For Club China, recruitment expert Floor Nobels discusses persistent misunderstandings about work in China and with the Chinese. This time, the topic is the cost of labour. The big question in this second of four blog posts: ‘Is cheap labour still around?’ Floor: “As always, quality comes at a price.”
If your business in China needs the expertise of local professionals, be aware that low wages for office workers are definitely a thing of the past. If someone knows his business and is well-educated, his or her salary should reflect these competences. Since the freelance market is not well-developed in China, you should be prepared to hire people, as an employee. With all legal security benefits that comes with being employed by you, the employer. If you don’t want the administrative hassle: China is a mature market and payroll companies can take the burden from you.
Spend more on salaries
Adding these two things together, most newbie employers from the west need to spend more on salaries and benefits for office workers than they had imagined before coming to China. The level of pay in first tier cities is almost the same for senior professionals as in many European countries and you also need to pay for unemployment funds, disability insurance, medical insurance, maternity leave, pension, housing fund et cetera.
Labour cost has gone up over the years; between 2000 and 2010, salaries have quadrupled. To add to that, employees expect salaries to be adjusted annually to the +8 percent inflation. Also, middle class workers in China live in the fastest growing consumer market in the world. There need money for good education, health care, transportation, parents that need their support and many other things.
Compensated for housing cost
In many cases, employees expect to be compensated for their housing cost. Many employers put a lot of effort in finding group housing for their employees – possibly in a simple apartment or a dormitory. The more effort you make, the higher the appreciation among employees. The same goes for bonuses: as an employer, there is no obligation to offer a bonus at the end of a good business year or just before Chinese New Year, but it does serve a very important purpose: it helps the retention of employees in which you have invested time, education and money.
This is important as many Chinese employees are aware of their market value and are prepared to leave for a slightly higher pay check. Job hopping is quite normal – a survey showed that only 40 percent of Chinese millennials is prepared to work longer than two years for one employer! Some employees wait for the annual bonus and will leave soon after that. To deal with that, I advise my customers to spread showing their appreciation over the year, and hand out a portion of the bonus every quarter. Every Chinese worker is hoping to make his salary jump with the next job switch – and if that does not happen, small steps will do.
Attract workers more easily
If your business is in one of the sexy industries, you will be able to attract workers more easily. In China, working in virtual reality companies, or in fintech, online marketing and quality management is regarded as very attractive – people are willing to accept less pay to work for you. In every other industry, there are ways to make your company and the jobs you offer super attractive. Offering greater responsibilities will work well, as well as offering education and training. Throw in some international travel, it allows your workers to put ‘international work experience their resume. The same applies for the opportunity to work with an international manager.
To conclude: cheap Chinese labour still exists in blue collar jobs, but a skilled office worker gets a decent salary. If you want to cut cost in this area, be prepared to invest in training – if you want quality and work experience, pay up! If you are unsure about salary and benefits, find and expert. I am always happy to get newcomers started. If you are a complete novice and need support in all areas of doing business, try 1421 Consulting.
One last piece of advice for employers: if you are going to negotiate in English with candidates about the job offer, make the salary offer clear and put the gross and nett figures in writing. Many Chinese find it hard to get a clear view of the numbers that apply to their situation.
Worklife Recruitment China中国, proud member of Club China, specializes in recruiting Chinese staff for Western multinationals and medium sized enterprises active in China. We recruit Chinese professionals who speak English at a decent business level. Our European/Chinese team is based in Shenzhen. With our online network, head hunting skills and social media marketing we cover Mainland China.