Global HR Update: Asia

By Pacific Bridge Recruiting March 14, 2013

Shortage of Skilled Labor Continues to Challenge Employers in Asia

In a recent survey of 1,200 Asian employers, nearly all reported that shortages of skilled labor have the potential to negatively affect their business. Half of those surveyed asserted that the shortages will impact their operations without a doubt.

Across all levels, sales, engineering, IT and technical skills are in the highest demand in Asia. In senior management roles, the hardest positions to fill are those in sales, engineering, accounting, finance, and human resources.

Asian employers have taken a variety of approaches to compensate for the shortage in skilled labor. Of those surveyed, the number of employers willing to hire foreign talent has jumped from 52 percent in 2012 to 68 percent in 2013. In the last year, 52 percent reported using flexible staffing to manage shortages. Asian employers are making greater efforts to attract and retain skilled labor. Other than increasing salaries or bonuses, employers are increasingly offering a variety of benefits. Health and life insurance are the most popular.

Salary Increases Projected to Be Less for 2013

According to a new report, 75 percent of surveyed employers in Hong Kong, China, Singapore, Malaysia and Japan said that they gave salary increases of less than 3 percent or none at all in 2012. That number is expected to stay the same for 2013, with 74 percent of employers giving low or no raises.

Of the remaining 26 percent, 20 percent of employers are expecting to offer salary increases of between 3 and 6 percent, while 4 percent of employers will consider raises of more than 6 percent. Two percent said they would consider raises of more than 10 percent during the next review period.

That trend reflects a slightly rosier economic outlook for 2013, according to Jonathan Sampson, Japan regional director for Hays, the group that conducted the survey. He said that 72 percent of Asian employers believe the economy will remain stable or strengthen in 2013. Of those surveyed, 65 percent said their business had increased in 2012, and 66 percent anticipate it will go up in 2013.

Meanwhile, employers in Asia continue to rely on temporary workers for some staffing needs. More than half of employers reported that they had used temporary, contract or part-time employees in 2012. Of all respondents, nearly a quarter said that they used temporary or contract staff on an ongoing basis.

More Taxes for Foreign Workers in China

Numerous income tax exemptions should soon end for foreigners working in China. New taxation rules, approved in January 2013 by China’s State Council, are expected to pass without debate at the National People’s Congress in March.

Since 1994, foreigners in China have not had to pay taxes on bonuses or dividends from foreign-invested enterprises. Once the new rules go into effect, that income will be taxed at a rate of 20 percent.

The new rules are part of a central government plan to improve tax collection and slow growing income inequality. The State Council’s 35 Point Plan also includes proposals for a nationwide property tax and salary ceilings for executives at China’s state-owned enterprises.

Since 2003, China’s government has been standardizing tax laws, especially those for foreign investors. In an effort to attract international capital during the late 1980s and 1990s, China had offered special incentives to foreign enterprises and individuals willing to invest money in China.

Conflicts Spark Unionization in China

Pushed by local authorities, some manufacturers in southern China have started holding union elections similar to those in the West. Although unions have existed in China throughout the modern era, they are controlled through the central government’s All-China Federation of Trade Unions (ACFTU). Traditionally, unions under the ACFTU rarely started strikes or engaged in lengthy contract negotiations.

But this is beginning to change. In 2008, the ACFTU announced its Rainbow Plan to expand collective bargaining in China. In 2011, Beijing announced plans to charge nonunion companies 2 percent of their total labor costs. And in 2012 and 2013, government officials have started encouraging companies to hold genuinely representative union elections.

Foxconn is the latest company to update its labor policies in China. Starting next year, the world’s largest contract maker of electronics will begin holding labor union elections with no management involvement. Junior workers will make up a larger proportion of representatives, and the nominating processes will be open and transparent, according to one member of the election committee.

Local Chinese officials will likely continue the push for unionization. They see it as a valuable tool to ease rising social pressures, as long as it does not lead to large-scale strikes or disruptions in the supply chain. Shenzhen’s municipal government was the first to call for representative company unions in early 2012, followed Guangzhou in January 2013.

