By Jocelyne Blais
China provides great opportunities for multinational corporations to expand into new markets. With inherently low operating costs and with a highly skilled and educated workforce, those who make China part of their corporate activities will likely gain competitive advantage.
By Jocelyne Blais
China provides great opportunities for multinational corporations to expand into new markets. With inherently low operating costs and with a highly skilled and educated workforce, those who make China part of their corporate activities will likely gain competitive advantage.
Social infrastructure, business practices, labour and cultural complexities must be addressed and monitored continuously to ensure success is not only attracting, but also retaining a highly qualified workforce. To be successful, multinationals must integrate cultures – both theirs and that of the country where they conduct business. This requires flexibility, understanding, empathy and a strong desire to bridge differences. The ability to bridge the cultural gaps will play an important role in being successful, welcomed and respected.
To attract and retain skilled and dedicated employees, foreign corporations must adopt a “total reward” strategy. This should include competitive pay, bonuses and training, career development opportunities, as well as other incentives and motivational techniques such as verbally acknowledging outstanding work in the presence of other workers. Employee career development has been recognized as the most effective retention factor in China, along with the absence of discrimination between men and women for specific jobs.
A competitive salary is not an incentive in and of itself, as it is expected in return for work performed. An employee who stays because of an attractive salary will leave because he or she will inevitably be offered a higher salary by another employer. The employee needs to have other reasons to stay.
Multinationals must adjust their philosophy regarding employee benefits and compensation to the particular environment. This could be complex in China since it varies from region to region. Employers must be well-informed of new legislation being introduced by government and must also be aware of how their competitors compensate their employees. A good example of this is the Labor Contract Law issued in 1994, which went into effect as of January 2008. This law was passed to protect workers from abuse, and requires employers to enter into written employment contracts with their workers. It applies to both domestic and foreign firms operating in China.
Another example is the change that occurred in 2007 to the pension system. In 2004, the government introduced the Enterprise Annuity plan, the only legislated retirement plan that provides a payout at retirement, similar to Canada’s Defined Contribution Pension Plans. When it was made mandatory by the end of 2007, existing supplemental pension plan assets needed to be transferred to licensed Enterprise Annuity management companies, which have proper infrastructure to ensure protection of pension assets.
New regulations concerning social insurance came into effect on October 15, 2011, requiring that all expatriates pay a portion of their monthly earnings into a national social insurance pool.
Have these reforms negatively impacted China’s competitiveness and reduced its appeal as a recipient of foreign investments? Contrary to initial fears, they have not.
China granted its first operating license to a foreign insurance company, American International Assurance, in 1992. Prior to that, foreign insurance companies were not authorized to do business in the country. Now that there are large numbers of foreign-owned insurance companies operating in China, it is imperative for multinational business operators to have local advisors – people who know the market and who can establish reliable relationships to serve company needs.
Multinationals have two distinct groups of employees to cater to: locals and expatriates. In countries such as China, differences between the various regions add a third dimension. To capitalize on China’s vibrant human resources, and to keep pace with competitors, foreign corporations need help from international firms that have alliances with local advisors.
Multinationals have been paying more attention to benefits, working with insurance companies to enhance existing plans in order to provide more beneficial programs to their employees. Areas being examined include enhanced medical coverage emphasizing preventive care, accidental, disability and business travel insurance. With a booming economy, work/life balance and employee well-being are issues of increasing concern to local and global employers in China.
Healthcare spending represents 5.8 per cent of China’s GDP, and only half of this is funded by the government. To put this into perspective, this represents about $250 per person compared to $7,000 per person in the U.S., which spends more per capita on healthcare than any other country. (Canada ranks among the top ten in terms of per capita healthcare spending).
Wherever you chose to do business, you will want an affordable and sustainable benefit program. If employee mobility is a requirement, you will need to look at a regional and global benefits platform that will complement the social security program in the various cities or regions where your company will be operating. You will likely find cost savings if you can pool your benefits package with programs you may already have in place in other countries where employee benefits are generous.
