Legal matters for HR

For any organisation with businesses operating across Asian borders, it is vital to have a basic understanding of the way each market operates, particularly when it comes to employment. HRM looks at employment legalities across the region

There is great diversity in the laws and employment practices across Asia, reflecting the nuances of various societies and their histories, languages, and cultures.

“For example, Singapore is geographically close to Indonesia, yet their respective employment law regimes could hardly be more different,” says George Cooper, partner at Ashurst Singapore and head of the firm’s Asian regional employment practice.

Singapore has a common law system and there is a relatively low level of statutory prescription to compliment the common law principles pertaining to employment contracts, particularly for senior employees. Indonesia, on the other hand, is a civil law jurisdiction with a prescriptive and highly protective Manpower Law, he points out.

Recent laws passed in Asia

There was quite a bit of activity in the employment law space across Asia in 2012. Singapore’s new retirement and re-employment scheme commenced on 1 January last year, requiring employers to offer ‘re-employment’ to workers upon reaching the prescribed retirement age of 62 years. The re-employment obligation continues to apply up to 65 years of age.

The Singapore Employment Act is currently under review. Phase one of the review is expected to be completed this year, while the second phase will likely commence in the last quarter of 2013.

Malaysia has introduced a minimum wage (following Hong Kong in 2011), extended maternity leave entitlements to all female employees, and expanded regulations against sexual harassment in the workplace. “It also set the minimum retirement age at 60 years,” says Cooper.

Meanwhile, in Vietnam, the New Labour Code was passed on 18 June 2012. It will repeal and replace the current Labour Code when it takes effect on 1 May this year.

“The New Labour Code broadens the rights of employees in Vietnam, particularly in relation to maternity leave, overtime and minimum wage requirements during probation,” says Cooper. “It also introduces stricter requirements around the employment of foreign labour in Vietnam and regulates the use of labour hire and outsourcing arrangements.”

Notable (legal) notes

One of the strangest workplace laws in China is the Trade Union Law. While there are locally different enactments of labour laws in China, the same law enacted by the national government can be differently implemented in different areas.

“People across China can only join one trade union,” says Judy Ng, Asia Marketing Communications Manager, DLA Piper. “This is not the right of association (结社权) universally applied.”

Furthermore, enterprises contribute a trade union fee, based on two per cent of the total amount of wages, rather than the number of employees who are members of the trade union. Even without a trade union, two per cent of trade union preparation fees should be contributed.

The different types of statutory leave in different jurisdictions are also interesting. While annual leave, sick leave and maternity leave are all fairly standard across Asia, there are other types of statutory leave in some countries, says Cooper. For example,

•        ‘casual’ leave in India,

•        menstrual leave in Indonesia, Japan and Korea,

•        single parent and victims of violence leave in the Philippines, and

•        sterilisation leave in Thailand.

The Japanese government passed legislation in 2008 requiring all citizens between the ages of 40 to 74 to undergo a medical examination each year. “As part of these examinations, citizens must have their waists measured and compared against government ‘maximum waist size’ guidelines,” says Cooper.

“Employees who exceed the maximum size are given counselling and support to lose weight,” he explains. “Employers and local governments who do not succeed in reducing the number of employees over the maximum measurement face higher payments into the national insurance programme.”

Flexibility and mobility in law

International employment mobility is an increasingly important area in the current age of globalisation. Multinational companies need to give careful thought to the transfer model and documentation to be adopted whenever they move employees from one jurisdiction to another, says Cooper.

“Basic questions such as ‘where will the employee have an employment contract relationship’ and ‘with which entity’ are often overlooked, to the company’s peril,” he adds.

The most appropriate model and documentation will differ depending on the source country and destination country, so a ‘one-size-fits-all’ approach will not work. However, having extremely localised policies may be detrimental to the business as well.

“A common mistake employers make is to try and have policies that are absolutely tailored and localised to every single jurisdiction,” says Paul G. Brown, Head of Employment, Baker & McKenzie Asia-Pacific.

“It is more effective to find a jurisdiction where the bar is higher and use that as a benchmark to formulate policies.”

With greater mobility in jobs within Asia also comes the challenge of protecting confidential information. “There has been a massive increase in instances where employees leave the organisation with confidential and sensitive information,” says Michael Michalandos, Partner, Baker & McKenzie Sydney. “There has been a lot of litigation in this area.”

Singapore has moved to protect intellectual property through specific data protection legislation which came into force at the start of 2013. To give organisations time to adjust, there will be a “sunrise period” of 18 months before the data protection rules are enforced.

“The Singapore Personal Data Protection Act regulates the collection, use and disclosure of personal data,” Cooper explains. “There are certain exceptions applying to employment-related data but employers still need to be mindful of the new scheme and implement policies and practices to ensure compliance.”

Looking ahead

Baker & McKenzie believes that ultimately, there will be a lot more consistency in the region and globally. This is because larger companies will want to ensure that their entire supply chain does not have any labour practices in it which are undesirable or focused upon by consumers.

“If the rubber comes from Malaysia, the computer components come from China, and some of the stuff was done in Taiwan, and your call centre was in Manila, while your financial centre was in Australia, we could tell you whether the labour practices in those countries met International Labour Organisation benchmarks,” says Brown.

He says labour laws in the region will migrate to a higher world standard when it becomes apparent that large organisations are only going to be interested in supply chains that are compliant with such levels, he adds, alluding to the Foxconn scandal.

While the development of employment law across Asia is fascinating because it is closely linked with the economic aspirations and development of the different countries, there is no clear trend towards higher or lower levels of regulation across the region, says Cooper.

“This is because governments have to strike a balance between attracting capital investment and facilitating growth, and seeking to spread the economic benefits of growth equitably across the population.”

In Indonesia, for example, many argue for further reform to encourage business investment, including de-regulation of labour. However, this can be met by fierce resistance, as can be seen from various demonstrations in the country recently.

Large-scale protests continue in Indonesia over outsourcing practices and wage claims, says Cooper. “It will be interesting to see where the debate takes us in the future.”

 

Top tip

First and foremost, HR professionals must recognise the diversity from country to country, says George Cooper, partner at Ashurst Singapore and head of the firm’s Asian regional employment practice.

“Also beware of making assumptions, as popularly held views may not always be correct,” says Cooper.

He explains that in Singapore, for example, employee coverage under the Employment Act as a whole (including unjust dismissal provisions), being distinct from more limited coverage under the part of the Act that deals with hours of work, overtime and annual leave, is often misunderstood.

 

Casestudy:

Singapore’s first labour strike in 26 years

In November, 171 SMRT bus drivers from China went on strike to protest the disparity in pay they received compared to their Malaysian counterparts. It was the first strike in 26 years in Singapore.

Acting Manpower Minister Tan Chuan Jin said strikes were illegal for ‘essential services’ unless those involved gave the employer 14 days of notice of the intent to go on strike.

To prevent such an episode from happening again, employers have been urged to review their grievance-handling procedures.

 

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