Wage and welfare

"Only by distributing benefits of economic growth to the people can we be supported by the people and maintain a harmonious and stable society."

——Report on the Work of Government (2008)

Wage income is the most important income of common families and closely related to the livelihood of the people and social stability of a country. It is because of such importance of wage income that international conventions and relevant production regulations have clearly defined that wage paid to employees must be at least the minimum wage that can guarantee the basic needs of employees be satisfied. According to the Minimum Wage-Fixing Machinery Convention (1970) and the Minimum Wage-Fixing Machinery Recommendation (1970), International Labor Organization (ILO), minimum wage shall be fixed by considering the following factors: 1) The needs of workers and their families; 2) Total wage level of the entire society; 3) Living cost and changes; 4) Social security allowance; 5) Production standards of other social classes; and 6) Economic factors, including requirements on economic development, productivity, wishes on realizing and maintaining high employment rate, among others. In most countries, minimum wage is fixed by considering the factors above-mentioned and the paying ability of employers.

However, many governments did not show a clear attitude to consider such factors when fixing minimum wage. Some governments in developing countries, for example, attached higher priority of economic growth above workers’ benefits and rights and considered minimum wage a factor impeding their competitive advantage. This is why the minimum wage fixed by some governments cannot satisfy the basic needs of workers and their families. Such minimum wage does not reflect inflation and other factors that affect life quality of workers. In some countries, the government is lack of initiative in enforcing minimum wage standard, and workers have to work overtime to earn legal minimum wage.

In recent years, the Chinese government has been working hard to increase individual income of the Chinese people through increase of minimum wage, solving problems on arrears of wages, decrease of interest rate of bank deposit, and increase of personal income tax cutoff point. However, the disposable income the people, particularly those of the low-income class, remained at a relatively low level.

According to the social bluebook published by the Chinese Academy of Social Sciences in 2008, although the national economy and GDP of China kept increasing, the proportion of wage in national income was decreasing year by year. Before 2003, the proportion of wage in GDP was more than 50%. However, it dropped to 49.6% in 2004, 41.4% in 2005, and only 40.6% in 2006. It is clear that there is a tendency of decrease of the proportion of wage in primary distribution and an increase of capital income. This phenomenon is called “wage corrosion by profit”. Some experts pointed out that for the future development of China, it is preferable to establish a high-wage economy, but not a low-wage one. Therefore, increasing proportion of labor income in primary distribution and letting more people enjoy the benefits of economic growth are of great significance for development of China and maintaining a stable society.

Procedures to Ensure Compliance in Your Facility

Ensure each employee has been educated on the facilities policy and procedures on compensation. (E.g. handbooks, meetings, courses, classes, postings, periodic notifications, etc.)
Ensure labor contracts are inclusive of the terms and conditions of worker compensation.
Ensure workers' time on the job is recorded accurately. (i.e. working time clocks, valid login sheets, time cards).
Review time and payroll records to ensure clear and accurate compensation calculation.
Ensure breakdown wage to show detailed items, such as allowance, deduction, basic salary, overtime compensation, leave payment, maternity payment etc.
Facility should keep documents to verify all legal benefits have been provided to eligible workers (i.e. paid annual leave application, maternity application, leave application etc).
All work, including overtime, must be recorded in the regular payroll record. Employers will not use hidden or multiple payroll records in order to hide overtime, to falsely demonstrate wages, or for any other fraudulent reason.
All compensation must be paid in timely manner within thirty days or less as required by law.
All workers have a right to use or not use employer provided services such as meals, housing or transportation.
Factories should not use monetary fines as disciplinary measures.
Factory must not pay recruitment fees for workers directly to the recruitment agency and then recover this expense by deducting the fee from the worker's wages.
Legally mandated benefits will be paid in full and in a timely manner.
Workers will be paid for holiday and leave as required by law.
The factory must communicate leave & holiday policy at the time of employment.
Ensure all piece-rate wage meet local minimum wage requirement.
Ensure quota is reasonable.
Ensure the sum of costs for meals and dormitories shared by workers are reasonable.
Interview workers to determine if they are knowledgeable and understand the facilities policies and procedures on compensation.
Post the national or local minimum wage notification within your facility.

Good Practices

Designate a person responsible for routinely verifying the effectiveness of the factory's policies and procedures on compensation.
Managers and supervisors are held accountable for violation of facilities policy on compensation.
Continuously trains managers and supervisors on the facilities policy on compensation.
Adopted a confidential system for factory worker feedback for violations of the factory's policy on compensation.
Management monitors subcontractors to ensure compliance with this standard.