Don’t hesitate to seek professional help when it comes to plan design and management. Although your plans may well have the same components as your Canadian plan, they will look quite different. Get informed, and make sure you get the right coverage for your situation.
Jocelyne Blais is Vice-President of Marchand, Fairchild, Blais Financial Services Inc.
Social infrastructure, business practices, labour and cultural complexities must be addressed and monitored continuously to ensure success is not only attracting, but also retaining a highly qualified workforce. To be successful, multinationals must integrate cultures – both theirs and that of the country where they conduct business. This requires flexibility, understanding, empathy and a strong desire to bridge differences. The ability to bridge the cultural gaps will play an important role in being successful, welcomed and respected.
To attract and retain skilled and dedicated employees, foreign corporations must adopt a “total reward” strategy. This should include competitive pay, bonuses and training, career development opportunities, as well as other incentives and motivational techniques such as verbally acknowledging outstanding work in the presence of other workers. Employee career development has been recognized as the most effective retention factor in China, along with the absence of discrimination between men and women for specific jobs.
A competitive salary is not an incentive in and of itself, as it is expected in return for work performed. An employee who stays because of an attractive salary will leave because he or she will inevitably be offered a higher salary by another employer. The employee needs to have other reasons to stay.
Multinationals must adjust their philosophy regarding employee benefits and compensation to the particular environment. This could be complex in China since it varies from region to region. Employers must be well-informed of new legislation being introduced by government and must also be aware of how their competitors compensate their employees. A good example of this is the Labor Contract Law issued in 1994, which went into effect as of January 2008. This law was passed to protect workers from abuse, and requires employers to enter into written employment contracts with their workers. It applies to both domestic and foreign firms operating in China.
Another example is the change that occurred in 2007 to the pension system. In 2004, the government introduced the Enterprise Annuity plan, the only legislated retirement plan that provides a payout at retirement, similar to Canada’s Defined Contribution Pension Plans. When it was made mandatory by the end of 2007, existing supplemental pension plan assets needed to be transferred to licensed Enterprise Annuity management companies, which have proper infrastructure to ensure protection of pension assets.
New regulations concerning social insurance came into effect on October 15, 2011, requiring that all expatriates pay a portion of their monthly earnings into a national social insurance pool.
Have these reforms negatively impacted China’s competitiveness and reduced its appeal as a recipient of foreign investments? Contrary to initial fears, they have not.
China granted its first operating license to a foreign insurance company, American International Assurance, in 1992. Prior to that, foreign insurance companies were not authorized to do business in the country. Now that there are large numbers of foreign-owned insurance companies operating in China, it is imperative for multinational business operators to have local advisors – people who know the market and who can establish reliable relationships to serve company needs.
Multinationals have two distinct groups of employees to cater to: locals and expatriates. In countries such as China, differences between the various regions add a third dimension. To capitalize on China’s vibrant human resources, and to keep pace with competitors, foreign corporations need help from international firms that have alliances with local advisors.
Multinationals have been paying more attention to benefits, working with insurance companies to enhance existing plans in order to provide more beneficial programs to their employees. Areas being examined include enhanced medical coverage emphasizing preventive care, accidental, disability and business travel insurance. With a booming economy, work/life balance and employee well-being are issues of increasing concern to local and global employers in China.
Healthcare spending represents 5.8 per cent of China’s GDP, and only half of this is funded by the government. To put this into perspective, this represents about $250 per person compared to $7,000 per person in the U.S., which spends more per capita on healthcare than any other country. (Canada ranks among the top ten in terms of per capita healthcare spending).
Wherever you chose to do business, you will want an affordable and sustainable benefit program. If employee mobility is a requirement, you will need to look at a regional and global benefits platform that will complement the social security program in the various cities or regions where your company will be operating. You will likely find cost savings if you can pool your benefits package with programs you may already have in place in other countries where employee benefits are generous.
Don’t hesitate to seek professional help when it comes to plan design and management. Although your plans may well have the same components as your Canadian plan, they will look quite different. Get informed, and make sure you get the right coverage for your situation.
Jocelyne Blais is Vice-President of Marchand, Fairchild, Blais Financial Services Inc.