Talent Challenges in China

Shalini Shukla 02 Jan 2013

China is changing. The Asian giant has moved from a labour-intensive, manufacturing-driven market to a more diversified one that includes increasing numbers of high-technology jobs. Manufacturing companies are moving inland from coastal cities and providing better benefits to their workers.

The number of foreigners working in China, including returning overseas Chinese executives, has also increased gradually in recent years. At the same time, with more global players operating in China, more local Chinese professionals are now moving overseas to gain international work exposure. When they return, most are taking up critical roles in companies.

“Expatriates are starting to spend more time to understand the Chinese culture and adapt to the new environment,” says Gao Lan, VP – HR (China, Asia-Pacific and Latin America), Lenovo.

With the increased movement of talent from different countries, cultural fit is being rated as the most important criteria when it comes to hiring or joining a company – making it even more important than salary. “Expatriates are starting to spend more time to understand the Chinese culture and adapt to the new environment,” says Gao Lan, VP – HR (China, Asia Pacific & Latin America), Lenovo.

Cultural fit is being rated as the most important criteria when it comes to hiring or joining a company in China – making it even more important than salary, says Simon Lance, regional director of Hays in China. Employers meanwhile are also considering not only a candidate’s technical skills, but also their cultural skills and ability to fit with the existing team.

“We have seen many cases where an employer will train a candidate in the necessary technical skills if they are otherwise the right cultural fit for a business,” said Lance. “These candidates usually go on to enjoy long-term tenure with the employer.

“By considering not only a candidate’s technical skills but their cultural and team fit, an organisation is far more likely to get recruitment right the first time. They avoid a mismatch between the candidate and the organisation.”

Due to the hierarchical structure at most Chinese companies, it can take longer to get things done. For instance, at Huawei, there are only 19 people who can make decisions for 145,000 employees. In addition, people typically work in silos, so any task that spans across various functions or businesses is very difficult and time-consuming to complete.

“Expatriate employees find it very difficult to penetrate this world,” says Steven Wood, HR Leader – Asia-Pacific, Doosan, and former Global Vice Presidect of HR at Huawei. “Their expertise and management skills are needed, but not easily incorporated as there is limited fundamental mind-set change within organisations.”

Still, ever since China opened its market, professionals there have been exposed to multinational companies and matrix organisations and have learnt a lot on how to work with multiple reporting-lines and cross functions, slowly moving away from hierarchical structures, says Gao.

Human capital challenges

A major talent challenge employers face in China is hiring the right people, fast and quickly enough, says Mark Ellwood, Managing Director - Asia of Robert Walters.

Recruiting and attracting calibre talent has become a challenge because there are too many opportunities for those skills in the current market. “Hence, using new ways to recruit people, such as adoption of social networking systems like Facebook and LinkedIn, is very common now in China,” says Gao.

Indeed, the use of Recruitment Process Outsourcing for global expansion is among the top issues that will dominate China’s recruitment market over the next 12 months, says Lance. Also high on the recruiter’s priority list is the importance of conducting thorough background checks rather than relying on content from social networking sites which can be embellished.

Since entering the China market, Automated System Holding (ASL) has been able to find good people to work with its business. “We believe one of the reasons is people in China love working in multinationals and get exposure to doing business regionally,” says Catherine Cheng, Vice President of HR and Administration, ASL.

ASL also taps on graduate talent, having established its establishing its Outsourcing Delivery Excellence Centre in the high-tech Industrial Development Zone in Zhuhai. There, it is surrounded by numerous reputable universities. “The fertile talent pool available around the area helps us easily attract the most suitable skilled talent to meet our business goals,” Cheng explains.

“We organise career talks for local universities to attract fresh graduates. We also plan to partner with local universities to arrange some internship and ‘sandwich’ programmes to encourage students to work on application development projects,” she adds. “The assignment and participation in ASL projects will be evaluated as part of their education performance. We will then invite the outstanding students to work for us and offer them on-the-job training.”

China is also in need of senior leadership with world perspectives and experiences. “There is a lack of visionary and internationally-exposed senior management personnel,” says Wood.

“There is also the ‘qualitative’ problem with senior leadership,” he adds. “Many do not have the experience of managing non-Chinese, of dealing with business markets that are fundamentally different, and not able to deal with different types of government and news media situations – they are different from the very controlled, one-party system they have grown up with in China.”

Paying the right price

One increasingly important factor in employment decisions is the soaring rate of price inflation across China. In particular, prices of real estate and rental accommodation are sky rocketing.

“Based on the price of 21,584 yuan (US$3,386) per square metre for newly-built commodity houses in Shanghai, and the average social wage of Shanghai of 51,968 yuan (US$8170) per year, the ratio is approximately 20 to one,” says Judy Ng, Asia Marketing Communications Manager, DLA Piper. This is shockingly high when compared with the World Bank’s recommended maximum ratio of five-to-one, and the United Nations three-to-one suggestion. In such an environment, workers will naturally demand higher and higher wages to compensate.

