Conventional wisdom has it that China is a land of plentiful labor. Millions of fresh university graduates and other hungry job seekers are eager to prove their hard-won language skills and know-how to multinational companies (MNCs) with operations in the country. Yet only a fraction of these legions of potential employees are actually qualified for the work MNCs need them to do.
In the past, online job boards such as Zhaopin and 51.com were the most popular channels for finding staff in China. But as job seekers have flooded these sites, experienced workers have become much harder to find online, forcing employers to diversify their recruitment channels.
Judy Chui, human resources manager for Sun Microsystems in China, said the company has had to change its approach.
“If you asked me three years ago, job sites actually were the major channel we used,” she said. “But recently, employee referrals and headhunters have become more and more critical because… more experienced people don’t want to waste their time posting on job sites.”
Yet, for other multinationals like Siemens, which hires some 5,000 employees a year to fill a diverse range of positions, job boards remain an important means of recruitment.
Marcelo Ballario, head of HR competence recruiting for Siemens in China, said that his company uses a lot of “niche” and specialized job boards, as well as employee referrals and headhunting firms, to find specific talent.
The revolving door
But finding local staff is only half the challenge for foreign companies, which also must retain the employees they find. According to a study done by HR firm Hewitt Associates, between 2001 and 2005, the average voluntary turnover rate across China in all markets climbed from 8% to nearly 14%, by far the highest rate in Asia. The average in 2007 is hovering around 15%, with high-tech sector employees the most restless.
This “creeping” turnover, as Zhang Wei, managing director of executive remuneration in Asia for HR consultancy Mercer calls it, is happening for a combination of reasons. Higher demand for skilled professionals, increased competition among corporations and a growing sense of mobility among young workers all factor in.
“The data is really about the career aspirations of the younger generation,” Zhang said. “When the economy moves fast, you have different expectations of what you can achieve in a short period of time.”
Take, for example, 24 year-old Cui Ying who spent two years at a computer design company in Beijing. Feeling her boss “didn’t care about staff” and that her salary was too low, she did what few in her parents’ generation ever considered: She quit and looked for something better
And while salary still plays a big part in attracting new employees like Cui, money alone is no longer enough.
Offering enhanced benefits packages is quickly becoming the industry standard for both recruitment and retention. A recent study by Mercer found that 88% of companies surveyed have begun implementing benefits programs, ranging from health and medical care to transportation and housing allowances.
In addition, a whopping 95% of companies said they are considering upgrading their existing packages in the next three years, fearing their employees would seek better benefits elsewhere.
New plans for the old
The main focus of these changes will be developing pension plans, which are now only offered by 39% of the companies surveyed. Pension plans have been slow to catch on in part because Chinese employees already pay into mandatory social security funds and are less than enthusiastic about any further burdens on their paychecks.
But Mercer’s Zhang said these government plans only cover about 10% of a worker’s pre-retirement income, hardly an adequate return for a lifetime of labor.
So instead, enterprise annuities (EAs), a voluntary “defined contribution” scheme where employers and employees invest a capped amount of money into a retirement fund, are gaining popularity. EAs are currently the only government-sanctioned supplement to existing social security plans available in China.
“EA regulations were issued three years ago,” said Zhang “and a lot of infrastructure has been built since then, so probably now is the time companies are thinking of using it to provide additional benefits and add motivation for their employees.”
Yet to date, the EA program hasn’t reached its full potential, some say, because key tax legislation hasn’t been passed. Currently, employers pay into the pension system before tax, but employees have to pay out of their post-tax paychecks, a major deterrent when the average monthly wage is only US$400 and many make much less.
New laws are in the pipeline to get EA on track, but some companies aren’t waiting around.
Siemens’s Ballario said that although the company already offers an EA pension plan, most employees haven’t volunteered many payments given the tax incentive arrangement.
Instead, the company is launching another set of benefits packages that go beyond pensions known as Flex benefits. As the name suggests, Flex allows employees to choose from a basket of benefits and decide which ones they want to pay for. Therefore, a fresh college graduate, for example, could choose to receive a housing or transportation allowance instead of a less relevant service.
Companies in the US and Europe have employed Flex for a while because they become elligible for tax breaks if they offer services like medical insurance and child care.
Ballario said Siemens will be one of the first companies in China to offer its employees Flex plans when it launches its program on January 1.
“There is a lot of interest from other companies in the market to see what we are doing [with Flex] and how we are implementing it,” he said.
The employees of those companies, to be sure, will be watching as well.