Human Resource Considerations in China

When people think about the reasons they have left an organization or have not accepted an offer with a company, one of the key common factors is perhaps something one might not expect: development, or rather, the lack thereof. Compensation, while certainly important, is often not the deciding factor in the decision to work or stay somewhere.

The same need for development seems to be a growing emphasis as part of the recruiting efforts in China for many organizations. The rapidly rising economy in China has led domestic and foreign companies to often compete for the same pool of candidates. Job-hopping has become commonplace as the workforce’s desire for growth and improvement increases. The HR function of foreign companies in China cannot simply focus on recruitment, but in order to retain qualified talent, it must increasingly focus on training and career development for its employees. This is increasingly evident as the days of cheap labor in China are quickly coming to an end. According to a study by the Boston Consulting Group, in 2000, China’s average wage rate was about 36% of that in the United States. By the end of 2010, the average wage rate was about 48% of that in the U.S. The Boston Consulting Group estimates that this gap will further shrink to 69% by 2015.

To throw some more statistics at you, it is estimated that the average employee turnover rate for private-owned companies in China for 2010 was 18.5% (compared to 15% in the United States). Some of the major reasons for the turnover included better compensation packages, career opportunities, training and development opportunities, benefits, and prospects for success. Thus, as in the United States, the key to attracting and retaining qualified candidates in China must be multi-faceted when it comes to a foreign company’s success and cost-saving efforts. Many companies have begun embarking on this comprehensive approach by focusing on college recruitment programs, utilizing social professional networks, developing and actually providing on-boarding and continuous training to their employees, and placing more emphasis on career development and succession planning.

Human resources has developed into a strategic partner in most large companies in the United States. This is even more important when it comes to operating overseas when cultural and legal issues come into play. Human Resources cannot be simply viewed as an administrative function – hiring and firing, paying taxes and benefits, etc. As the workforce in China continues to emerge into a key contender in the global economy, so must the effort to recruit and retain continue to evolve for companies who seek to make the most of this workforce.