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HR: Something You Must Know about Layoffs in China
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After the ‘Gradual Model’ program of enhanced early retirement was put forward last year, IBM decided to reduce cost by laying people off. For cutting down USD 1 billion costs, IBM plans to get rid of 6000 to 8000 employees. Many companies consider layoffs as one of the most efficient methods to save themselves. However, have you considered the questions below before you did it? How will massive layoffs influence companies in both short and long-term, and how should a company handle the process to reduce the negative consequences to the lowest level? It is always a tough problem for HR departments. Therefore, a professional plan with logical steps and enough communication are necessary when you are going to let people go.

The first step of massive layoffs is to make sure you know the targets. Obviously, enterprises would like to cut down on employees who work ineffectively or have low KPI. Based on the Chinese law, however, employees cannot be fired under the following circumstances:

Employees who have occupational disease.

Female employees who are pregnant or in maternity leave.

People who are disabled from working for your company.

Employees who have worked in the company for more than 15 years and will retire in 5 years.

Quite a few enterprises do not actually really care about these rules and regulations, especially small and private companies. In this regard, it is necessary for employees to enhance their legal consciousness to protect their benefits.

The first step to be discussed is whether it is proper to give the sack to employees who bear heavy economic pressure. Let’s say if the employer knows that there is an 8 year old little girl going to primary school in the family. Besides paying off the mortgages for the apartment, unfortunately the parents of the employee are sick in the hospital. Wouldn’t it be of mercilessness of the boss to fire this employee at the moment? I would say it is much easier to pull the trigger between the two parties during the tough period. In fact, these people normally have strong motivation to work hard for the company. And most importantly, they may show more eager reactions than others when they face the issue of being laid off. Therefore, if the company insists on dismissing this kind of employee, the result is usually a big loss for both sides. As for the company, bad influence will be exerted if the company is not able to handle the layoff well. One of the negative influences is that the company might lose the trust of its employees once they find out that their colleagues have been dismissed without reasonable payment. Therefore, it is not smart for companies to fire employees who are suffering from a lot economic pressures or encounter emergencies. If it has to be done, the way the company does it and the related social welfare and benefits package must be proper.

The second step of the process is to inform employees who you have decided to lay off. This is a difficult step for most companies because it is a piece of bad news and no one feels good about telling it to employees. However, it is an essential aspect that lots of companies actually ignore. That will hurt your organisation very hard. Being honest with your staff is always a good way to build mutual understanding and trust. Announce the layoff news openly and clearly, but there is no need to publish the name list within the company.

Next step, as the emotional factor is important, it is better to ask their direct manager to talk with employees closely, because this makes it easier to find out what they really care about after they leave the company. The announcement must be fair and clear. For instance, there is a company which decides to dismiss some of its employees. The management department issues an announcement which says that in order to take good care of employees the company has decided to provide more time to some employees in order to make sure that they have enough time to spend with their families. Obviously, it is an absolutely terrible excuse. If employees feel that the company is cheating or attempting to fool them, the layoff process will be very tough, and may even cause some conflicts. Actually, fairness and sincerity are basic factors when the management personnel are communicating with employees. If a company considers this problem from a long term perspective, it must show respect to its employees. 

In addition, HR needs to cooperate with the management department to deal with payment issues and aftercare work. As it is stated in Chinese law that companies need to pay extra salary to employees who are dismissed. The payment function is (n+1)*monthly salary. Employees’ working years equal to n, which means that the company needs to pay a monthly salary for each year the employee worked there. Besides, the monthly salary is the average level of the monthly salary during the past year. These are the basic conditions to layoffs. However, a lot of companies would like to pay more than the standard rates to their downsized workers to reward their contribution. For example, Siemens paid their employees a (n+3)*monthly salary in 2012, and Dell paid as (n+3)*monthly salary too during the layoffs in Xiamen in 2009. The fact shows that added payment is helpful for companies to go through layoffs process smoothly.

Furthermore, career guidance is also useful for employees who have just lost jobs. Compared to the payment, most staff members care greatly about what they will do in the future. In this regard, employees will be grateful if the company  provides career guidance for them. In 2009, Hitachi cut down a number of employees. Most of them were worried about their future career. However, through the discussion of their management department, they decided to try their best to recommend these employees to others companies. In this way, instead of getting too many complaints, Hitachi’s employees felt very grateful for the careful consideration. It is a striking example to prove that layoffs can be managed in a peaceful and effective way. However, if your company really cannot afford higher payment and career guidance, a recommendation that explains the reason clearly would also be helpful.


In addition, psychologists are playing a more and more important role in a company, especially in the laying off process. Because of the high pressure in modern society, someone may be stressed out if he or she is dismissed. In this case, a psychologist is very necessary. The psychologist can talk with employees about their work burdens, what they worry about and what they care about most. Subsequently he can report these problems to the management department who should think carefully about how to solve these problems in a proper way.

Actually, some companies tend to use a third-party HR team help them to dismiss employees. Companies who choose this method avoid facing their employees directly. However, how can a company expect a third party HR team to take all the responsibility? If the leaving employee feels unsatisfied about the process, they will not complain to the HR team, but to the company itself. Organisations cannot push all responsibilities away by hiring third-party HR teams to help them with layoffs.

Many people see layoffs as a terrible experience, but it can bring benefits for companies if you treat it in right way. Actually, layoffs usually happen in times of economic crisis. Instead of only seeing the negative effects, it can be seen as an opportunity to enhance the company’s brand. It is a good time to demonstrate welfare, care and a sense of responsibility from your company. As we know, economic crises do not occur all of the time, so the benefits will return to companies and employees sooner or later. 

By Robert Parkinson, CEO and Founder of RMG Selection
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