| Part of the IAOP China Chapter
Please stay tuned for information on the next chapter meeting in Shanghai City.
IAOP Members: To register for the upcoming meeting, please email our chapter coordinator at amanda.corbett@outsourcingprofessional.org
If you are not as yet a member of IAOP and would like a guest pass for this meeting, please Request a Guest Pass
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Chairman’s Summary – October 23, 2007
IAOP East China Chapter Meeting Minutes October 23, 2007
The October 2007 IAOP East China Chapter meeting was well attended. Due to a last minute family emergency the scheduled speaker, Paul Zanker of PWC, had to drop out so we moved forward the planned speaker for the December Chapter Meeting. Paul’s speech on an Emerging Global Trends in Outsourcing report by PWC will be rescheduled for the December Chapter Meeting.
The topic for this Chapter Meeting became China’s New Labor Law and its Impact on the Outsourcing Industry. Speaking was Bob Zhu, Asia Pacific HR Director for Electronic Arts. Bob was previously the Asia-Pac HR Director for Capital One, Danone and Tektronix and he has a wealth of experience adapting HR practices of multinationals to the China environment.
In his speech Mr. Zhu highlighted several areas that will impact all companies operating in China as a result of the new labor law. Noting that the new law was not negotiable he suggested that one’s time is best spent understanding the impact and creating strategies for dealing with the new labor landscape in China.
While the labor law will may make operations more difficult for vendors in China who provide offshore outsourcing services it will likely act as a catalyst to promote outsourcing within China. Multinationals may choose to outsource more positions in their China operations to mitigate the increased risk and overhead the new law places on employers in China.
Mr Zhu pointed to six key impacts that the new labor law that goes into effect January 1, 2008 will have on employers. They are: 1. The practice of making fixed term, (1 or 2 year employment contracts) will be phased out in China in favor of permanent employment contracts. This will limit the current practice of being able to terminate employees by simply not renewing their labor contracts when they expire. Going forward companies will have to prove cause in all cases when terminating staff. 2. Probation, which is commonly used at the start of an employment relationship is effectively eliminated. Previously companies could enjoy a 3 month probation period with new hires if they made the employment contracts for 1 year and 1 day. During probation it was very easy for a company to terminate the employee if they found their performance or attitude was not good. Now probation will be limited effectively to one month, and there will be no more termination without cause. So employers will need to document and prove their case that the employee did not perform during probation, a very difficult hurdle, if they with to terminate. One strategy Mr Zhu pointed to for this was to put a clause in employment contracts stipulating that it is conditional on a successful background check. Then if the employee is found to have misrepresented anything even slightly, it could be grounds for dismissal. However, the change in this new probation term will put much more burden on HR departments to do more due diligence on candidates before hiring them, since it will be significantly harder to terminate them during probation if they are found to not be a match with your company. 3. One favorable change to the labor law is a change to the amount of severance a company must pay in the case of termination. Previously the law required 1 month salary for each year of employment as severance, plus one month notice. Under the new law 1 month notice is still required, but the compensation for time served will be based on the average salary in one’s city, not the employee’s actual salary. So for highly paid IT workers whose salary is far above the city average salary, they will receive less. 4. Companies will need to be much more careful that their employees all have valid labor contracts. In the past, if an employee’s labor contract expired the company could make a new one at its leisure. Under the new law, if a company lets more than 30 days lapse between the expiration of an old labor contract and a new one, significant penalties will be due to the employer. So HR departments will need to be much more organized in their handling of labor contracts with employees. 5. The penalty for wrongful termination is doubled. If an employee is terminated and elects to take the employer to the labor bureau for arbitration and they win, whatever compensation they would have received as a result is doubled. This creates a dangerous situation for companies since employees win 80% of the time in labor court in China. With the new policy of doubling the money the employee can get, it should be expected that employees will start to take far more cases to arbitration since they have nothing to lose and lots to gain. However, Mr Zhu pointed out that companies should not be intimidated by this and that if handled right, a favorable settlement can be achieved by a skillful HR department. What this means though is HR departments will need to be much more professional in the new regime. 6. All companies will have to start a union. Mr Zhu commented that one should not look at this measure from the Western point of view since unions are not as strong in China as in the West. This is preferable to the alternative under the law which would require unanimous approval from the staff for any change of policies or firing decision. So companies should be proactive in planning their union strategy to put in place a friendly organization rather than letting it happen organically or falling into the trap of needing unanimous consent for operational decisions.
