Collective Bargaining


 

Possible Developments 

Employee strikes in Guangdong in recent months have restarted the agenda of the Chinese government to promote the adoption of collective bargaining. These strikes have mainly affected foreign-owned companies.
(By way of definition, we have collective bargaining when the trade union representatives of a company negotiate, with the employer, minimum wages and other employment terms for all the employees of the company in question).

One of the reasons for the government’s promoting a more widespread adoption of collective bargaining is to provide a regulatory framework for conflicts between companies and employees and, as a result, prevent strike actions. 

The adoption of collective bargaining has important consequences for foreign-invested companies in China. Some of these are as follows:

1) The establishment of trade union organizations (associated with the All-China Federation of Trade Unions – ACFTU) at the company level. The current regulatory framework already provides that employees have the right to establish trade union organizations at the company level. However, the implementation of this legislation has not always been very strict.

2) The adoption of collective bargaining will (paradoxically) acknowledge the role of the employee strike. In fact, in western countries, strike action is fairly often threatened – and sometimes carried out – during the negotiation of collective agreements.

3) The increased importance of trade unions within a company. It should be noted, however, that workers do not always agree to be represented by trade union officials associated with the ACFTU. They often elect new representatives to negotiate collective agreements with the company.

4) Increased costs. It is very likely that there will be more pressure on companies to increase minimum wages. In addition, as soon as trade union organizations at the company level are established, the company must make a monthly contribution to the trade union. This will be an amount equal to 2% of the total (gross) monthly wages of its employees.

What to do during this transition period

1) Stay up-to-date with the new regulations, at the national and local levels, on collective bargaining. The new legislation will likely introduce new obligations and burdens for businesses.

2) Get to know how the employees are organized. The recent strikes in Guangdong suggest that employees are rather distrustful of the official trade unions (which, at times, are regarded as closer to the employers’ than to the workers’ interests). The workers may prefer to directly elect their own representatives for contract negotiations with the company. Therefore, it may be helpful to know the structure of the labor force (places of origin, groups, or leaders – also known as “gongtou” (工头) or “laoda” (老大) to identify early on potential counterparts for negotiations.

3) Get to know the competent officers at the relevant local authorities because they will certainly be involved in cases of negotiations of collective agreements.

4) Do not think of collective bargaining as a mere formality aimed at implementing the minimum wages setout by the local government. The workers’ request for collective bargaining usually indicates their intention to obtain minimum wages higher than those indicated by the local government.

5) Adopt an internal code of conduct, a corporate best practice, on how to handle the negotiation of collective agreements and, if necessary, strike actions within the company.

Posted by Carlo Geremia (carlo.geremia@nctm.it)

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