Terminating China Employees? The Labor Union Can Help

Terminating China Employees? The Labor Union Can Help.

For many companies adjusting to the new normal in the global economy China no longer makes sense. Tough competition among consumer goods and high wage demands from Chinese employees are putting pressure on these companies’ profitability. Many executives are looking to South East Asia to provide manufacturing solutions previously found in China.

In this context, our firm is seeing quite a few company closures, and the inevitable employee terminations which come along with that. When we explain the relevant China laws to a client, their first instinct is to pay each worker to the minimum legally required severance compensation and to be quick about it.

This is almost always a bad idea. Unless your China company has less than 10 employees, paying the legal minimum severance compensation is very likely to result in problems for your operation. We have seen cases of protests, blockade of facilities, property damage, kidnapping and more.

Chinese law requires consultation with local labor authorities, including the Labor Bureau and the Labor Union. These authorities help provide a vital gauge of employee expectations on termination in the area, and will guide your company as to acceptable practice in the area. The Labor Union can also work as a trusted intermediary which can act to bring angry workers back from the brink, and to help your company avoid mass protests.

Employees may demand double the minimum required severance payment or threaten your company with disruption. Unless your company is prepared to give in to those demands, you need a well thought out plan designed to management expectations and avoid unrest. An experienced China Lawyer who has worked on mass terminations in the past is a vital resource during this process.

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