Critically Examine the Importance of Managing the Employee Relations Climate for Hrm in China

Critically examine the importance of managing the employee relations climate for HRM in China

Employee relations climate refers to the atmosphere, norms, attitudes and behaviours reflecting and underpinning how organization members interact collectively with each other in the workplace, which in turn, affects workplace outcomes (Kersley et al. 2006). It is s a key mediating factor in the link between high-performance work systems and organizational performance and effectiveness (see Buttigieg and Gahan 2005; Ferris et al. 1999; Kersley et al. 2006). Positive employee relations climate enhances both dual commitment and employees’ participation in organizational decision making (e.g. Deery and Iverson 2005; Godard and Delaney 2000; Snape and Chan 2000). Other outcomes that have been found to be associated with a positive employee relations climate include: positive perceptions of organizational prestige, positive attitudes towards supervisors, reduced absenteeism, turnover and conflict, innovation, customer satisfaction, and service/product quality (e.g. Carmeli 2004; Clark 1989; Cooke 1992; Dastmalchian et al.1982; Deery and Iverson 2005; Deery et al. 1994, 1999; Iverson et al. 2003 Wagar 1997b)

Employee relations climate is also the social and economic relations generated by the transactions between the company, the employees and their associated organisations. The critical question is how to handle and regulate the unavoidable tensions and conflicts of interest that are implicit in employee relations in order to make them stable and responsive to change. This has been a fundamental challenge for China where labor disputes and crisis have intensified in recent years, alongside the labour shortages and wage inflation, particularly since 2008 when several Chinese labour related laws were issued or updated, spurring enlightened workers to voice their various demands in the labour market. The experience of disputes suggests that, even in the current legal frame work, the two facets of labour power—top-down and bottom-up—can complementeach other.  Labor disputes take various forms, including workers’ initiation of labour disputes and other collective actions such as complaints and strikes.  In addition, there are other events indicating employment conflicts such as chain suicides and frequent employee turnovers. Examples include of disputes include Foxconn employee Sun Danyonog’s suicide by jumping off the building, steel executive murdered in Tonghua, assassination of boss by an employee in Dongguan, assassination of HR executive by a man in Guangzhou and strikes arising from minimum wage etc.  

Why is it important and a challenge in PRC?

1. Tension between institution and employees arising from the marketization of Chinese economy

Given the impact of globalization and the membership of China in the WTO, China has been undergoing a transition from a planned economy to a more market-oriented economy, employment relationships have undergone significant changes.  There appears to be a tension between the market forces and the institution that seeks to protect Chinese workers against these forces.  The transformation together with the changes in its legislative landscape have produced widespread insecurity in the field of capital-labor relations. Such insecurities include the replacement of lifetime employment with a system of contract employment, the relaxation of dismissal laws and the encouragement of performance-based rewards (Ding and Warner 1999; Frenkel and Kuruvilla 2002). This has resulted in employers gaining greater bargaining power and more flexibility in adjusting labour during downturns in demand.

1. Collective labour relations due to legislative change

Revisions of trade union laws, changes to the union constitutions and adoption of the New Labour Contract Law were designed to address increasing labour unrest and employment relations problems in China. It also reflected PRC government’s effort to modernize employee relations and redefine the role of trade unions in the new environment of market-based employment relations.  

The New Labour Contract Law provides minimum contractual provision and attempts to increase employee involvement in management by encouraging unionization and collective bargaining, employee participation in HRM decisions, union membership on the board and top management team. These changes are expected to affect the management of employee which increase labour protection and employee participation in organization life in China. This legislation has also increased employee awareness of legal rights. The changing social landscape and increased understanding of wokers’ right has also sought to undermine traditional responses to people management and employee relations climate in China.