The new labor law puts more power into the hands of employees, which may be needed in some industries like manufacturing where perhaps they are exploited today. However, in the outsourcing industry it is already a candidates market and these new measures will further tip the balance in the favor of employees to the detriment of employers. On the other hand these new laws will increase the incentive for companies to use contractors rather than full time permanent employees for their China operations and may reduce the appeal for overseas companies to build Captive centers in China and instead find a suitable outsourcing vendor.
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Eric Rongley, CEO Bleum Software Outsourcing Cloud 9 Mansion 8/F
1118 West Yan’an Road Shanghai, 200052 PRC Phone: +86 21 6282 1122
Fax: +86 21 5230 0913 eric.rongley@bleum.com
Primary Purpose
The East China (Shanghai City) Chapter, part of the IAOP China Chapter, aims to build a body for vendors, customers and advisors operating in the China market that is both educational and social. The focus will be on shaping the future of outsourcing in China and on enhancing the professionalism of the industry in the China marketplace.
Executive Committee
The Executive Committee will comprise sub-committees to reflect different industries and associations and strategic partners, i.e. legal advisors, customers, etc.
Meeting Frequency
Frequency of meetings will be determined after the inaugural meeting, but Year 1 intention is for quarterly meetings.
Meeting Type
Meetings will be a mix of face to face and social, in office/meeting rooms as well as social venues.
Guest Speakers
Thought leaders and motivational speakers
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| Chairman’s Summary – April 12, 2007
The topic of the meeting was BPO in China and we had two speakers, one from the advisor side and one from the vendor side.
On the advisor side we heard from Vibhash Ranjan from Morgan Chambers. Vibhash gave a high level overview of the outsourcing industry, its critical success factors and reviewed the BPO landscape in China. Importantly, he found that the market in China is very nascent, with just a handful of players able to operate at the international level. One interesting take away though, was a large opportunity seen for servicing the China and Asia operations of multinationals from China. This could be a huge as-yet untapped market.
Following Vibhash’s industry overview we heard from one of China’s BPO success stories, ResourcePro. Matt Bruno, their CEO, discussed the motivations for setting up operations in China and how they service insurance customers in the US. With a more stable talent pool than India, it looks like China will grow in popularity as a BPO destination whether serving the local market, or the US and UK.
One other interesting take away was that of the 30 attendees at the meeting, eight reported being involved in BPO. This is clearly a growing trend in China. One attendee is also servicing the US market with local resources. They are providing graphics design work from China and have been experiencing strong growth. English language skills may be a challenge to doing BPO in China, but if one chooses the right service offering, language need not be an obstacle.
Chairman’s Summary – Inaugural Meeting – September 11, 2006
The inaugural meeting of the IAOP Shanghai Chapter was held on September 11th at the offices of Bleum Software Outsourcing. There was a great turnout with attendees traveling from as far as Hangzhou and Suzhou, over two hours by car. The guests were welcomed by China Chapter Chair, David Barrett, Partner Simmons & Simmons. The Shanghai Chapter Chair, Eric Rongley, Bleum CEO and Founder, then went on to explain the objectives of the Shanghai Chapter and the role that all attendees could play in shaping the future of the IAOP Shanghai Chapter and the outsourcing industry in China. This was followed by a short presentation by Michael F.Corbett, who highlighted current trends in the global outsourcing industry and detailed the wide range of services that the IAOP offers to all members.
The keynote speaker for the evening was Professor Ju, Executive Director of the Shanghai Informization Council. On behalf of the board of directors for both the Shanghai Software industry Association and the Software Business Union of Shanghai Professor Ju congratulated the Shanghai Chapter for launching its inaugural meeting. He outlined some of the initiatives that the Shanghai Government, in particular, is implementing to encourage the software outsourcing industry in Shanghai and to raise the overall level of professionalism.
Eric Rongley, Chair of the Shanghai Chapter, finished the session with a thought provoking presentation entitled “China – Overcoming the challenges.” He reflected on the challenges of outsourcing to China from the perspective of both customers and vendors. Eric then focused on the war for talent; a topic of interest for all MNC’s operating in the China market space and of particular import to those involved in software outsourcing. This led to a lively Q&A session and a well attended drinks networking event.
Prior to the inaugural meeting, a series of small group interviews were held with leading English and Chinese trade and news publications. Coverage about the IAOP and the role that China plays in the outsourcing industry appeared in China Daily and Shanghai Daily the following day. Further coverage is expected in longer lead time publications.
IAOP members wishing to attend the upcoming meeting please email Beryl Sorensen, Member Services Director, at beryl.sorensen@outsourcingprofessional.org.
If you are not as yet a member of IAOP and would like a guest pass for the meeting, please Request a Guest Pass. |
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