The Dilemma and Solution of Layoff in China

The Dilemma and Solution of Layoff in China(tutututututu)

An inevitable result from economic slowdown and enterprise reform.The slow economic growth is one of the most popular global hotspots nowadays, spreading over all kinds of forums.

In the recent 2016 Boao Forum for Asia, Premier of China, Li Keqiang mentioned several times of the challenges in the “new normality” of Chinese economy in his speech. “As the deep-seated structural problems have become more prominent, and the economy goes through transformation and upgrading, temporary problems have inevitably occurred.” Of course, challenges and opportunities coexist with each other. What comes with the domestic economic slowdown are the emergence and development of new technologies, industries and business models.

To deal with capacity restructuring and economic-focus shifting, enterprises need to come up with countermeasures promptly in accordance with the changing global and domestic economy, as well as their markets. A proactive enterprise will never wait until operational challenges or even deficit actually show up to make changes. Instead, it will catch any adverse sign and potential new business opportunity in the market, and accommodate strategies or business practices accordingly at once.

The fierce market competition no longer gives time for enterprises to reform slowly. Business leaders reform their current organization drastically in order to fit for future business need, which is the prevailing reasons for scaled labor relations adjustment, seldom resulted from previous deficit. This has become one of the major trends for adjusting labor relations.

A social and legal environment with contradictions

However, the adjustment based on the future variations seem to cause contradictions and conflicts against the layoff rules of existing labor laws. Also the employees, who have already been trapped in the depressed re-employment environment, find layoff decisions hard to accommodate and accept.

Legal dilemma, the same cases yet different trial results

One of the enterprises’ most common misconceptions is to exploit the Article 41 of the Labor Contract Law of the People’s Republic of China (hereinafter referred to as “Labor Contract Law”) upon any mass layoff; whereas most of the actual adjustment reason doesn’t comply with the stipulated “economic indicator” in the Law. Besides, some companies failed to follow the stipulated rules in selecting who should leave and who should stay, causing snowball errors that end up with chaos among labor unions and all employees.

The Item 3 of Article 40 of Labor Contract Law is another popular option. However, there are different trial results for whether the enterprise is allow to make labor adjustments for future development. This may be affected by different regions, various preconditions, and understandings of dissimilar judges. No matter which side wins, enterprises shall have the rights to adjust strategies for surviving in the changing market.

Mass incident is easy to break out, and quick to get aggravated.

The Dilemma and Solution of Layoff in China(待加图)

The current social environment seem to worsen the dilemma what enterprises have already experienced when seeking legal solutions. Employees’ “overly” consciousness of rights is the major issue for employers. Besides, people turn to focus on individual interests more under the economic slowdown, which comes along with depressed re-employment environment and fierce competition. The intervention of labor unions and lawyers always result in the employees’ misconception of laws. All these issues are magnified and spread significantly in the micro-revolution era of social media.

The sharp contrast of the following 2 pictures shows the dilemma that enterprises face

The Dilemma and Solution of Layoff in China(待加图)

When the abovementioned circumstances arise, enterprises usually face some practical challenges: How to achieve the goal of adjustment and reform without impairing labor relations? How to minimize the risk of labor disputes?

What makes enterprise leaders most puzzled is that, without adjustment and reform, the company would be out-competed in the market; With the adjustment and reform, a lot of risks will appear to hang up companies’ development, including legal disputes, mass incidents and arbitration/lawsuit, etc.

Enterprises are in urgent need of the instructions upon how to balance between management goals of adjustment or reform and labor relations in the current social and legal background, so that the abovementioned problems could be solved.

LABOURS solutions

The Dilemma and Solution of Layoff in China(待加图)

Classic triangular methodology of LABOURS scale adjustment ©

Wisely use the company’s autonomy in management

Comprehensive selection and flexible application of legal basis

Solutions of labor relations issues shall be performed based on facts and laws instead of subjective assumption or arbitrary execution. LABOURS suggests companies to maintain harmonious labor relations, achieving consensus agreement if possible. Labor relation adjustment is a complicated process involving society, government, enterprises (or affiliated enterprises), employees, labor unions, etc. LABOURS believes that using comprehensively specific laws and rules for cases of different issues, goals and stages, also known as “comprehensive utilization, stage-wise implementation” is the best solution. Nowadays, most of the companies, especially the foreign-invested ones, are performing labor adjustment in accordance with future development strategies, such as organizational restructuring, employee and position changing. The goal is to meet the conditions in the Article 36 of the Labor Contract Law with an assisting major legal basis as the breakpoint. On the one hand, settling by reaching agreement from employees could minimize any legal risk for the company. In the era of the “new normality”, where gap exists between enterprises’ objective adjustment and relevant laws or regulations, this is significantly important. On the other hand, the introduction of catch-all clause can prevent enterprises from being passively trapped in the legal dispute with employees regarding agreement of termination. Catch-all clause is one of the most important conditions to grant successful adjustment within a time limit.

Comprehensive investigation and rigorous plan

Initiate the advocacy of fairness, impartiality and openness

A full risk analysis and a comprehensive background investigation of employees’ information, adjustment reasons, and legacy issues , are the key of a rigorous plan for labor adjustment. Only an integral plan that comes from detailed preparation, and that combines solutions in compensation, implementation and communication, can ensure a stable layoff with lower cost. During a mass layoff, mass incidents can be easily triggered due to employees’ suspicion, speculation and rumors. Withholding information results in suspicions. Therefore, after a scientific, rational and unified plan being designed, we suggest all problems be handled in a fair, impartial and open manner. Showing the company’s standpoints and assisting employees in the appropriate fashion is the only way to maintain human-based management.

Inclusive communication in terms of law, reason or compassion

Achieve peaceful termination just like getting off work daily

Law is the foundation of communication. Enterprises shall deal with labor relation issues strictly according to relevant laws, the bottom line during all negotiation with employees. In the premise of law observance, compassion means the humanistic concern of corporate’s culture when solving problems. Enterprises shall recognize employees’ contribution, show understandings, pay attention to their feelings and provide emotional supports. Reason means the clear clarification of the situation and the reasons of adjustment. For unreasonable appeals, companies shall insist on convincing them with reasons. During the communication with employees, enterprises shall help them sort out pros and cons, persuading from the perspective of law, reason and compassion. The small employee groups shall be split up. Enterprises shall be a patient listener, yet controlling communication efficiency to comfort employees’ emotional agitation, therefore reducing the occurrence of mass incidents.

The LABOURS’s Scale Adjustment of Labor Relations Solution

The Scale Adjustment of Labor Relations Sollution is designed to help companies to deal with emergent separation problems in a legal, peaceful, efficient, respectful, and fair way. Guided by the company’s management goals, LABOURS helps enterprises and their internal/external stakeholders reach consensus to comply with management goals and strategic objectives. This can effectively prevents the unforeseen issues in labor relation management, since it combines comprehensive and flexible application of Chinese laws as well as inclusive communication in terms of law, reason and compassion. It provides companies with an extraordinary capability of project management and impartial, objective and result-oriented services. Over 20 years since its establishment, LABOURS has handled over hundreds of labor relation adjustment projects and one third of them are nationwide-scale projects that involved ten thousands of people. LABOURS’s business has covered 90% provinces, cities, autonomous regions and municipalities of China, with an average success rate over 98.8%.

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