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3 min read

The Top 5 Human Resource Challenges in China and How to Overcome Them

China’s fast-paced development is powered by its massive and diverse population. Both the working-age population and literacy rates are high, and many companies now are or are wanting to do business in China to get the most out of the country’s immense human resources.

However, for foreign companies, HR management in China can be a great challenge that makes it difficult to do business in the country. Not only is HR management a challenge now, but according to a study by the German Chamber of Commerce in China in partnership with Watson Wyatt, HR will also continuously remain an issue, even in the not-too-distant future.

china hr challenges
HR Challenges in China (http://www.eusmecentre.org.cn/article/hr-challenges-china)

Some of the top challenges that make hiring good quality staff in China a challenging process include:

Knowing Where to Find, and How to Attract Talent

According to a recent study, two out of every three foreign companies engaging business in China face the challenge of finding and attracting the right talent. This makes it one of the main challenges faced by HR professionals who recruit employees for their businesses in the country. China’s labor supply market lacks workers with high job performance skills that are imperative to working in a foreign firm. International firms are thus facing this problem and it becomes difficult for them to find a workforce with top-notch skills.

china talent shortage

Dealing with Staff Turnover and Retention

Another major challenge that employers face in China is the issue of staff retention in the long-run. While finding and attracting qualified workers in China is difficult, retaining them is even more problematic. According to a report conducted by the Chinese public sector, the average employee turnover rate for private companies in China was about 19%.

Strategies for Retaining Qualified Employees in China
Strategies for Retaining Qualified Employees in China

 

Some of the reasons why employees change jobs include: better career opportunities, better compensation packages, better training and development opportunities, improved benefits, and better prospects for success. Thus, it is a real challenge for HR to identify workers who will remain and be committed in the company genuinely.

Managing Increasing Labor Costs in China

The past decade has seen manufacturing wages for workers in China rise to nearly 12% annually. While this improves the standard of living, it has also negatively impacted foreign firms doing business in China. With the growth of the Chinese economy accelerating at breakneck speeds, manufacturing labor costs are mounting rapidly. ‘Made in China’ is no longer synonymous with ‘cheap’, and the result is that foreign companies now face increased production costs.

China Manufacturing Cost Compared to Mexico

Rising wage demands are also a burden to HR in China’s major cities, and it has been increasingly difficult for businesses to meet the workers’ skyrocketing salary expectations.  As more and more remote companies expand their commitment to China, and with an increased number of local Chinese establishments having the capability to pay higher incomes, competition for top talent will progressively become even more intense.

Addressing the Shortage of Qualifications

A research study by MGI suggests that on average, less than 10 percent of Chinese job candidates are suitable to work in a foreign company. Additionally, China’s fast-growing economy absorbs most of the talented and highly qualified candidates available, which leaves very little to none for multinational companies.

Talent Shortage in China

This has given rise to aggressive competition among foreign organizations trying to recruit employees with talent and advanced qualifications. What is more, international firms are forced to dig deeper into their pockets as they must offer better remuneration deals if they are to attract highly qualified employees.


Uncovering Fabricated Resumes

Because most local employees lack sufficient qualification and experience to work in international companies, some provide incorrect resume information in order to be hired. A recent study steered by Kroll shows that roughly 20% of job applicants have inconsistencies in their job bids. This is a huge obstacle that can result in HR departments failing to recruit successful workers or having to put in additional filtering efforts to find genuine candidates.

The HR challenges discussed above require the full attention of both the HR and top management departments for companies that want to expand their horizons in China. The truth is that only when an organization is capable of attracting and retaining skilled professionals will it be able to thrive and succeed in China.

For most foreign companies wanting to do business in China, it is becoming increasingly difficult to find people with the right talent and skills. Again, with today’s low joblessness rates, workforce planning is likely to continue to be a major HR concern, which calls for creative and advanced strategic planning.

Working with a Professional Employer Organization

For remote companies looking to expand their business operations in China, the good news is that they can work with a Professional Employer Organization (PEO). Businesses that partner with professional employer organizations are able to tap into the Chinese labor market and are highly likely to attain and retain talented workers, which significantly reduces employee turnover according to the National Association of Professional Employer Organizations (NAPEO).

Professional HR Specialists for the Chinese Market

If your business is looking to obtain highly-qualified executive and management candidates, as well as to market your products and services in China, partnering with a China’s PEO or EOR will ensure you tap into the most qualified workforce. 

 

At RemotePad, Lech draws on his professional experience to write about employment taxes and payroll (both remote, and in-office). Lech holds a Bachelors’ degree from the University of Kent, a Master of Arts (MA) from Kings College London, and professional payroll and tax qualifications. He has 20 years experience advising on all manner of tax and business planning matters.

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