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Sep 22, 2011

The Ten Commandments of Labor Relations in Asia: Korea Legal Times by Sean Hayes

The following was published in the Korean language in the Legal Times' October 2011 edition.

Korea has one of the most capricious and least efficient labor forces in the world and China is catching up with Korea very fast. Vietnam, Cambodia, Laos, Malaysia, Indonesia and the Philippines will soon follow. The fault is on the employees, but on the employers.

Korean companies have departed for greener fields in China to discover that the fields are not as green as originally imagined. Many of these same companies, as we all know, have packed their bags and moved to the less developed Vietnam, Cambodia, Indonesia, Malaysia, Laos and the Philippines.

In all of these nations, one thing holds true, lawyers are needed, not only to mitigate the ubiquitous legal risks, but to structure a labor relations system that mitigates labor relation risks.

Because of the lack of this advice or more likely the lack of company management willing to hear this advice, Korean businesses have become some of the least favored companies to work for, for the more skilled employees in Asia. Even in Korea, foreign companies are increasingly becoming the favored choice of many of the most skilled employees.

The situation can change with the active involvement of lawyers with the knowledge and guts to push clients to heed this very simple advice.

All of my clients doing business overseas are, always, strongly advised to follow these Ten Labor Law Commandments otherwise they will likely need to move to another green pasture or face the costs of the legal system or the scorn of employees.

For example, one of my clients, recently, departed China to move his factory to Vietnam. The company left China because of an inability to find skilled workers. This Korean Company was blackballed by the local skilled employees, since a employee representative noted that they wished to work for a “kinder and gentler” employer.

I strongly told the Company that they will run into the same issues if the employer is not willing to consider employee relations as their number one risk. Luckily for the Company, the management is, now, heeding my advice. Much of this advice was developed over my decade in Asia working along with Tom Coyner a former human resources professional with a leading international software company.

Ten Commandments of Good Employee Relations
  1. Carefully Draft Employment Rules and an Employee Handbook. The form rules and handbooks being utilized by the majority of the smaller law firms are not adequate. These employment rules and the employee handbook should be drafted with the advice of a knowledgeable international attorney and a local Human Resources professional. The employment rules should be strictly followed and enforced. Always apply rules equally to all employees;
  2. Hold Monthly Meetings between Management and Employee Representatives. Be honest about issues in the company, the future vision for the Company’s Management and the hopes and wishes for the employees;
  3. Publish a Quarterly Newsletter. In the newsletter summarize the Management –Employee Representative Meetings, Job Training Programs, Available Positions, Promotions, Welfare Benefits, Requests to Employees, Personal Stories (Births and Marriages), Charitable Endeavors etc.. If possible, have a monthly newsletter;
  4. Separate Management Compensation from Union/Employee Collective Pay Increases. This helps to alleviate collusion between employees and management. Union/Employee pay increases should primarily be tied to inflation, while management should, primarily, be tied to job and company performance;
  5. Hire a Professional HR Manager. The HR manager should have a position equal to the Finance Manager. In addition, the HR Manager should be trained in HR and not merely moved from a different department of a company. The HR Manager is an essential role in the company and as such should receive the same pay, support and education as the Finance Manager;
  6. Build Good Relations with Labor Boards/Labor Relations Organizations. These organizations are a useful source of information, can assist with hiring and also assist with terminating an employee;
  7. Reward Workers with Token Gestures of Appreciation. A reward for Best Worker of the Month, Least Absence Days, Most Improved etc. goes a long way in building loyalty to the company;
  8. Make Concessions. Some of the concessions made can be utilized to show that the management respects the employees. Most strikes and labor disputes occur because of a breakdown in trust, not the simple lack of enough compensation. The breakdown in trust, usually, occurs because of the perceived lack of respect the employer has for the employee. The breakdown in trust leads to a breakdown in communication, which ultimately leads to labor disputes;
  9. Embrace Good Ethical Management. Differentiate your workplace from other workplaces by leading the company with a respect for the law, best business practices and strong business ethics. The companies that embrace ethical managements, overwhelming, attract better talent and achieve far better results;
  10. Educate Employees to know how their Specific Task Leads to success for the Company as a Whole. This is especially important in manufacturing companies. Often the employees’ role is so mundane that they lose focus on the essential nature of their function. An employee that understands the importance of his or her role is an employee that will be more productive.
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SeanHayes@ipglegal.com