As we have noted in many of our previous posts, doing business in China can be very lucrative. However, it is not the same as doing business in the United States and understanding the many factors that make it different is essential to being able to succeed.
As in nearly any standard business arrangement, creating a firm foundation through contracts is a necessary step. Agreements are necessary across the full spectrum of relationships. This includes vendors, franchisees or partners in manufacturing. Nor can the importance of employment contracts cannot be understated. To make it worth your while to engage in business in China, you need to be aware of nuances in contracting.
Be open-eyed about real costs
Back in the 1950s and 60s, the phrase “Made in Japan” was a joke. For a time, the target of the jibe shifted to Korea. Most recently, “Made in China” has taken the floor. The notion that goes along with the statement is that products made in China, if not shoddy, are definitely cheaper because of lower labor costs. But the reality, widely reported in the media, is that China’s burgeoning economy means the gap between here and there is significantly narrowing, especially for skilled workers.
So, what should your planning include if you want to get the most for your money when hiring in China. Here are some things you should know.
For skilled staff, you can expect to pay:
- A commensurate monthly salary
- Taxes in the form of “social insurance” which could be in the neighborhood of 45 percent
- A full extra month’s salary at every Chinese New Year
It is also important to be specific and detailed about the expectations of the job. What might be common practice in the U.S., such as washing your own coffee mug, might be seen as beneath some employees. Being clear in the contract best manages expectations and helps foster relationships.
Many consider Chinese law skewed in favor of workers. This should not be a surprise considering its Communist political structure. That does not mean there’s no place for commerce. To minimize potentially negative effects on business, work with experienced legal counsel.