IHRM in different regions
National, cultural, legislative and economic differences impact on human resource practices and strategies.
Let’s take the EU and China as examples to explore the differences between HR practice in different regions.
The European Union
The separate countries of the former European Community (EC) have unified into a common market for goods, services, capital and even labour called the European Union (EU). Tariffs for goods moving across borders from one EU country to another have generally disappeared, and employees generally move freely between jobs in EU countries. The introduction of a single currency (the Euro) by a subset of EU countries has further blurred differences between states. Despite (or perhaps partly because of) Greece’s recent fiscal problems, EU countries today are moving towards increased economic integration.
Companies doing business in Europe must adjust their HR policies and practices to EU directives (laws) as well as to country-specific employment laws. The directives are binding for all member countries, but each country can implement them as they wish. Some laws are applied uniformly across Europe but some are not. For example, Germany has high barriers to dismissal, in Italy poor performance is not a reason for dismissal and in Norway a dismissal must be justified based on the evidence.
The Whirlpool Corporation spent more than three years trying to eliminate 500 jobs in Italy, while (for better or worse) it took them less than a year to dismiss 1,000 people in Arkansas in the US, which has particularly low barriers for dismissal.
Other details, such as whether job offers must be in writing, and whether there is a mandatory minimum wage (yes in Germany, no in Austria) also vary among European countries.
For years, employers relied on China’s huge workforce to provide products and services at low cost. Part of the reason for the low labour cost was the dearth of labour laws on things like severance pay, minimum wages and benefits.
However, things are changing.
For one thing, China’s workforce, while still huge, is growing at a slower rate. China also has new labour contract laws, adding many new protections for employees and making it more expensive for employers in China to implement personnel actions such as layoffs. Multinational companies doing business in China argue that the new law will raise labour costs and make it difficult to lay off employees, by instituting new severance package rules.
Local firms, including the remaining state-owned enterprises, tend to use fewer modern HRM tools than private Chinese MNCs, but they must all still deal with the fallout of the new labour laws. There are, therefore, wide variations in how companies in China deal with HR issues such as:
- Recruiting: Compared to some Western countries, it’s relatively difficult to recruit, hire and retain good employees. China’s employment contract law requires, among many other things, that employers report the names, sexes, identification numbers, and contract terms for all employees they hire within 30 days of hiring to local labour bureaus.
- Selection: The dominant employee selection method involves analysing the applicant’s résumé and then interviewing him or her. The ideal way to do this is to institute a structured interview process, as many of the foreign firms in China have done.
- Compensation: Although many managers endorse performance-based pay in China, other employers, to preserve group harmony, make incentive pay a small part of the pay package. And, as in other parts of Asia, team incentives are advisable.
- Labour unions: Recently, Chinese facilities of IBM, PepsiCo, Walmart and others have seen extensive strikes by workers, with several things potentially contributing to this action. China’s new labour law expands workers’ rights, an ageing population in China means a diminishing supply of factory workers, and China’s government may see the strikes as a way of raising workers’ incomes and thus supporting its desire to boost consumer spending (Dessler 2020).
What is standard HR practice in your own region?
Dessler, G. (2020) Human Resource Management. 16th edn. London: Pearson Education Limited
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