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There are some basic rules about Xiamen human resource management for business person to know. And the following are the introduction of the rules.
Human resource management and labor-management relations in China are different from those in other countries because of different political and economic systems and social and cultural backgrounds. Lots of changes have taken place in human resource management since the 1978 economic reforms. As the economic reforms deepen and a market economy is established, changes will take place in the nature of labor- management relations and human resource management in Chinese enterprises.
Rules About Xiamen Human Resource Management – General Rules and Regulations for Staff Employment
Foreign Representative Offices are not permitted to hire their own local staff. Government organizations such as China Intellectual Corp or FESCO are required to hire the local employees on behalf of the foreign companies. According to Chinese officials, as Representative Offices are not legal entities, the foreign labor service market needs to be regulated and standardized in order to guarantee that welfare and social benefits are provided to the employees by the Representative Offices.
Wholly-Foreign Owned Enterprises or Joint Ventures are limited liability companies and therefore have the right to employ local staff directly without using a government agency. There are certain issues all employers should address when designing labor contracts. There are two types of labor contracts: individual or collective. Individual contracts are made with employees on a one-to-one basis and collective contracts are made between the employer and the trade union. Individual contracts can be filed for certification within a month of signing whereas collective contracts must be filed with the local labor bureau within seven days of signing.
For workers, overtime payment is typically 150% of the normal base wage, 200% for non-holiday "rest days" and 300% for public holidays. Salaries and individual income tax must be paid monthly. Other types of compensations include bonuses, benefits, housing, transportation, meal allowances (if any) and leave.
In the case of foreign-invested enterprises (FIEs) there are major differences between western and Chinese business practices, which make it more effective to provide employees handbooks in conjunction with employment contracts in order to convey company policy and expectations.
Rules About Xiamen Human Resource Management – Rules and Regulations for the Employment of Foreigners
When deciding to employ foreigners in China particular care should be given towards the application and licensing process. This is to ensure that neither the company nor the individual overlooks or neglects to comply with any regulation that may subject them to fines, revocation of working status or in serious cases, expulsion from the country.
Once arriving in China, the foreign expatriate must receive a Health Check performed by a specific government hospital before receiving the work permit and residence permit.
It is important to note that employment permits and residence permits are subject to annual inspections and renewals by the local labor authorities. It is the employer's responsibility to present these documents to the issuing certificate office. Failure to observe and follow the regulations in general can lead to fines, deportation or in severe cases, criminal prosecution.
Individual Income Tax payment is a big issue in China. In simplified terms, if an expatriate is less than 183 days in China, the income does not have to be declared in China. If an expatriate is in China for more than 183 days, this person has to declare their worldwide income to the tax authorities. Foreign companies should be aware that it is common for expatriates to under report the period of residency, salaries received in or outside China, or if they travel all over China instead of being based in one location.
To discuss a remuneration package for foreign employees that includes the fact that they will have to pay IIT in China, is important, because if the employee undervalues or does not pay the correct amount, it may lead to consequences for the company as well.
Rules About Xiamen Human Resource Management – Potential Risks of Under-Declaring Salaries and Expenses
Many companies setup local personnel accounts in China under the name of the Chief Representative or local Chinese staff to fund the WFOE or the RO and pay related expenses which are not officially booked in the WFOE / RO accounts in order to reduce tax liabilities. Other common practices include the General Manager / Chief Representative withdrawing money through the local ATMs from foreign accounts to fund RO related expenses, under declaring salaries, not registering foreign or local staff.
Again, the foreign company should understand the common practices, in order to put monitoring systems in place avoiding these are used without the company's knowledge.
If the company does not officially declare all expenses through the WFOE / RO account or have separate funds to finance the local activities, then firstly, it is not in compliance, and secondly there is the risk of staff turning this against you when they are dismissed or leave the company (blackmailing and threats to disclose malpractices to local authorities are common in order to seek own financial gains). Local staff may even manipulate the company records to ensure it is not in compliance - in order to hold leverage against the company in the event of any disciplinary action being taken against them at a later stage. It is common. China is no exception to the rule that it does not like tax evasion. The penalties for late payments, non-payment and other transgressions (naivety is no excuse) can be severe - often five times the amount due, plus the original liability. In cases of blatant evasion, businesses can have their licenses withdrawn and assets seized.
Rules About Xiamen Human Resource Management – Conclusion
Whereas previously, foreign companies may have invested more long term in their HR strategy, in today's China, companies are under more pressure to deliver in a shorter timeframe. Consequently, expatriate managers with only two to three years in which to make an impact may not have the time or motivation to develop a long-term focused HR strategy because the benefits are not going to come in their tenure. What is required is a far greater long-term involvement by companies in educational activities and internships, and for a policy shift to make the educational system more focused on servicing the needs of the evolving business community. Such developments may take a long time to make a difference. For some time to come, effective Human Resources management will remain a tough challenge for foreign companies and one that is only likely to get tougher.
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