Does The New Labor Law Force Shoe Companies To Raise Wages?

Large enterprises, state-owned enterprises and social security payment norms have basically not affected; labor-intensive, low value-added small private enterprises have a greater impact.

At the end of 1 2008, CICC conducted research on the new labor contract law (hereinafter referred to as the "new law"), and conducted research in various provinces and cities in Sichuan. It also investigated the feelings of the local government and enterprises on the new law in order to judge the overall trend of 2008.

On the whole, the new law does not necessarily constitute a significant inflationary pressure in the short term, and more likely to affect corporate profits and employment.

Large enterprises and state-owned enterprises pay no attention to their labor costs because of the operation rules of social security payment. High tech companies have high added value, few personnel, and social insurance payments. The new law has no upward pressure on their labor costs. For small and medium-sized private enterprises, which are still labor-intensive and low value-added, the new law does increase their labor costs. However, due to fierce competition among small and medium-sized enterprises, it is difficult for enterprises to completely shift the cost pressure by raising product prices.

We have participated in our research, including large Human Resources Inc and high-tech, service and traditional manufacturing and processing industries.

For example, IC design, machinery and electronics, electrical equipment, clothing, printing and dyeing, shoes, smoking sets, glasses and other industries.

Generally speaking, in most provinces, the space for rural labor to continue to pfer is basically small.

The relatively tight supply of migrant workers has made the average wage increase of migrant workers in Jiangsu and Zhejiang provinces 10%~15% in recent years.

But in the same period, the production efficiency of private enterprises has also maintained no less than the growth rate of wages.

Private enterprises in Jiangsu and Zhejiang are mainly labor-intensive industries. The demand for general skilled workers and migrant workers is quite strong. In recent years, labor supply has been tight and recruitment has become more difficult. Private enterprises can only retain their migrant workers by raising wages, making the average annual wage growth in the region in recent years 10%~15%.

However, most of the respondents also indicated that the production efficiency at the same time has maintained no less than the growth rate of wages, which can withstand the growth rate of labor costs in recent years.

The enterprises also said that the wage level will remain at least 10% growth in 2008.

As far as the impact of the new law on enterprises is concerned, it has no effect on high-tech and large enterprises, but it poses a pressure on the labor cost of most small and medium-sized labor-intensive enterprises, because the new law will increase the wage cost of such enterprises by 10%~20%. In addition, the new law will also affect the recruitment plan of private enterprises.

In the small and medium-sized labor-intensive private enterprises in Jiangsu and Zhejiang provinces, they did not pay social insurance to all employees. Therefore, the implementation of the new law in 2008 and the payment of social security for employees will further increase the labor costs of these enterprises.

The new law on overtime wages also poses a certain upward pressure on labor costs.

In addition, some interviewed enterprises indicated that the implementation of the new law increased the potential risks of labor disputes and affected the recruitment and employment plan of enterprises.

Some private enterprises also said that due to the high mobility of migrant workers, social security has not yet achieved nationwide interconnection, and the original intention of providing old-age security for migrant workers can not be realized. Most migrant workers have to pay for their personal income and reduce their cash income rather than participate in insurance.

The "policy" increase of labor costs may not be fully pmitted to the price of products.

Due to the low technology content of labor intensive industries, the industry threshold is low, and competition in the same industry is fierce.

In the survey, we learned that although the price of raw materials continued to rise and labor costs continued to rise in recent years, most small and medium-sized private enterprises did not pfer the increased cost to consumers by raising the price of products, but usually they were able to digest the increased cost through efficiency improvement.

Most small and medium-sized private enterprises are operating in "small profits".

However, in the medium to long term, because the profits of SMEs are negatively affected, it may increase the opportunities for mergers and acquisitions of large enterprises in the industry. Therefore, the concentration of industries will be increased and finally pmitted to the prices of products. Therefore, the pressure on prices can not be ignored in the medium and long term.

Related specific cases of different types of enterprises analysis of high-tech enterprises (Suzhou, less than 100): engaged in IC design, the average wage of employees in the company is higher than 2000 yuan, managers, technicians and operators accounted for 10%, 80% and 10% of the total number of employees respectively.

In the past 5 years, the average annual wage growth of the enterprise has reached about 15%. In 2008, wages will continue to grow at an increase of around 15%, and wage costs will account for 5% of the cost of enterprises.

Cost pressures are expected to come mainly from raw material costs and wage costs in the next few years.

The implementation of the new labor contract law has no pressure on the enterprise to increase the cost of labor. There is no fixed term contract, and even has a positive effect on the human resources management of the enterprise, and it can stabilize the workforce.

Catering enterprises (Suzhou, three sizes: 100 people, 400, 1000 or more): the average wage level of employees is 1300 yuan / month, managers and waiters account for 20% and 80% of the total staff respectively.

In the past 5 years, the average annual wage growth of the industry has reached 10%, and wages will continue to increase by about 10% in 2008.

Wage costs account for 15%~20% of the cost of an enterprise.

The cost pressure is expected to come mainly from wages and raw materials in the coming years.

In addition, the flow of employees in the service industry is very large. Enterprises consistently reflect the tight supply of service personnel, and the staff are more difficult than before.

Due to the high labor intensity in the industry and the failure of employers to pay social security for migrant workers, the implementation of the new labor contract law has increased the labor cost by 15%.

In addition, it is understood that the service category of the industry is unwilling to pay part of the social security personal commitment, and the personal desire to participate in social security is not high.

