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The International Labor Environment

19 January, 2016 - 15:28

As we have already alluded to in this chapter, understanding of laws and how they relate to host-country employees and expatriates can vary from country to country. Because of this, individual research on laws in the specific countries is necessary to ensure adherence:

  1. Worker safety laws
  2. Worker compensation laws
  3. Safety requirements
  4. Working age restrictions
  5. Maternity/paternity leaves
  6. Unionization laws
  7. Vacation time requirements
  8. Average work week hours
  9. Privacy laws
  10. Disability laws
  11. Multiculturalism and diverse workplace, antidiscrimination law
  12. Taxation

As you can tell from this list, the considerable HRM factors when doing business overseas should be thoroughly researched.

One important factor worth mentioning here is labor unions. As you remember from Working with Labor Unions, labor unions have declined in membership in the United States. Collective bargaining is the process of developing an employment contract between a union and management within an organization. The process of collective bargaining can range from little government involvement to extreme government involvement as in France, for example, where some of the labor unions are closely tied with political parties in the country.

Some countries, such as Germany, engage in codetermination, mandated by the government. Codetermination is the practice of company shareholders’ and employees’ being represented in equal numbers on the boards of organizations, for organizations with five hundred or more employees. The advantage of this system is the sharing of power throughout all levels of the organization; however, some critics feel it is not the place of government to tell companies how their corporation should be run. The goal of such a mandate is to reduce labor conflict issues and increase bargaining power of workers.

Taxation of expatriates is an important aspect of international HRM. Of course, taxes are different in every country, and it is up to the HR professional to know how taxes will affect the compensation of the expatriate. The United States has income tax treaties with forty-two countries, meaning taxing authorities of treaty countries can share information (such as income and foreign taxes paid) on residents living in other countries. US citizens must file a tax return, even if they have not lived in the United States during the tax year. US taxpayers claim over $90 billion in foreign tax credits on a yearly basis.  1 Foreign tax credits allow expatriates working abroad to claim taxes paid overseas on their US tax forms, reducing or eliminating double taxation. Many organizations with expatriate workers choose to enlist the help of tax accountants for their workers to ensure workers are paying the correct amount of taxes both abroad and in the United States.

Table 14.7 Examples of HRM-Related Law Differences between the United States and China

United States


Employment Contracts

Most states have at-will employment

Contract employment system. All employees must have a written contract


No severance required

Company must be on verge of bankruptcy before it can lay off employees


Two years of service required to pay severance; more than five years of experience requires a long service payment



Employment at will

Employees can only be terminated for cause, and cause must be clearly proved. They must be given 30 days’ notice, except in the case of extreme circumstances, like theft


None required for salaried employees

Employees who work more than 40 hours must be paid overtime


Up to individual company

A 13-month bonus is customary, but not required, right before the Chinese New Year


No governmental requirement

Mandated by government:

First year: no vacation

Year 2–9: 5 days

Years 10–19: 10 days

20 years or more: 15 days

Paid Holidays

None required by law

3 total. Chinese New Year, International Labor Day, and National Day. However, workers must “make up” the days by working a day on the previous weekend

Social Security

Required by law for employer and employee to pay into social security

Greater percentages are paid by employer: 22% of salary paid by employer, 8% paid by employee

Discrimination Laws

Per EEOC, cannot discriminate based on race, sex, age, genetic information, or other protected groups

Laws are in place but not enforced

Maternity Leave

Family and Medical Leave Act allows 12 weeks

90 days’ maternity leave

*In China, all employees are covered by the Labor Contract Law.