Vietnam Increases Minimum Wage

In January 2013, Vietnam issued its first round of regional minimum wage hikes since August 2011. Wages went up an average of 17 percent across four different regions:

In Region I (which covers rural and urban districts in Hanoi, Ho Chi Minh City, Hai Phong and Bien Hoa City, among others), wages rose from $96 to $113 per month.

In Region II (which covers remaining rural districts in Hanoi, Hai Phong and Hai Duong City, among others), wages rose from $86 to $101 per month.

In Region III (which covers the remaining provincial cities, Chi Linh town and some rural districts in Hai Duong and Vinh Phuc Provinces), wages rose from $75 to $87 per month.

In Region IV (which covers all remaining localities), wages rose from $67 to $79 per month.

While Vietnam’s deputy prime minister said that the minimum wage hike will not adversely affect foreign companies doing business in Vietnam, some employers said otherwise.

Quach Thi Nhung, the head of HR for South Korean garment maker K.J. Vina in Vietnam, said that payment packages for insurance, labor union fees and other allowances—all tied to the minimum wage—will also go up in 2013 and 2014.

Personal Income Tax Update for Foreigners in Vietnam

Vietnam’s General Department of Taxation issued Official Letter 187/TCT-TNCN (OL187) on the finalization of personal income taxes on January 15, 2013.

Key updates in the letter include:

183 Day Rule: Foreigners who live in Vietnam a total of 183 days or more per calendar year (starting Jan. 1, 2013) will be subject to personal income taxes.

Personal income tax filing may be conducted by an employer on behalf of an employee unless:

  • The employee has been issued a personal income tax withholding receipt.
  • The employee did not sign a labor contract.
  • The employee signed a labor contract (for a term of more than three months) but they have more than one source of employment income.
  • The employee signed a service contract that withholds 10-20 percent in personal income taxes.

In order to claim a dependent on personal income taxes, the dependent must already be registered. If an individual changes his or her place of work, they must re-submit copies of their dependent registration to their new employer as certified by their previous employer.

Japanese PM Calls for Voluntary Wage Hikes

Japanese Prime Minister Shinzo Abe has called on Japan’s biggest companies to voluntarily increase employee wages. The request, made at a February 2013 meeting, is part of Abe’s campaign to end deflation by driving down the value of the yen and driving up domestic consumption.

Abe said that the success of his macroeconomic policies depend on increasing the income of hard-working people, who have been hit by high unemployment and flat wages for more than a decade.

Most private employers have chafed at the request, saying that government involvement in wage negotiations is not appropriate.

Wage negotiations are between individual companies and unions, said the chairman of Japan’s Chamber of Commerce and Industry. It’s natural that a company with better profits would increase pay, but it’s not appropriate to talk generally about how much and when during wage negotiations, he said.

Last year, average monthly salaries in Japan—including bonuses and overtime—were at their lowest rates since 1990, according to figures released in January by the Ministry of Health, Labor and Welfare.

Salaries in India to Rise over 10% in 2013

According to a recent survey by Aon Hewitt, salaries in India will rise 10.3 percent on average in 2013. The highest wage increases are expected in the pharmaceutical sector (13.5 percent), life sciences (13.1 percent), medical devices (12.6 percent) and consumer business (11.8 percent). The projected wage increase in India is slightly lower than the 10.7 percent wage increase seen in 2012. However, the projected wage increase for 2013 is still seen as a sign of economic health. Following the global financial crisis, 2009 wages increased only 6.6 percent.

The same survey indicated that India would rank 5th globally for projected salary increases behind Venezuela (25.6 percent), Argentina (24.2 percent), Vietnam (12.6 percent) and Tanzania (10.6 percent). On the other hand, salaries in 2013 are projected to increase by 2.7 percent in the U.S. and 3 percent in the U.K.

Pacific Bridge Recruiting is a leading Asia executive recruiting and human resources consulting firm based in Bethesda, Md.

Republished with permission. © 2013 Pacific Bridge Recruiting. All rights reserved.

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