Moreover, potential labor disputes also constitute a hidden pressure on rising labor costs.

According to the catering enterprises visited, the net profit margin of the industry is generally 5%. The new labor contract law increases the cost of labor, and the prices of raw materials (agricultural and sideline products and edible oils) continue to rise in 2008. As a result of fierce competition, enterprises are unable to raise prices and pass the cost upward to consumers, and the living space of enterprises is squeezed.

Textile enterprises (Suzhou, 500~1000): in the printing and dyeing industry, the average wage level of employees is 1100~1500 yuan / month.

Managers, technicians and operators accounted for 10%, 5% and 85% of the total staff respectively.

The average wage of the company has increased by 10% annually in the past 3 years, and wages may not increase in 2008.

Wage costs account for 5% of the cost of the enterprise.

The cost pressure is expected to come mainly from the cost of raw materials and the rise of the RMB exchange rate in the next few years.

Since the company did not pay social security for 20% of the total number of migrant workers, the implementation of the new law caused an upward pressure on the labor cost of the enterprises by about 7%.

Machinery and electronics enterprises (Suzhou, 700 people): the average wage level of employees is 1800 yuan / month.

Management and technical personnel and operators accounted for 33% and 67% of the total staff respectively.

The average annual wage growth of the enterprise in recent 3 years has reached 15%, and wages will continue to increase by 10% in 2008.

Wage costs account for 8% of the cost of the enterprise.

The cost pressure is expected to come mainly from the cost of raw materials, the rise of workers' wages and the RMB exchange rate in the coming years.

Since the company is a private enterprise pformed by state-owned enterprises, and the work of paying social security for employees is standardized, the implementation of the new labor contract law will not increase the cost of labor force for the enterprise.

Electrical equipment enterprises (Wenzhou, tens of thousands of people): the enterprise is a leading enterprise in Wenzhou, with a large number of employees, and its main competitors are famous enterprises such as SIEMENS, ABB and Schneider abroad.

The company is in the preparatory stage of listing.

The company believes that the new labor contract law is a "shuffle" for the modeling enterprises. As the company has been preparing for the listing, its wages and social security are relatively regular. The issuance of the new labor contract law does not generate additional cost for its wages, but it will affect the small and medium-sized enterprises in the same industry.

Garment enterprises (Wenzhou, more than 60 people): the wage level is 1600 yuan / month.

The proportion of managers and operators was 15% and 85% respectively, and local and foreign staff accounted for 20% and 80% respectively.

In the past 5 years, the wage growth of the company is about 10%, and it is expected that wages will continue to grow at a rate of 10% in 2008.

The cost of enterprise workers mainly accounts for about 50% of its processing cost and gross profit margin is 20%.

The production efficiency of enterprises increased by an average of 10% per year, almost the same as that of workers.

The cost pressure of enterprises mainly comes from energy, workers' wages and environmental protection input.

At present, only 20%~30% of the more stable employees have been on social security, and other highly mobile employees are not insured.

It is estimated that the new labor contract law may bring about 15% extra wage cost to enterprises.

However, enterprises can not pass on the cost to raise the cost. Instead, because of fierce competition in the industry, they may reduce their prices to seek product sales.

Footwear enterprises (Wenzhou, 3200 people): the average level of employees is around 1500 yuan / month.

Managers, technicians and operators accounted for 10%, 5% and 85% of the employees, respectively. Among them, the local people accounted for about 5%~10% and 90% of the employees.

Over the past 5 years, the company's wages have increased by an average of 5% over the past 5% years. It is estimated that the natural growth of wages will remain 5% in 2008.

The wages of enterprise workers account for 17%~20% of the cost of the enterprise and gross margin is around 10%.

Annual production efficiency is higher than that of workers' wages.

The cost pressure of enterprises is expected to come from raw materials such as oil and its by-products, wages and the rise of the RMB exchange rate.

Enterprises belong to large scale enterprises, so the social security of employees is relatively standardized.

However, enterprises believe that the unequal rights and obligations between owners and employees may bring some hidden pressure in the future.

Smoking enterprises (Wenzhou, 400 people): the average wage is 1500 yuan / month.

The proportion of managerial staff and operators is 20% and 80% respectively.

The ratio of local to field personnel is 6% and 94% respectively.

Over the past 5 years, the wages of enterprise workers have risen by about 10%, and the expected increase in wages in 2008 is about 5%.

The cost of workers' wages accounts for about 15% of the cost of the enterprise, and the gross profit margin is 10%.

The annual production efficiency of enterprises is higher than that of workers' wages.

Enterprises expect future raw materials, wages and appreciation of the renminbi will become the main source of cost pressures.

More than half of the employees do not have social security, and usually work hours around 40~50 hours. Therefore, the new labor contract law is expected to increase the cost of enterprises by an additional 20%.

Glasses enterprises (Wenzhou, 500 people): the average wage of employees is 1600 yuan / month.

Among them, managers, technicians and operators accounted for 10%, 3% and 87% respectively.

The ratio between local and foreign staff is 2% and 98%.

Over the past 5 years, enterprise wages have increased by about 10% every year.

It is estimated that the natural growth rate of wages in 2008 will be around 5%.

The cost of workers' wages accounts for about 25% of the cost of the enterprise, and the gross profit margin is 12%.

The cost pressure is expected to come from workers' wages in the future.

About 20% of the employees in the enterprise have relatively stable employment relationship and have already been on social security.

Other highly mobile employees do not pay social security. The new labor contract law will increase the cost of enterprises by an additional 10% or so.