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There's Good News, Bad News for Employers in China's Planned Labor Law

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We blogged recently about how rising wages in India and China will likely make it more expensive to do business in those countries, possibly leading companies to evaluate other offshore alternatives.

 

Now comes news that China will soonintroduce a new labor law that "aims to empower employees," according to coverage on SiliconValley.com.

 

The law would boost the profile of unions in the workplace, requiring them to be consulted on businesses' restructuring plans, among other things. Employers would also be required to offer severance pay to Chinese workers if they choose not to renew employment contracts.

 

While the law will drive up costs for companies operating in China in the short term, it also should have the welcome effect of reducing turnover -- which the article says averages 20 percent to 25 percent for tech companies in Shanghai and Beijing -- and thus ultimately lowering or at least stabilizing labor costs.

 

Employee attrition rates have risen steeply at firms in India, and are beginning to do so in China as well.

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