Understanding the Chinese overtime dilemma

From time to time, we hear some version of the following story. Maybe you do, too.

With the best corporate social responsibility (CSR) intentions, an OEM tells its Chinese contract manufacturer to limit workers' overtime to the amount prescribed under law. Then many of the workers quit and go to another manufacturer that doesn't follow the law.

Electronics manufacturers and others face the dilemma of breaking the law to offer as much overtime as possible to workers, or complying and losing workers to employers who don't play by the rule. Chinese labor law stipulates that workers cannot work more than 36 hours of overtime in a month, but does not enforce the rule, and workers want as much overtime as they can get.

We hear the stories, but rarely see any documentation of the problem. So shame on us for not noticing sooner: A study group from the Foreign Investment Advisory Service of the World Bank and Business for Social Responsibility, with financial support from various organizations, including the Electronics Industry Code of Conduct group, recently CSR, including the overtime problem, in Shenzhen Province's electronics sector and published its finding last summer.

Entitled "Corporate Social Responsibility in China's Information and Communications Technology (ICT) Sector," the report examines CSR issues based on interviews with several EMS companies, including Celestica, Flextronics and Foxconn, and several OEMs, including Hewlett Packard, Motorola, Nokia, and Philips.

Here's a sample of its findings, from section 2.2.7, "Complexity of the overtime issue:"

"Since employee retention is a major challenge in Shenzhen, factories are extremely concerned with losing workers due to insufficient overtime. Among the suppliers interviewed, turnover ranged from 3% to 20% per month. Many suppliers felt that workers demanded at least 60-80 hours of overtime per month, and that overtime only became unwelcome above 100 hours per month."

No single electronics company can begin to resolve the gap between law and reality. The existing law may be too restrictive, but there is likely an appropriate level of overtime that all parties--the industry, the Chinese government, and the workers - could agree to if they were to negotiate, which the study group recommends.

CSR is important to electronics companies, so it is time for all parties to get together and iron out a resolution, one the Chinese government will enforce. The report recommends stiff fines for companies that break the law and incentives for those that abide by it.

What's your experience with the Chinese overtime dilemma?

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