Expat Taxes, Labor Unions Are Targets of New China Regulations -

McDonald’s Chief People Officer and a senior labor lawyer discussed labor unions, new tax rules and compensation issues at a seminar that DHR International sponsored in December in Shanghai. The seminar, which highlighted recent changes in China human resources laws and their applications, was attended by corporate human resources executives interested in finding out how the changes affect multinational corporations.

 Kevin Jones, Counsel at DLA Piper, highlighted recent changes that affect foreign-owned companies.

• Unions: New regulations in China promote unionization at foreign invested enterprises (FIEs). While previous unionization campaigns targeted Fortune 500 companies, the focus is now moving to small and medium sized FIEs. Measures supporting the establishment of unions include possible counter-measures against non-cooperative companies, such as negative comments to media, lobbying local government authorities to impose sanctions and initiating regulatory-related audits. The regulations also call for funding labor unions from company payrolls even if the company is not unionized.
• New Tax Rules crack down on expatriates receiving China sourced income paid by offshore entities. The individual income tax rules strengthen oversight and documentation requirements for high-income earners particularly with respect to benefits, expenses and tax-exempted income.
• Stock Options: Another area receiving recent attention is stock option awards for PRC Nationals. Currently in order to award stock options, the employer must set up the stock option plan with a Domestic Agent, Asset Manager and Custodian Bank. The plan must also be registered with the State Administration of Foreign Reserves. This area is continuing to evolve with the establishment of new administrative precedents.

Lynn Tan, Vice President and Chief People Officer at McDonalds Corporation described how the world’s largest fast food chain copes with large-scale hiring in China. McDonalds has lower-than-average turnover in China. Ms. Tan, who herself began as a server in a McDonalds, believes this is because of the clearly-articulated career path and promotion opportunities that the organization offers each employee. The company also surveyed employees to design the most attractive incentive compensation program for China. It found cash awards attract and retain employees better than longer-term incentives.
For additional information about Kevin Jones’ presentation, please contact me.

Salary Benchmarking: Supply Chain Executives in Asia

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