Several executives from multinational firms in Beijing were discussing labour costs, recently, when talk turned to the mainland's proposed new labour law. The draft law, released in March, is meant to provide more protection for workers. But it has raised two chief concerns among foreign employers, according to comments by major chambers of commerce on the mainland and the US-China Business Council. Those worries centre on the proposed, stricter contractual obligations that firms would have to make to employees, and the role of trade unions.
Are the executives' concerns warranted? If so, how should they prepare for any changes that could alter the bargaining positions between employers and employees?
In my view, a lot of flexibility will remain in drawing up employee contracts. But it seems that trade unions will become a fact of life of doing business on the mainland.
Multinationals are concerned about proposed rules that could increase employers' administration costs. These include shorter probationary periods and a cap on damages payable for violating a 'non-compete' clause. That's an agreement in which employees agree not to work for competitor companies - or to form new, competitor companies - within a set period after leaving the firm.
These possible changes, however, need not drive multinationals into the overpriced arms of corporate lawyers in self-defence: they do not read like absolute state diktats. More importantly, the massive surplus of workers means the government is unlikely to implement vigorously any policies that would worsen unemployment.
In contrast, draft rules on trade unions should not be ignored so quickly. A stronger role for labour unions goes with the current leadership's motto of 'putting people first' - and its goal of redressing the ever-growing wealth gap.