What’s New in Korea and China—a View from Shanghai

11/1/19

Recently, I spent a couple of days with about twenty members of the HR Policy regional ally Asia Pacific Employee Relations Group.  I was there primarily to talk about the launch of HR Policy in India and to preview some elements of our brand new International Collective Bargaining program (to be run for the first time on December 12, 2019, in D.C.).  Let me pick out a few highlights that may be of interest to global HR leaders.

Hours of work, bullying, and performance management in Korea:  Korea has long had a notorious reputation for long working hours and heavy-handed management.  The country also rivals neighbor Japan as being one of the most difficult places in the world to dismiss poor performers—the burden of proof is high and employees are often “encouraged” toward mutual terminations.

On heavy handed management, think about the “nut-rage” incident on a Korean airliner in December 2014, when a Korean Air executive (also the chairman’s daughter) was served her Macadamia nuts in a packet rather than warmed up in a bowl.  The cabin crew member was awarded compensation of $18,000 for the treatment she received.  The executive, Cho Hyun-min, lost her job and was humiliated across the globe.  Separately, in December 2017, and in the wake up of the amplification of #MeToo in the country, the Korean government introduced new laws on harassment at work and companies now have to offer mandatory training on sexual harassment.

On working hours, the government has clamped down on employers requiring long hours systematically.  Until July 2018, the Korean working week was 40 hours, plus an overtime limit during the working week of 12 hours.  The Korean working week was then defined as just five days—so, in fact, companies routinely rostered 16 hours additional overtime on the other two days of the week.  This made Korea operate the second longest hours (after Mexico) in the developed world.  The average Korean works about 7 more weeks per year than an American, 10 more than a Brit, and 15 weeks more than a French worker.  In July last year, in an attempt to offer a better work-life balance and to boost the low birth rate (that’s what they said), it was made clear that the twelve-hour limit applies to the total week, giving a maximum of 52 hours.  Additionally, a labor inspectorate that had historically paid little attention to working hours is now routinely looking for evidence of accurate time recording.

There have been no legal changes to dismissal laws, the standard for fair dismissal remains very high—but the balance in the “carrot and stick” approach typically adopted to performance based “mutual” separations has changed in light of new harassment laws. 

Strikes in China: The number of strikes in China (as reported by the Hong Kong-based China Labor Bulletin) have been reducing since 2016—some 3,922 strikes were reported in 2016, 2,963 in 2017, and 1,705 in 2018.  In 2019 to date there have been just 1,112 incidents.  The vast majority of strikes are small, involve less than 100 people, are short in duration, and take place in Chinese-owned companies.  Around 90% of all strikes are caused by non-payment of wages, social security charges, or pensions.   

So, nothing to worry about for international companies?  Well, not quite.  Last year there were 27 strikes in international companies all related to  or transfers of ownership.  In the event of relocations and divestitures, Chinese workers often seek to achieve two aims: to get a job transfer guarantee on similar terms of employment and with continuous service as well as a separation payment even if they choose to stay in employment.  

Employees have been prepared to strike—often irrespective of the initial offer put on the table—with a simple demand: “for more.”  Companies have typically been prepared to make offers that meet these demands in whole or in part.  We see buy-outs of prior service, service continuation promises, and bonus payments associated with transfers of employment.  Bonus payments have typically been around what the Chinese call N+1 or N+2 terms (where N is length of service in years and the numeric reflects months pay).   

Hitting the news recently has been an international company paying an unprecedented award of N+6.  I have received a number of calls about this asking if this is the new normal.  Be aware, this is not what it seems—the N+6 calculation involves salary caps that in effect redistribute cash from higher to lower wage workers with the result that the total population award is closer to N+2. 

In the face of an economic slowdown in China and the impact on companies in the supply chain of U.S. companies impacted by the “negative list” and by new tariffs, businesses need to watch this space closely.  Companies facing restructuring in China need to plan appropriately and be up to the minute on developments.

Reflections on HR in Asia Pacific:  As I work with HR professionals from the region, I reflect on how far things have come in the region in the last ten to fifteen years, from a time when HR was barely a discipline in China and the regional leaders tended to be from a different era—or not to be local. The group I met last week was majority local, smart, and with big careers in front of them.  The Chinese nationals were probably the first generation of Chinese HR staff that have learned American skills and put them into practice with Chinese characteristics—an adaptable bunch.  

Many of us have experienced much of our business growth over recent years in China, India, Malaysia, the Philippines and the countries of Eastern Europe. This means that much of our emerging HR talent no longer sits in North America and Western Europe but elsewhere in the world.  We’ve invested a lot in them—time to make sure this is reflected in our succession and career planning