“China is no longer a low-labour-cost country,” says Gao. “Pay has been increased drastically over the past years. Generally speaking, Chinese employees expect faster career advancement and pay increases when compared with mature markets.”

Based on the findings from the Michael Page International 2012/13 Employee Intentions report, China, salary also remains an important incentive when either changing roles or remaining with a current employer.

More than half the survey respondents (55%) indicate they would expect a salary increase of 16% or above when changing jobs. For those remaining with their existing employer, 63% plan to request a salary increase over the next six to 12 months, a significant increase on the 34% indicating they would request a pay rise in last year’s survey.

Employers seem to be listening. According to the 2012 Hays Asia Salary Guide, China was the stand-out market in terms of salary increases in the region. Fifty-one per cent of employers there reported paying salary increases of between six per cent and 10%. A further 21% of respondents offered increases of above 10% in 2012.

“Within this climate, employers need to look at the most appealing incentives to attract and retain talented professionals,” says Andy Bentote, Managing Director, Michael Page International in North & Eastern China.

“Based on employees’ responses to our survey, we know that a competitive salary in addition to opportunities for career development remain the key motivators for skilled employees when choosing to stay in their job or search for a new one,” he adds.

Cheng says salary is only one of many important factors that staff weigh up when accepting a new role. “Employees in China are expecting more than just remuneration,” she says. “They are now looking at companies that present great prospect and are involved in cross-territory business to offer them regional or international exposure.

“Graduates are keen to widen their horizons to climb up the social ladder. At the same time, they expect career advancement and pay rises, and learning opportunities,” she adds.

In view of this, ASL offers various kinds of training and opportunities for Chinese staff to come to Hong Kong for more interaction and broaden their horizons.

Allen Kuo, a general HR practitioner with experience in both external HR management consulting and in-house HR, says staff demanding higher wages is not an unusual event. “Having worked in four different countries and territories, and been stationed in more than six cities across the globe, none of the people I came across ever thought they were being paid enough,” he tells HRM. “However, with the Chinese market developing so fast and opportunities more readily available than in Western countries, the frequency and amount of salary increase expectations in China is simply unfathomable.”

Pertinent labour reforms

In the past five years, a number of laws regarding employment have been formulated to enhance worker security in China. Inevitably, this caused a soaring rise in the labour cost for employing organisations.

“Taking Shanghai as an example, the minimum wage for 2008 was 960 yuan (US$150) and 1,450 yuan (US$227) in 2012. That’s an increase rate of 51%,” says Ng.

Additionally the number of labour disputes is also increasing dramatically.

China’s 2008 Labour Contract Law and recent labour reforms tend to protect more of employees’ (individual) benefits concerning regulations of annual leave, labour contract termination condition and probation periods.

The Labour Contract Law primarily targeted domestic companies that did not have labour contracts and generally failed to comply with China’s previous laws, says Cheng. “The law protects employees with at least 10 years of employment from being dismissed without cause.”

The new law also requires employers to contribute to employees’ social security accounts and set minimum wage standards for employees on probation and working overtime, says Cheng.

The law was enacted after a string of staff sacking scandals in China, the infamous one being that by Huawei Technologies. In that incident, the telecom network giant tried to buy out the advantages of seniority from older employees.

“While most of the laws were not that difficult to deal with, Huawei did ask everyone who had worked for more than five years to resign, so that the company would not have to employ them as permanent employees,” says Wood.

After handing in their ‘voluntary’ resignations, staff were then asked to compete for their previous posts and sign new labour contracts with the firm once they were re-employed. Huawei later agreed to suspend the controversial scheme after talks with the All China Federation of Trade Unions.

“Not only does working in China present some unique challenges due to the socio-political and economic environment, but also the way people cope with changes such as new laws,” says Kuo. “Personally, I think if you can successfully manage in China, you can manage well everywhere.”

Quirky laws

One of the strangest workplace laws in China is the Trade Union Law. “People across China can only join one trade union,” says Judy Ng, Asia Marketing Communications Manager, DLA Piper. “This is not the right of association (结社权) universally applied.”

Furthermore, enterprises contribute the trade union fee based on two per cent of the total amount of the wage, rather than the number of employees who are members of the trade union. Even without active membership of the trade union, two per cent of the trade union preparation fee shall be contributed.


Top ten recruitment issues

•        Bilingual skills

•        Background checking

•        Mobile technology

•        Return of the counter offer

•        Recruiting from overseas

•        Business and commercial analysis skills

•        Salary disparity

•        RPO for global expansion

•        Instability of the Eurozone

•        Internal mobility

Source: Hays


Labour Contract Law

The main changes attributed to the Labour Contract Law are as follows:

•        A written employment contract shall be concluded for the establishment of an employment relationship, otherwise a variety of penalties will be imposed.

•        The barrier for a non-fixed-term employment contract has been lowered.

•        The provisions for probationary period have become stricter.

•        Compensation for breach of a contract cannot be stipulated randomly.

•        The conditions and procedures for dismissing an employee have been made stringent, and the cost of illegal dismissal has risen.

•        Enforcement orders can be applied in the event of payment delays.


Source: DLA Piper


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