China Consults on Labour Laws to Avoid Huawei Resignation Scandal

China's Legislative Affairs Office of the State Council has published the draft of implementation regulations for the labour contract law - and is seeking public opinions. The law is controversial as it offers contracts with no fixed termination dates to employees with over ten years service with the company. The result was that many companies asked/forced employees to take redundancy just before their ten-year term and then rehired them.

The most renowned of them was the "voluntary resignation" scheme by the Huawei Technologies - although the company strongly denied that the new law was the reason for its resignation project. Last November, some 7,000 employees of China's Huawei were encouraged to resign from the company - and get rehired almost immediately afterwards.

Currently, most Huawei staff are employed on contracts lasting between one and three years. Under the new law, long term staff would become effectively permanent and harder (but not impossible) to dismiss in the future where necessary.

Huawei for its part said at the time that the move was nothing to do with the new law, and simply an adjustment in its human resources departments. The company said that early employees when the company was still young are one more generous pay and compensation packages than later employees and that this is causing resentment within the staff. The long serving staff would be reemployed on contracts similar to current terms - in exchange for a compensation package when they resign. The cost of the compensation package has been reported at around US$135 million.

The official news agency, Xinhua reported that the draft for the new law, stipulates that under circumstances including employee's incompetence to live up to job requirements during the trial use period, serious violation of regulations and duty dereliction, the employers could terminate labor contract with no fixed termination dates.

The draft stipulates that the employers should double the amount of compensation if they terminate the contract at their own will.

In related news, the China Business News is reporting that Huawei is offering bounties of 500 yuan to each employee who refers a friend/relative for a job with the company and where that person is then hired. The company is reported to be having difficulty hiring skilled workers to fill middle-management positions. The move is not unusual as reports suggest many companies are having difficulty hiring staff with the correct skills - causing a surge in wage inflation.

A Huawei employee cited in the report said out of over 200 applicants who came for job interviews, only a few were qualified. "Our company wants to recruit those with working experience on top of a master's degree or at least a bachelor's degree," he said.

Posted to the site on 9th May 2008