China represents a huge growth opportunity in most segments today despite several factors that are of major concern, such as the economic situation or the currency and financial risks, Human Resources management continues to top the list of business challenges for foreign companies doing business in China.
According to a recent study conducted by the German Chamber of Commerce in China, HR will remain the biggest challenge in the near future too. As the labor market keeps growing, China-based foreign companies have been steadily growing their workforce to match the growing need for products and services within the country’s major cities in the past years to support economic development.
This article focuses on the major 5 HR challenges that prevent many teams from recognizing, hiring, and retaining the most skilled and experienced employees in China.
1) Recruiting Platform – the most popular job portals in China are Zhaopin.com, Liepin.com, and zhipin.com. However, these three job portals only accept registered companies in China for talent research, such as recruitment companies.
If you don’t have a company in China, you can search for candidates through Linkedin.com or engage a headhunting or recruitment firm to help you search for the candidates. However, LinkedIn is certainly not anymore, the only popular recruitment and networking platform in China anymore. LinkedIn closed in 2023 in China for good and is not used by the local talents anymore.
2) Shortage of talent – the imbalance between business opportunities in China and qualified talent is one of the biggest challenges recruitment managers face.
There is a shortage of talent with international and domestic experience in the areas of marketing, sales, technology, HR, and management. Only about 10% of Chinese candidates for jobs in key areas such as finance, accounting, and engineering are qualified to work for a foreign company, according to one McKinsey study. This shortage is even more prominent in the 2nd and 3rd tier cities.
Chinese institutions of higher learning are striving to ensure that their graduates are adequately prepared for the job market. It is now safe to say that there is sufficient talent in China compared to the past.
The talent challenge intensifies as different ‘new industries’ spring up in China; since there are no readily available talent pools for these sectors, graduates with transferable skill sets are creating competition for talent in the traditional industries.
Attracting and retaining the best local talent is becoming an increasingly strong differentiator of success.
3) Employer brand recognition – working for a recognized foreign or domestic brand is an important part of a Chinese employee’s social standing. In that regard, SMEs are at a particular disadvantage compared to big foreign or domestic brands. In this case, a recruiting company can help to promote the benefits and advantages of a certain company environment.
4) Turnover and Retention – While attracting and recruiting qualified employees in China is difficult, retaining them is even more challenging.
Based on report findings from a survey covering 19 industries by one of China’s largest human resources service providers, the average employee turnover rate for privately-owned companies in China for 2018 was 18.5%.
The major reasons cited by employees for changing jobs are better salaries, better benefits, and career development perspectives. In addition to monetary incentives and bonuses, companies should also attract and motivate employees through non-monetary incentives and other “soft” values as employees are expecting regular, flexible, and holistic benefits that add value to their personal and professional lives.
5) Legal Environment – foreign-owned SMEs often need to face tough and changing regulations.
For example, foreign representative offices, financial institutions, and economic organizations are not allowed to hire employees directly – they need to go through specially designated HR management agencies. The official version of the labor contract must be in Chinese.
Only two fixed-term contracts are allowed. While some Chinese SMEs can get away with minor infractions of the law, foreign-owned companies are usually held to a higher standard. Very often good government relations or guanxi are required to obtain permits in a timely manner.
How to solve it?
The current labor market presents employers with a unique set of HR challenges, necessitating hiring managers to engage a recruitment firm for a successful hiring process.
That is the surest way of getting hold of the best talents. Without a doubt, Human Resources is an essential part of any business. As such, any shortcomings that the department faces must be optimally studied and sufficiently addressed early enough.
At Talent Fishers, thanks to more than 15 years of expertise in the Chinese job market, we specialize in recruitment and HR retention services with a team of foreign and local experts in the Chinese labor market in different industries, will help you easily overcome these challenges in the recruitment for long term goals. Contact us today to learn how we can help you to overcome hiring in China!