Asian Hr Enewsletter_volume 9, Number 1_012009

1/16/2009

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Pacific Bridge, Inc. - Asian HR eNewsletter Volume 9, Number 1 (January 2, 2009)

Volume 6

CHINA INCREASING EFFORTS TO EASE ECONOMIC RECESSION

Volume 5

China’s National Development and Reform Commission (NDRC) recently reported that over 65,000 previously profitable Chinese companies had collapsed during the first half of 2008. Many more companies are facing restructuring. The Chinese government is trying urgently to stabilize the economy, since it believes large-scale unemployment may bring instability to the country. For example, in October 2008, when two large factories in Guangdong Province declared bankruptcy, over 7,000 workers were left jobless and unpaid for the last stretch of their employment. These workers protested for two days, demanding back pay. To resolve the situation, the local government chose to pay the wages on behalf of the bankrupt factories. The amount paid totaled over 24 million yuan (about $3.5 million USD). In its ongoing effort to battle the economic slowdown, the government of Beijing has adopted a new method. As an incentive for firms to employ laid-off workers, the municipal government is now offering to pay a subsidy for each laid-off person hired. Companies willing to give jobs to the unemployed will be eligible to receive up to 10,000 yuan ($1,462.65 USD) per hiree per year for the next three years or more. The subsidy may last up to five years for firms that choose to hire people who are disabled, from low-income households, or nearing retirement age.

Volume 4 Volume 3 Volume 2 Volume 1

Essentially, the Chinese government has made job creation and retention its top policy priority for 2009. Investment projects that can generate jobs will be strongly supported by the government. In particular, the government has taken special measures to assist large employers. For these employers, government officials are taking a wide array of measures including increasing bank loans, raising export tariff rebates, and providing more favorable taxation and financing. In addition, they are providing more vocational training for laid-off workers to increase chances for reemployment. In this new economic environment – whose full affect on the Chinese economy is still unclear – foreign firms should be aware of the resulting shift in HR incentives. In particular, working to avoid staff cuts, where feasible, may win foreign companies more favorable government treatment in other ways.

HIGHER OVERTIME PAY RATE FOR JAPANESE WORKERS The growing number of employees working extended overtime has been an increasing point of concern in Japan. On December 5, 2008, in response to this issue, Japan’s Diet revised the Labor Standards Law governing overtime pay, in an effort to discourage companies from having their employees work excessive overtime. Currently in Japan, compensation for any overtime worked simply needs to be 25% above the regular pay, regardless of how many additional hours are worked. The revised legislation preserves this basic rate. However, for overtime exceeding 60 hours per month, it requires the overtime rate to be 50%. Also, for overtime between 45 and 60 hours per month, the overtime rate must be between 25% and 50%, decided company-by-company based on management-labor consultations. The new measures are set to be implemented in April 2010. However, the new measures will not be enforced stringently. Small and medium-sized firms, which are more financially vulnerable than larger corporations, will generally not be held to these new standards. After the initial three years of enforcement, these firms may be held accountable to the new law based on the government’s discretion. Efforts to address the disproportionate overtime situation date back to early 2007, when the Ministry of Health, Labor, and Welfare (MHLW) proposed a bill to eliminate overtime benefits for many white-

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Asian HR eNewsletter collar employees. After this proposal failed, the MHLW revised the bill in March 2007 and proposed raising the extra pay rate for overtime exceeding 80 hours per month to 50% of regular pay. However, labor representatives argued that the cutoff point of 80 hours of overtime per month was inappropriate, since it had previously been used as a reference point in cases of “karoshi,” where employees actually worked themselves to death. As a result, both sides compromised, capping the hours of overtime worked per month at 60 before qualifying to receive an extra 50% of regular pay. Additionally, the revised Labor Standards Law allows employees to use up to five days’ worth of their vacation time in hourly increments each year. This measure is designed to encourage workers to use their vacation days. The Japanese government hopes that these new rules will help Japanese employees balance their work and personal lives. However, it remains to be seen how well the law will be enforced in practice. The existing law requiring extra overtime pay has often been ignored in Japanese workplaces.

CHANGES TO VISA REGULATIONS FOR FOREIGNERS IN KOREA As more foreigners come to work in Korea, there has been a push to amend the current visa regulations. Currently, foreigners employed in Korea on E-9 visas can stay for up to three years. However, they must renew their visas every year. Also, after three years, it is mandatory for them to leave the country for at least one month before renewing contracts with their previous companies for two more years. This is a very costly process, in terms of both money and time. Therefore, a new bill has been introduced so that foreign nationals working on E-9 visas will be able to stay in Korea for up to three years before having to renew their visas. The bill is currently being considered by the National Assembly and will be effective in early 2009, if it is passed. Support for this amendment stems from a shift in focus for many Korean companies. In order to globalize their operations, Korean firms are adjusting their hiring needs. In a survey by the Korean Chamber of Commerce and Industry, over 25% of companies indicated that they had hired employees from English-speaking countries, while another 25% said they had hired people from China. In most cases, firms reported that this shift in focus was simply because they are moving into foreign markets. As a result, hiring international employees is becoming significantly more common in Korea, for both local and multinational companies. Regulations easing visa rules means that multinational companies in Korea, who already tend hire diverse workforces, may begin face more competition for the same talent pools from local Korean companies. However, at the same time, it is likely to make it easier administratively for companies to employ a workforce that best reflects their multinational interests.

NEW LABOR LAW IN MACAU In August 2008, the Legislative Council of China’s Special Administrative Region of Macau approved an overhauled labor law, which will become effective as of January 2009. The Labor Relations Law, which is intended to offer workers more protections, is predicted to boost the cost of labor in Macau and has employers worried about making ends meet during the global financial crisis. Overtime pay is specifically addressed in the new law. Beginning in 2009, voluntary overtime work must be compensated with an additional 20% of regular pay, while mandatory overtime must be compensated with an additional 50%. Firms who fail to make these payments will be subject to fines ranging from 5,000 to 10,000 Macanese patacas (about US$625 to US$1,250) per employee who is not paid. Furthermore, employees will be entitled to one day’s paid leave after working an additional eight hours over the normal eight-hour day. Employers failing to meet these requirements may be punished with fines of up to 25,000 patacas (about USD $3,100) as well as jail time. Other requirements in the new law cover night work and maternity leave. Employees working between midnight and 6 AM will be entitled to an additional 20% over regular pay, unless they were aware of the working hours before taking the job. Paid maternity leave has been extended from the original 35 days to 56 days, available to women who have worked for their employer for at least one year. These changes are likely to increase operation costs for companies in Macau, particularly small to medium-sized firms. As a result, this new law has been met with opposition, as reflected in the Legislative Assembly, which voted 19-7 in favor of passing the law. One of the bigger issues Macau is now addressing is how to prevent employers from cutting wages. Current labor law mandates that the Labor Affairs Bureau must give prior approval to any wagecutting. However, the new law will only require that the Labor Affairs Bureau be informed of any changes in wages.

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