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More U.S. Companies Moving Product Delivery, Sales Offices to Asia
With U.S. and European businesses seeing higher profit margins in Asia, many have relocated key offices to places like Shanghai, Hong Kong and Singapore. Even C-suite executives are on the move: In 2008, only 19 percent of Western multinational corporations had at least one board member living in Asia. By 2011, that figure had risen to 30 percent.
The reason so many high-level executives are moving to Asia is twofold. First, they want to show that they are committed to fully engaging with their partners and customers in Asia. Second, they want to streamline supply chain management and marketing operations to better serve these markets. A 2012 survey by the U.S.-China Business Council found that 94 percent of respondents were in China primarily to access Chinese consumers, not to manufacture and re-export to the U.S. market.
For example, Procter & Gamble, a Fortune 500 consumer goods company, announced in August 2012 that it would be relocating a key division to Singapore. Its global skin, cosmetics and personal-care unit will be based in a place that many consider an ideal steppingstone for accessing markets in Southeast Asia and India, much as Hong Kong is considered a “gateway to China.”
China Implements 2013 Minimum Wage Hikes
Minimum wage rates rose in 24 of China’s 33 provincial-level regions, with Beijing and Shaanxi posting increases for the second consecutive year. Other provinces and cities enacting wage hikes include: Shenzhen, Shanghai, Tianjin, Chongqing, Sichuan, Jiangxi, Shandong, Shanxi, Yunnan, Jiangsu, Fujian, Zhejiang, Hainan, Hunan, Hebei, Heilongjiang, Inner Mongolia, Qinghai, Xinjiang, Gansu and Ningxia.
This is the latest in a series of centrally mandated wage hikes, with an average increase of 14 percent. Shenzhen leads the nation with the highest minimum wages of U.S. $241/month, followed by Zhejiang at U.S. $236/month.
Mandated minimum wage hikes combined with other market forces have driven up Chinese wages. At the same time, this has also cut into the bottom lines of foreign manufacturers relying on China as a supply of cheap labor. The labor market for low-wage workers has gotten so tight that some foreign companies have turned to vocational school students to fill the gaps. Government officials lean on schools to meet worker shortfalls, with schools sometimes taking a cut of the profits.
Meanwhile, other foreign companies have moved their manufacturing operations out of China to lower-wage nations like Vietnam and India.
Amendment to China’s Labor Contract Law Changes Rules for Contracted Labor
Employers in China frequently use contracted labor to maintain flexibility in staffing. Currently, about one in three workers is employed through a labor contracting agency. Though contracted labor is supposed to enjoy the same wages as permanent employees and receive benefits from their contracting agency, they are frequently underpaid and do not receive such benefits.
An amendment to the Contract Labor Law, effective July 1, 2013, requires employers to hire the majority of their workforce directly. The number of contract laborers will be strictly controlled and will only be allowed for “temporary, supplementary and backup jobs.” Temporary jobs are jobs lasting six months or less, while backup jobs are defined as positions filled while permanent workers are on temporary leave for maternity, study or holidays.
The amendment also imposes new rules on contract agencies. It requires agencies to hold a minimum amount of registered capital. An agency must hold at least 2 million RMB ($320,000 USD) to ensure the agency’s solvency.
Safety Issues for Women in India
Foreign companies in all sectors of business should enact measures to increase security among their female workforce in India. In the wake of the Delhi gang rape case, many women are leaving work early, refusing overtime or even quitting over fears that their after-hour commutes may leave them vulnerable to similar attacks.
According to a survey of the IT and business process outsourcing industries, one in three female workers has reduced her hours or quit her job since mid-December. Outsourcing managers say the resulting drop in female work productivity is as high as 40 percent in Delhi. Workers in India’s other major outsourcing centers—Chennai, Bangalore, Mumbai, Hyderabad and Pune—have reported similar results.
With female participation in the labor force rising, foreign corporations doing business in India need to consider specific measures to ensure the safety of these workers. This could include everything from 24-hour help hotlines to GPS-equipped transport for women leaving after dark.
The IT and business outsourcing industries are particularly reliant on female labor. As many as half of India’s IT workers are now female, up from just one in three in 2008. And with the industry subject to traditionally high rates of attrition, foreign employers providing additional security benefits to their fastest-growing group of workers will have an advantage in hiring and retaining employees.
Changes to Singapore’s Employment of Foreign Manpower Act
Foreign blue-collar workers have been faced with many challenges working in Singapore, including employers circumventing or breaking employment laws and regulations. An amendment to the Employment of Foreign Manpower Act (EFMA) gives the Ministry of Manpower (MOM) greater capabilities for enforcing work pass rules for foreign workers. The amendment, which took effect in late 2012, is designed to prevent employment scams, abuse of foreign workers, and to ensure employers pay the full cost of hiring foreign workers.
The amendment establishes a new administrative penalty regime wherein employers can be swiftly punished with heavy fines of up to $20,000 per administrative infringement without criminal prosecution. Additionally, offending employers may be blocked from hiring foreign workers. “Administrative infringements” are breaches of the EFMA that do not directly harm workers and are not otherwise criminal activities. An independent appeal board has been established for employers seeking redress.
The amendment furthermore gives the MOM increased investigatory powers such as “the power to enter and inspect a premise for the purpose of conducting audits, as well as when there is reasonable belief of the presence of EFMA breaches.”
Proposals for Changes to Singapore’s Employment Act
The Employment Act (EA) defines the rights and obligations of both employers and employees with the aim of harmonizing the relationship between them. The last major review was conducted in 2008. The EA is now under review again to stay relevant to the changing work environment. New proposals in the review include:
Pacific Bridge Recruiting (PBR)
www.pacificbridge.com is a leading Asia executive recruiting and human resources consulting firm based in Bethesda, Md.
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