Expanding a business globally is an exciting endeavor for any business owner. Understanding and navigating different countries, cultures, and work standards will be vital for success for any company expanding globally.
It is important companies properly navigate new countries, cultures, and expectations. This requires an understanding of local laws and regulations for each country especially in terms of the local labor laws which are necessary to protect not just your business’s best interests but also your employee’s best interests.
Each country has different laws and regulations that an expanding business need to comply with before they can begin hiring employees to work for them. Every country’s labor laws function in a unique way and it is crucial to have the right knowledge for every country you expand to.
The general rule in hiring employees in China is that they can only be hired by companies that are based in China. For multinational companies, they must have their own local entity in China to be able to hire locals in China. This rule applies even if you’re planning to hire only one employee. Additionally, in accordance with Chinese labor laws it is obligatory to have written employment contracts for most of the types of employment relationships. Once the employee is on board, the company must finalize the contract terms and deliver it to the employee after a lapse of not more than one month but less than one year. In case the employment contract is not delivered, the employee is entitled to twice her/his salary.
Before finalizing a contract for an employee, it is best to be aware of the benefits that apply to employees. According to Chinese labor laws, employees are not required to work more than 44 hours in a 5-day in China, namely: New Year’s Day, Chinese New Year (Spring Festival), QingMing Festival, Labor Day, Dragon Boat Festival, Mid-Autumn Festival, and National Day. For these holidays, employers are required to provide paid leave to the employees.
In addition to the holiday paid leaves, employees in China only start receiving vacation leave after a year of being employed in the company. Employees employed between one year but less than 10 years are entitled to 5 days of paid annual leave. Those who have been in the company for 10 years but less than 20 years have 10 days of annual leave while those who have at least 20 years have 15 days of annual leave. It is worth noting that most foreign employers may give 2-4 weeks of annual leave for employees with mid-level to senior executive experience/designation.
Taking the entire annual leave entitlement for each year can be required by the company or employer but for those who do not do this the employee is entitled to a 300% of the employee’s average daily pay for every unused leave. This is if the employee refuses to carry over the annual leave forward. Bonuses such as a 13th month pay or annual bonus are not required in China but it is practiced by most employers in China. For sales employees, employers usually replace the bonuses mentioned above for a commission plan.
Contracts play a big role in the employer-employee relationship in China. This is emphasized by the Chinese government and is a must to have a strong employment contract in place where all terms and conditions and the relationship of the employer and employee are clear to each party. The employment contract’s mandatory clauses include but are not limited to the employee’s compensation, benefits, and termination requirements.
The ins and outs of doing business are different in each country, and India is no exception. For example in countries such as China agreements are direct. To the contrary, negotiations in India can be dawdling. People, in general, are very patient and they avoid making rushed decisions. Hierarchy is followed strictly in India and companies make decisions in a top-down manner which can be one of the reasons why it takes some time before a negotiation can be completed. Most of the time they avoid saying “no” so it is important to take note of context, clues, and euphemisms that denote refusal and other messages.
Working hours in India should not exceed 48 hours per week or 9 hours per day but most companies average 40 hours per workweek and a standard workday of 8 hours. There are no set dates and days for public holiday leave in India because holidays vary in the 29 different states and seven union territories in the country. Additionally, it may also vary due to religion and local customs. However, in accordance with India’s labor laws employees receive 11–18 paid public holidays per year.
Paid holidays are generally covered by the employment contract. Paid vacation leave for employees in India usually ranges from 12 to 21 days per year. However, employees with higher ranks and other senior professionals may request more from their company.
Compared to other countries, the compensation package in India is more complicated and is usually referred to as Cost-to-Company (CTC). There are various types of allowances that employees negotiate with their employers because employees are highly concerned with their take-home pay. Employee compensation usually includes the basic salary, incentives or bonuses, conveyance allowance, rental allowance, medical allowance, leave travel allowance, vehicle allowance, telephone or mobile phone allowance, and other special allowances. Most of the allowances are non-taxable up to a certain amount and are taxable once it exceeds the stipulated amount by the government.
South Korea is one of the most developed countries in the East Asian region and has an established set of labor regulations and laws that are competitive and beneficial to the employees. The South Korean government highly encourages entrepreneurship and market competition. When it comes to decision making South Koreans tend to be collaborative which can make the process of getting a concrete answer slow. Just like many other Asian countries, image is very important in South Korea. It is an unspoken rule in Korean society to avoid criticizing others in public.
When it comes to working hours, South Korea is known to have one of the longest working hours in Asia. Having said that the Labor Standards Act (LSA) imposes a maximum of 40 hours working week and an 8-hour day. An employee may agree to an additional 12 hours a week in overtime and the employer may have to pay an additional 50% of ordinary wages for overtime. However, it is a must that employers allow at least one paid day off every week as stated under Korean labor laws. Most companies use Sunday as the paid weekly day off while professional employees tend to work a half-day on Saturdays. Like in India, regular employees are given 15 days of paid annual leave once they have reached one year of service in the company or business that they are working for. An employee with over three years of service is entitled to an additional day of paid leave for every two additional years of service following the first year, to a maximum of 25 days. (Article 60, LSA)
In South Korea, the public holidays are New Year’s Day, Lunar New Year’s Day, Independence Movement Day, Children’s Day, Buddha’s Birthday, Memorial Day, Independence Day, Harvest Moon Festival, National Foundation Day, and Christmas Day. Company policies usually treat these public holiday days as paid holidays, although they are not required to. The only required paid holiday is the 1st of May, the Labor Day holiday. Employees must receive 50% additional pay for working on this holiday.
Although the information given above is only a peek into the different rules and regulations that apply to three countries, it can give you a glimpse of common requirements and the differences between each country. There are more countries out there with a different set of rules, regulations, and ethics when it comes to employment so before you embark on expanding your business to a new country make sure you are equipped with the right information and knowledge.