By Cho Jin-seo
Staff Reporter
An alarm is ringing for Korean firms operating in China after Beijing passed a stronger labor law aimed at protecting workers' right last week.
When the new law goes into effect in January 2008, it will reduce labor flexibility and increase operational risks for Korean firms while improving the basic rights of local workers, experts say.
The impact is expected to be heavier on small independent firms that account for 98 percent of Korean businesses operating in China, while conglomerates and other big firms are better prepared for the change.
``The Chinese government has passed the Contract Labor Law that has a heavy focus on workers' rights. There is a high possibility that labor costs will go up for foreign firms,'' said Kim Kyung-yong, a senior manager of the Asian team at the Korea International Trade Association (KITA), an interest group representing some 65,000 companies. ``Firms have to cope with the changes while they still have the time to do so.''
Kim said KITA has invited a Korean lawyer based in Beijing to give a presentation on the new labor law today in Seoul. More than 250 firms have enrolled for the conference despite the short notice, he said.
The new law passed the Chinese legislature with strong support from the public after a series of reports were published on poor working conditions and compensation at workplaces. Most foreign firms have welcomed the law, at least on the surface.
The law has some provisions that can be considered too rigid to the eyes of Korean employers, who generally anticipate lower wages and less stringent labor regulations in China than here.
For example, the law will ensure people who have worked more than 15 years or ones within five years of retirement will not be fired in any eventuality. Also, interns and other probationary workers must be paid more than 80 percent of regular wages.
Workers can get a lifetime contract from their employers when they complete two short-term contracts. It also gives greater power to labor unions for collective bargaining and the implementation of new employment regulations.
Major companies such as Samsung, Hynix, and Doosan said they aren't worried about the law as they carefully monitored its formulation and expected the result.
LG Electronics said it recently reduced its Chinese workforce by 10 percent by not signing new contracts with some of its workers. Such actions could be ruled illegal from next year, an official of the Korea Trade-Investment Promotion Agency, which supports Korean firms operating in overseas countries, said.
``It seems that LG cut incompetent workers before the law was changed. There was no problem with that then,'' the official said. ``We think that many big foreign firms will follow LG's suit to square up their organizations within this year.''
Some others said they are in a more relaxed mood.
``We have been very cautious in dealing with the labor issue because we are foreign capital,'' said a spokesperson at Doosan Infracore, which operates a large construction equipment factory in Yentai. ``We allowed workers to set up a union when we first came to China 10 years ago. We only have to keep operating as we have done so far.''
``We have consulted over the matter with our Chinese subsidiary and it said there were no worries as it has always followed the Chinese government's instructions,'' said a spokesman at Samsung Group headquarters in Seoul.
indizio@koreatimes.co.kr
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