at their own discretion, and of course excepting breach of contract. So every permanent employee needs to be reviewed. Or not. (This should have been dealt with some time ago and can only be seen as a legal loophole. One that you might not want to go through. Chinese professional staff have choices, and under the new law they also have power.)

Employee Council - The new rulings on the issue of unions is still not clear, but what is clear is that companies cannot bar employees from setting up unions.

An alternative is to set up an employee council that represents the employees and solicits their opinions. This body does have a say on issues like your Employee Manual, and it is advisable to have one because it can make the approval of this kind of document easier. If you don’t have an Employee Council you have to get every-single-staff-member to agree to each issue one by one. (The jury is still out on this one.)

It would also be advisable to create an Employee Council as a way of beginning a new kind of conversation with employees. Not having had previous experience of this issue, most Chinese employees do not have the language of employer/employee cooperation, and this council would give them the breathing space to develop that ability.

Public Relations - This may not seem like an obvious department to be involved in anything to do with the new labor law, but according to Image Thief the underlying narrative in China is “Chinese employee vs. callous multinational employer or foreign boss”.

Foreign companies are easy targets, with deep pockets and an aversion to negative publicity. He suggests that you consider the various possible negative PR scenarios that could happen, and prepare a response. It’s all about managing risk.

Clearly the power has shifted in favor of the employee in China. This is not to be feared, as fear tends to be immobilizing. The new labor law really only brings China in line with many other countries around the world. The bonus is that the establishment of the rule of law is an absolute good in itself.

That doesn’t mean you shouldn’t be prepared for the change because the new law may overreach on behalf of employees for a period of time, until employers push back.

SHANGHAI, Feb. 26 (Xinhua) -- Venshtorgbank, Russia's biggest bank, opened its first Chinese branch in Shanghai on Tuesday, marking the start of a new era in Sino-Russian finance.

"China's banking service industry is the fastest-growing and most promising in the world economy. I believe the Shanghai branch will grow as energetically as China's economy," said Andrei Kostin, Venshtorgbank Group (VTB) chairman and president.

VTB has entered into credit granting agreements with a number of Chinese banks and the China Export and Credit Insurance Corporation to provide Russian importers with long-term financing and insurance services when purchasing Chinese goods and services.

Clients can receive up to 1.3 billion U.S. dollars in financing from Chinese banks.

According to Kostin, the Shanghai branch will cooperate with China UnionPay system to provide banking card services to both domestic and Russian clients. It also plans to apply for offering RMB services within three years, and will broaden the business scope of the branch for a larger operating scale "very soon".

VTB even plans to issue its own union cards in China.

The lender is the largest international banking group in Russia. It has branches and financial firms in 17 countries, with assets of 80 billion U.S. dollars.

While it established a Beijing office 20 years ago, VTB is a latecomer to China's lucrative banking sector, now crowded with more than 300 foreign banks.

Robert Walters, the recruitment specialist, is buying its first business in China, a headhunter that provides a range of jobs in the commercial sector.

Walters, which also today announced operating profits up by a third to £26.1 million, is paying RMB 20 million (£1.4 million) for a 70 per cent stake in Talent Spotter, a consultancy with 49 staff and a head office in Shanghai and another in Suzhou, a city with a population of ten million, 75 miles inland from Shanghai.

Robert Walters, the chief executive, said that 62 per cent of fee income was generated outside the UK last year.

The company has a growing presence in the Far East and an office in Hong Kong. Alan Bannatyne, the finance director, told Times Online that the Chinese market was especially lucrative, paying fees representing 25 per cent of annual salary. "Shanghai is a very strong and growing market."

Talent Spotter typically provides a variety of commercial jobs such as sales and marketing and human resources, with a small involvement in accountancy.

During 2007 Walters opened offices in Madrid and Osaka, and an office in Kowloon was opened this year.

The trading statement for 2007 said that activity levels remained strong, with a healthy balance between permanent and contract recruitment.

A final dividend of 3.35p makes a total raised from 4p to 4.7p.

China's amended individual income tax law, which raises the tax levy threshold from 1,600 yuan (about US$220) a month to 2,000 yuan, will go into effect on March 1, accompanied by some regulations on its implementation.

Individuals who earn money from contractual operations and contract to lease businesses will also enjoy a raised tax threshold from 1,600 yuan to 2,000 yuan, according to the regulations.

This was out of consideration that the living costs of those individuals and their family members had increased, said a joint explanation on the regulations made by the Legislative Affairs Office of the State Council, Ministry of Finance and the State Administration of Taxation.

Individual tax payers who have housing in China but work overseas, or live overseas but earn income in China, will keep their tax threshold of 4,800 yuan a month unchanged, according to the regulations.

This will help reduce the gap between tax thresholds of different taxpayers, the joint explanation said.

The raised individual tax threshold will reduce government revenues by 30 billion yuan annually, according to official statistics. It will also mean that 70 percent of income earners will be exempt from income tax, against 50 percent now.

The individual income tax cutoff point was raised from 800 yuan a month to 1,600 yuan starting in 2006. This was based on consumption expenditures for basic living costs at the time.

However, the consumer price index rose several times last year, further burdening low- and medium-income earners.

Robert Walters, the recruitment consultants, will tomorrow announce an expansion into mainland China through an acquisition designed to increase its exposure to one of the world's fastest-growing job markets.

The company, which already has operations in Hong Kong, Malaysia, Singapore and Japan, has bought Talent Spotter, a specialist recruitment business headquartered in Shanghai, for around £1.4m.

Although the deal is relatively small - Talent Spotter has 49 staff and one other office in the prosperous nearby city of Suzhou - it reflects the growing importance that professional services companies are placing on China.

Despite the country's rapid economic growth over the past few decades, the recruitment sector is still in relative infancy. Nevertheless, the demand for such services is expected to rise as the country becomes more integrated into the global economy and Chinese businesses and organisations face calls for increasing professionalism.

Several recruitment companies have set up offices in China or established joint ventures, but Robert Walters' move is believed to be the first foreign takeover of a domestic firm and is the first it has made in more than 10 years.

The acquisition is expected to be a platform for growing the business throughout the country. The acquisition comes as Robert Walters' full-year results are expected to show a 17 per cent increase in net fee income to around £127m and a 30 per cent increase in pre-tax profits to £24.5m, despite the economic turmoil.