Wednesday, October 21, 2009

Grappling with Relocation Issues in China

Recently one of our American clients was interested in hiring a Chinese national who lives in Beijing to be General Manager of its Guangzhou operation. They were surprised when our candidate (let’s call him Zhang San) explained he was reluctant to relocate because his “hukou” or family registration is in Beijing. Zhang explained that the “hukou” authorizes Chinese access to healthcare, education, housing and other benefits. Since his “hukou” is valid only in his birthplace, it means that he and his family are entitled to free benefits like education and healthcare only in Beijing.

Zhang San had two choices: he could move his family’s “hukou” from Beijing to Guangzhou. This takes a long time and is a bureaucratic nightmare. Also the “hukou” benefit package varies from municipality to municipality so Zhang risked losing some of his family’s benefits. In the event that our client later decided to relocate its head office from Guangzhou to, for example, Shanghai, Zhang San would have to go though the headaches of moving the “hukou” again.

Zhang’s second option was to request reimbursement from the hiring company for the lost benefits. He negotiated an education allowance for each child as well as health care insurance. This is how most multinational companies handle the “hukou” problem: they pay their way out of it with additional benefits or higher salaries.

These days, younger Chinese professionals have more “mobility-oriented” mindsets. They understand that relocation is a pre-requisite for management success in the private sector. Nevertheless the “hukou” system continues to inhibit internal mobility in China. We have even seen instances where a senior-level employee relocates with an employer but his/her family stays behind to take advantage of “hukou” benefits. While the Chinese government is looking at replacing “hukous” with simpler residence permits, the relocation issues in China probably will not be fixed for five years or more.

Salary Benchmarking: Finance Director/Controller Positions in Asia

1 comment:

Anonymous said...

Is it really that hard or was he just vying for a better package?
I had a new employee that yesterday applied for and received a Shanghai resident permit which took all of 2 hours and cost RMB 25. He can now receive the benefits paid to all our staff according to Chinese law.