Global HR: Russia and China

The vast states of Russia and China have a lot in common, not least a shared border of 4,300km, and a longstanding strategic partnership that earlier this year resulted in an intensified programme of military co-operation.

On a more human scale, both countries have a rapidly maturing HR profession. In Russia, HR is a younger discipline than in the UK, and has only grown from being considered a merely administrative function to a professional discipline in the past 10 years, according to Stephen Quick, director, human resource consulting services, at Price­water­houseCoopers Russia.

Developing expertise

“As a result of this, HR is still developing its expertise, learning about sound HR policies and practices from colleagues in other countries and adapting them as necessary for the Russian environment,” says Quick.

“Another factor is that for historical, as well as unique market and economic reasons, the focus of HR in Russia is different to the UK. Russian HR teams have typically been working to transform outdated, complicated and rigid pay systems into a form that better connects skills and performance with reward, and allows for merit-based career progression.”

The rapid growth of the economy in recent years has focused the energies of many HR functions on recruitment (and in the financial crisis, on downsizing) rather than on people-development areas such as talent management, Quick adds.

However, there are signs that, in the context of the economic turbulence of the past 12 months, companies in Russia are changing the way they think about HR matters, and are recognising that a well thought-out and long-term HR strategy is key to their success in the face of downward pressures on cost and demographic challenges.

All change in China

The most significant differences between HR in the UK and in mainland China arise from the rapid development of the People’s Republic of China (PRC) legally, culturally and economically over the past 30 years, according to Monica Debiak, an associate in the employment department with international law firm Paul Hastings.

The policies and laws of the PRC continue to rapidly develop and are subject to frequent change, in contrast to the mature employment laws of the UK. “In the past two years, numerous laws and policies have been issued in the PRC, some that have had a great impact on the workplace, such as the Employment Contracts Law, the Employment Promotions Law, numerous provincial regulations on sexual harassment, and regulations on vacation, to name just a few,” says Debiak.

“HR professionals in the PRC over the past few years have experienced constant change in the law and best practice. Although the UK has promulgated new laws regarding anti-discrimination pursuant to EU directives, I think the main difference is that in the UK, HR professionals are dealing with a mature legal system, and therefore can often make decisions quickly and with more certainty.”

HR professionals in the PRC often must research the law and/or consult with their legal department and the business unit before they are able to resolve even a mundane HR issue, Debiak adds. In contrast, an experienced HR professional in the UK is often able to deal with day-to-day issues without consulting with the legal department.

The PRC continues to rapidly develop culturally as well. Before it adopted its ‘open door’ economic reforms in 1978, the concept of the ‘iron rice bowl‘ existed.

“Before 1978, the PRC had no privately-owned enterprises and employees were guaranteed employment for life. Employees were on a low fixed wage, but in turn received free housing, education, food, clothing and medical care,” Debiak says.

“As the PRC now embarks on building a socialist market economy, such allowances have changed or been eliminated. Such changes are difficult to implement, however, and employees are still adapting to the new environment.”

HR professionals in the PRC have to spend time with employees carefully explaining the new benefit regime, new ways of providing compensation, or the differences in fixed-term contracts versus lifetime employment, because the culture of employment has changed so rapidly in China, she says.

Similarly, staff in the PRC may make requests that would seem unusual in the UK, such as requests for housing, but Debiak says this stems from past cultural practices.

“In comparison, employees in the UK are aware of the employment culture and norms. As a result, the negotiation style concerning recruitment, performance, and termination can be very different in the PRC compared with the UK.”

Perception of HR

In the state-owned enterprises, before the economic reforms, the trade unions often functioned as HR. However, with the economic reform and the change in enterprises, trade unions are now acting in a more Western style as advocates.

“HR is therefore a new burgeoning area of employment that has opportunity and potential,” says Debiak. “With all the recent changes in employment law, it is also seen as a challenging new field.”

The advent of the global financial crisis has seen HR rapidly changing in a fundamental way in China, according to a recent report from Cornell University’s Center for Advanced Human Resource Studies. It found that HR is gradually emerging as a strategic partner in reaching company objectives, and during the downturn and general talent shortage in China, retention has been a key issue for HR.

In addition, the report found that the more contact a Chinese subsidiary has with its headquarters abroad, the more likely the firm is to have strategic HR management practices and capabilities. “This means there are more Westernised practices within the firm and these change how the company navigates through the economic downturn,” the report found.

Simple approach

In Russia, HR is also in the early stages of development. Irina Kozlova, HR director for Russian telecoms company ER-Telecom, says: “The HR director here is more of an operational person. As such, few HR directors in Russia are strategic and sit on the board.” But as HR in Russia establishes itself, Kozlova says it is “full of ideas and innovations”.

She adds that Russian HR professionals are aware of the high quality of HR management in the UK, seeing it as a transparent and well-established HR system that is easier to understand.

“We consider the approaches to the system of top-management compensation to be very useful, especially long-term bonus plans which help to motivate top management on the strategic goals of the company and to form the loyalty of employers.”

Although it depends on the size of the company (and whether the company is a Russian company or a multinational with operations in Russia), Quick says a typical HR professional in Russia is more of a generalist than in the UK.

“Given that the HR function has developed from being a purely administrative function in Russian companies, a view still exists in some quarters that HR is there to serve rather than to lead in the HR sphere,” he says. “The HR director is rarely, if ever, on the board, and despite having the ‘director’ title, is sometimes quite junior in the organisation.”

A consequence of this is can be the lack of HR input by a suitably qualified and experienced person into the strategy of the company, Quick says. However, this is becoming less common as things change and HR directors continue to gain status.

Employment standards: Russia and China vs UK

  • Employees in Russia are entitled to annual paid leave of at least 28 days, and employees are also generally entitled to paid sick leave, which can vary between 60% to 80% of salary. Women are entitled to paid maternity leave, ranging from 70 to 84 days before and 70 to 110 days after the birth.

  • Employees in China who have served one full year but less than 10 years are entitled to five days’ annual leave, while employees who have between 10 and 20 years’ service receive 10 days’ annual leave and 15 days for 20 years of service. Workers may receive six months’ sick leave at 60% to 100% of salary, while maternity leave at full pay is provided for up to 90 days.

  • Both Russia and China set monthly minimum wages.

HR earning power: Russia and China vs UK

  • In Russia, HR directors can earn between RUB140,000-400,000 (£2,800-£8,000) per month, while HR managers earn RUB120,000-300,000 (£2,400-£6,000) per month, according to a survey by Russian recruitment firm Antal International.

  • In Shanghai, an HR director can earn between CNY700,000-1.4m (£63,000-£124,000) annually, while a regional HR director based outside Shanghai can earn between CNY800,000-2m (£71,000-£177,000), according to a Hudson salary survey. HR officers in Shanghai can earn as little as £7,000 (CNY80,000) a year.

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