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Coping with the Mainland's New Labour Law
By: HK Trader

While the current financial crisis is bad enough for Hong Kong-based small and medium-sized enterprises (SMEs), a larger challenge is the Chinese mainland's new labour law and the implications it has for those doing business in the mainland.

"Most companies are concerned about the new labour law, because it brings more labour costs and risk to the employer," said May Bai, Human Resources head for the JLJ Group in Shanghai, a consulting firm that specialises in helping foreign firms set up shop in the mainland.

Arbitration cases are three times higher than they were before the law was implemented, according to Ms Bai, because employees are now more aware of the labour contract law, and they know how to protect themselves. She added that employers are now more willing to spend money on drafting an employee handbook that each employee must read, agree to and sign. If even one clause is violated, the employee can be fired legally.

Outsourcing Risk

Other responses to the new labour law include outsourcing human resource functions, or "talent dispatching." A human resource specialist company hires the employees, then outsources them on contract to a manufacturer.

"This way they can actually outsource the risk," Ms Bai said. "The HR company is the actual employer and takes on the risk. A lot of SMEs are choosing this option."

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