Post transition get ready for inspections
As a parting gift, your GM or one his cronies may play informer for non-compliance. Worse, he may inform his pay-off buddy the well is drying up. Here are the big ones:
Labour contracts: If your contracts are not up to date, you can be subject to many penalties. Sometimes after 3 successive contracts, they enter an ‘open’ state, which makes termination and negotiation difficult. Check with your local labour lawyers. Great chinalawblog post here.
Get a handle on everyone on probation immediately and do a proper review before their contracts pass to permanent status. If you let these pass, you’ve just added considerable headache later.
There can be all kinds of hoops to jump through with finding alternate positions and GROSS violations before terminating someone. Incompetence is not necessarily strictly valid, especially if they’re off contract. You can assign a manager to janitor, so getting rid of her can be more annoying than long-term (it still can seem interminable to you). But what about the janitor?
On a practical level, many employees are ignorant or misinformed about their rights. They also are practical themselves unless you’ve turned it into a personal fight. It’s about the payout. But compliance is still necessary.
Overtime and pay: Hopefully you have an OT policy and actually pay it. There are however, strict OT caps at 36 hours/month. You may end up paying a penalty, and there’s no good way to avoid it. It’s really about planning to get into compliance in the future.
There’s also other issues such as the hot temperature subsidies that you must comply with. One note, don’t get suckered into paying it if you provide comfortable office conditions–it’s then about making employees happy, and convincing the local authorities of your exemption. (Good post on that here)
Software: Only a sucker or large corporation pays for software in China right? That’s certainly still the prevailing attitude. IT’s function is often not compliance but advanced piracy. Prepare for them to come calling. (article on Microsoft plans here) You probably have a relationship in the US or EU with these vendors. They can be a resource to help clear things up, but they’re also an avenue to come collect.
I advocate for compliance, but some advice for those who insist on doing it the China way: set aside funds and tally a ground-zero license requirement. Factor in a certain degree of back payments/penalties. They may go for as much as 22%/year/license plus penalties. You can usually negotiate, but if they decide to play hardball you can be in a tight spot if their relationships with the local business bureaus happen to be sufficient to lower the boom. Further, you need to demonstrate credible action: if you leave any hint in public that you’re knowingly trying to duck the fees, they can sniff it out and it can turn antagonistic fast.
Environmental & Regulatory compliance: If you emit or dispose of any hazardous waste or are subject to any specific regulations, get a jump on it. Make sure you follow rules stated in your internal manuals, particularly regarding safety. ISO can not be worth the paper it’s printed on, but if it’s valuable to your business, you should do a review. Product quality programs are probably most valuable to your operation and reputation.
Taxes: China can seem fanatical about collecting taxes with as much control and little efficiency as possible. (Article here on 发票 fapiao, or tax receipts.) However, if any money was being hidden, it may come out now, either from ‘anonymous sources’ or your own forensics. Just going to have to pay and fix it. This applies to import/export too.
These are some of the things that you may have to do by law. Next week I’d like to address what you may want to do because it’s just good leadership and how you right the ship.
Practical China 