Tom Pattinson speaks to Matthew Kong from recruitment consultancy Talent Spot about trends in Chinese recruitment strategy
For businesses looking to enter the Chinese market, what are the first things they should consider when it comes to hiring?
Without a doubt, employers should ensure they have carried out a background or reference check before taking anyone on. Legally speaking, companies need to ensure they are legally able to employ staff directly in China, which, according to China’s labour law, means a fully registered legal entity in China. This could be a Wholly Foreign-Owned Enterprise (WFOE), a Joint Venture or a representative office. But, hiring staff from overseas or a UK registered firm directly is breaking the labour law. Alternatively, they can choose a licensed HR vendor to hire these staff until they have a legal entity fully established.
How easy is it to hire staff before a WFOE or other entity is established?
It’s illegal to hire staff directly before you have a WFOE or other form of legal entity but it is quite easy for a licensed third party to give support with the hiring and to organise the related paperwork. Talent Spot, as a licensed vendor, has actually helped quite a few UK brands entering the China market with this solution before they have an entity established.
What mistakes do many foreign companies make when recruiting?
Hiring staff without checking references is the most common problem. Staff are often hired directly after meeting people at events but it is essential to speak to their previous employer, especially for candidates who have not worked for international firms or who have come from state-owned companies. Also, it is worth noting that if the foreign company is new to the market they will need to pay around 20 percent above the market average to attract good talent.
Hiring staff without checking references is the most common mistake foreign companies make.
China has different HR laws, customs and cultural rules to the UK. What are the most important things to be aware of?
China’s labour law is very complicated and favours the employee. It is common for staff to have at least a three-month probation period and if the candidate doesn’t pass this probation period then the contract termination period needs to start before the period ends. Otherwise, they are classed as full-time staff and it is very challenging to terminate a full-time contract.
It is best to avoid signing an open-ended labour contract and most should have a fixed-term contract as the termination procedures are incredibly complicated once the probation period has passed. It is very difficult to sack a member of staff, unlike in the UK or US.
For example, I have a British client that had two employees causing trouble over their termination. Luckily, the employees’ labour contract was signed with Talent Spot under the contract staffing service, so Talent Spot was regarded as the legal employer and therefore we could deal with them, arrange compensation and eventually get the paperwork signed peacefully.
What are the current HR challenges in China?
HR in China has many obstacles but the two points that are important for newcomers to understand are the social contributions and salary management.
Unlike 20 years ago when labour costs in China were relatively affordable, today there is a completely different story. Salary levels and the cost of employment for employers is high by international standards, especially in first-tier cities, and salaries are still very much the main reason top talent will work with a company. Competition is fierce and salaries can be surprisingly high.
The cost of social contributions in China is also very high and shocks many international companies. These vary from province to province so, as the saying goes in China, treat every province like its own country.
Do you think the millennial generation has a different work ethic or expectations to the older Generation X?
The younger generation has totally different expectations than the older one. In China, the ‘born-in-the-80s’ generation, are now considered the ‘older generation’ whereas the ‘born-in-the-90s’ generation are the ones with more free will and are less interested in job security and are harder to train. They may resign at any time for any reason and expect to be promoted with a good title and high salary very quickly. The good traditional values have somehow been lost.
Therefore, recruiting and training the millennial generation is a common headache for HR and business owners – though of course there are good ones out there.
What top tips do you have to keep and retain good staff?
- Ensure they have a competitive salary and are given the opportunity for promotion regularly.
- Provide regular training to ensure the best staff can learn new skills.
- Have a transparent policy or guidelines for your rewards and punishment system.
- Always make sure to enact these policies when goals have been reached or rules have been broken.
- If staff still don’t meet their key performance indicators after a first warning them terminate their contract. Don’t keep them on, regardless of their excuses, because they will be a bad influence on the good staff and drag others down.
How much does a company succeed or fail on its staff in China and do you have any examples of this?
I believe the success or failure of any company is mainly dependent on its staff. After all, people are the major factor; your staff are the core and determining factor of your company. Neither the products or the service you provide, nor the amount of investment you receive, nor any other element is of equal importance as the staff. By hiring good staff from the beginning, you create the right working environment and work ethic, and the company will attract more good staff and grow in a healthy way.
A perfect example is Huawei. The core values and success of Huawei is totally dependent on the staff they have attracted and retained over the years by providing an above0market average pay structure and stock options for employees. The founder has a very limited number of company shares, and he has built a common interest that has united every member of staff inside Huawei to truly work as a team. The success of Huawei is not to be found primarily in their technology, their values, the founder, the products or anywhere else; it’s their staff and their HR policy that constantly attracts good staff, terminates the contracts of low performers and retains the good ones.
Previously in China companies would discuss their headcount as an indicator of size and success of a company rather than profit. Is this changing to become more about efficiency?
Yes, happily there’s a trend now towards efficiency rather than headcount after all, efficiency and profit are the key to success, not the number of staff you have. When I do recruitment for my own team, I prefer a small team with high efficiency rather than a large team with low performers doing not much all day and influencing the motivation of the good staff.