Reward System  Communist Iron Rice Bowl ( )- workers assigned to jobs; workers had fixed wages and no rewards for how hard they worked; guaranteed lifetime employment; gov’t provided housing and clothes  1978: rules changed to allow bonus systems and rewards for amount and difficulty of work done  1986: new regulation makes it possible to fire workers  more incentive to work harder  Today: Iron Rice Bowl System dying out but still seen in many state-owned enterprises

Reward System  China’s talent market paradox: companies in a country with more than 1.3 billion people suffer staff shortages  Compensation packages have risen sharply in China over the last few years to reduce risk of losing top performers  High inflation and demand for workers have driven up wages  Unions do not concern themselves with collective bargaining  Workers often belong to a unit, or work group, and their pay and benefits are governed by policies set for the unit

Reward System Compensation standards can vary significantly  City? State-owned enterprise? Foreign invested enterprise? Expatriates? E.g.: Accounting exec in Shanghai: Employee 1: Five years of accounting experience at a SOE: Salary: $6,000 Employee 2: Same as above, but with experience at a FIE instead of an SOE: Salary: $12,000 - $24,000 Employee 3: Same as above, but with fluent English: Salary: $50,000 - $60,000 Many companies send employees to China as expatriates, the cost of these expatriates sometimes equals 2,000% to 4,000% of the cost of a local counterpart.

Reward System  Paid Annual Vacation Days - Service of 1-10 years= 5 days leave - Service of years= 10 days leave - Service of 20 years= 15 days leave  Workers may receive six months' sick leave at 60% to 100% of salary  Maternity leave at full pay is provided for up to 90 days.  Monthly pension premiums are 8% of each employee’s salary contributed by the employee, and at least 10% (varying by city) contributed by the employer. Monthly unemployment insurance premiums are 1% of salary from the employee and 2% from the employer.

Reward System  In retaining key employees, stock options have become much more common recently. Introduced in many private and even state-owned companies.  Congratulations and condolence policies for long-service awards, employees’ marriages, employees’ birthdays, birth of children, and for death of employees’ family members  Annual bonuses of app. one month's salary traditionally are paid at Chinese Lunar New Year.  Performance based bonuses have emerged and have been enthusiastically welcomed by younger professionals.

Reward System Housing Boom Issue: Very expensive rental rates in cities In many Chinese cities, employers are required by law to contribute at least 5% of an employee's salary to government-managed housing contribution funds. In practice, many FIEs issue direct housing allowances rather than contributing to the less efficient government fund. Some larger companies are even building their own housing units, which they sell or rent to their employees through regular payroll deductions.

Reward System  While there is upward pressure on the compensation and benefits for managerial personnel and professionals, the wages for unskilled Chinese workers have remained stagnant.  Abundant supply of migrants from inland China who have swarmed into cities searching for jobs  Issue of Increasing Compensation Disparity Chinese Migrant Workers

Reward System China's first minimum wage law set in 2004 by the Ministry of Labour and Social Security. Provinces, municipalities and autonomous regions allowed to legislate own min. wage separate from the national one. Eg. Guangdong Province increased its minimum wage on 1 September 2006 and was split into five categories. The highest is ¥ 4.66 (~US$ 0.68) an hour. The lowest is ¥ 2.69 (~US$ 0.39) an hour.

Reward System  Wages have increased in the last few years, but barely keep up with high rate of inflation  Minimum wages were raised in the last few years, but many enterprises do not pay minimum wage  A big problem is non-payment of wages  considered the norm in some sectors. Often wages are not paid for months, and many do not get the full sum.

Reward System Factories in China often provide employees with meals and lodging. Migrant workers, whose homes are too far away to commute, live in shared dorms Largest factories- 200,000 worker residents Worker Dormitory-Shenzen Employees eating dinner at a Chinese toy factory