Reward System: The End of the Iron Rice Bowl

Iron Rice Bowl (1949-1978)- Communism “provided”

1978: Rules changed to allow bonus systems and rewards for amount and difficulty of work done

1986: New regulation makes it possible to fire workers more incentive to work harder

Today: Iron Rice Bowl System dying out but still seen in many state-owned enterprises

Compensation • Unions do not concern themselves with collective bargaining

• Workers often belong to a unit or work group, and their pay and benefits are governed by policies set for the unit

China’s talent market paradox

Compensation packages have risen sharply to retain employees

High inflation and demand for workers have driven up wages

Compensation Levels

•Compensation standards can vary significantly: •City? •State-owned enterprise?• Foreign invested enterprise? •Expatriates?

•Expatriates= 2,000% to 4,000% of the cost of a local counterpart

Compensation Levels: Variance

Experience Annual Average Salary

Employee 1 Five years of accounting experience at a SOE

$6,000

Employee 2 Same as above, but with experience at a FIE instead of an SOE

$12,000 -

$24,000

Employee 3 Same as above, but with fluent English

$50,000 -

$60,000

Reward System: Benefits

Paid Annual Vacation Days- Service of 1-10 years= 5 days leave- Service of 10-20 years= 10 days leave- Service of 20 years= 15 days leave

Six months' sick leave at 60% to 100% of salary

Maternity leave at full pay is provided for up to 90 days

•Pension premiums and unemployment insurance

Reward System: Incentives

Stock options for retention purposes

Congratulations and condolence awards

Performance based bonuses have been enthusiastically welcomed by younger professionals

Unique Reward: Housing

Housing Boom Issue: Very expensive rental rates in cities •Employers are required to contribute 5% of an employee's salary to government-managed housing contribution funds

• Inefficient Housing Fund Many FIEs issue direct housing allowances

•Some larger companies building their own housing units:• sell or rent to their employees through regular payroll deductions

Reward System: Migrant Workers

Wages for unskilled Chinese workers have remained stagnant.

Abundant supply of migrants from inland China who have swarmed into citiessearching for jobs (18,000 people a day moving from rural to urban areas)

Issue of Increasing Compensation Disparity

Chinese Migrant Workers

China’s Minimum Wage

•China's first minimum wage law set in 2004

Eg. Guangdong Province increased its minimum wage in 2006:Range: ¥ 4.66 (~US$ 0.68) to ¥ 2.69 (~US$ 0.39) an hour

Minimum wages have been raised in the last few years, but many enterprises still do not pay minimum wage lack of

enforcement

Wage Issues: Migrant Workers

Low-skill wages have increased in the last few years, but barely keep up with high rate of inflation

Problem: wages are not paid for months, and many do not get the full sum

Housing Migrant Workers

•Factories in China often provide employees with meals and lodging•Migrant workers, whose homes are too far away to commute, live in shared dorms•Largest factories- 200,000 worker residents

Worker Dormitory-Shenzen

Employees eating dinner at a Chinese toy factory