Expanding a business all across the globe is always the bigger goal of every business owner. It is a goal that many want to achieve but most of them doubt if they can actually take the challenge. For starters, it is not easy to expand a business from one country to another as there are many factors that need to be considered before it can be done. It is no easy feat so to speak. In expanding a business to another country, it is not just about hiring locals and getting them to operate the business by completing regular tasks for your company.
It is about navigating countries, cultures and expectations too. It requires understanding of the laws and regulations that apply to 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 a start-up company or expanding businesses need to comply before they can begin hiring employees to work for them. Every country’s labor laws function in a variety of ways and it is crucial to have the right knowledge about it for every country you would choose to expand your business in.
We have listed a few countries outlining basic information about the employment and labor regulations that apply to each of them.
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 just planning to hire one employee. Additionally, in accordance to Chinese labor laws it is obligatory to have written employment contracts for most of the types of employment relationship. Once the employee is onboard, 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 work-week, where employees work 8 hours a day. It is important to note the 7 public holidays that China has, 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 leaves after a year of being employed in the company. For 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 is 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 it is must to write a strong employment contract where all the terms and conditions and of the relationship of the employer and employee is spelled out in black and white. The employment contract’s mandatory clauses include but are not limited to the employee’s compensation, benefits and termination requirements.
Unlike China, doing business in India works differently. In China, all agreements are printed in black and white and doing business is direct to the point with no room for second guesses. In 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 considered as 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 for most companies they only average of 40 hours per work week and a standard work day of 8 hours. There are no set dates and days for public holiday leaves 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 custom. However, in accordance to India’s labor laws employees receive 11–18 paid public holiday leaves. It is up to the employee to use the public holiday leaves as they see fit.
The entitlement for paid holiday is generally covered by the employment contract. The threshold for paid vacation leave for employees in India usually ranges from 12 to 21 days’ per year and it is usually what most companies follow. However, employees with higher ranks and other senior professionals may request more from their company.
Compared to China, the compensation package in India is more complicated; it 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, house rent allowance, medical allowance, leave travel allowance of concession, 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.
Being one the most developed country in the East Asian region one can expect that the government of South Korea has a set of labor regulations and laws that are competitive and beneficial to the employees. Their government highly encourages entrepreneurship and market competition. When it comes to decision making South Koreans tend to be collaborative making the process slow and this requires patience. 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 the Korean labor laws. Most companies use Sunday as the paid weekly day off while professional employees tend to work a half-day on Saturdays. Just 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)
When it comes public holiday leaves, as per Korean law it is only the 1st of May or the Labor Day Holiday wherein the employer is required to give a paid holiday to the employees. Employees must receive 50% additional pay for working on a holiday, including public holidays. Aside from this there are 10 other public holidays in Korea, namely 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. But the employer isn’t required to treat them as paid holidays. However, company policies usually treat these public holidays days as paid holidays.
Although the information given above is only a gist of the different rules and regulations that apply to each country, it can give you a glimpse on what are the common things and 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 venture in a different country make sure you are equipped with the right information and knowledge as well as have consulted the right people to help you reach your goals.