HR trends and compliance strategies

We did it again—July saw another full house for HR Magazine’s latest HR conference on HR trends and compliance strategies. With so much happening in terms of Labour Ordinances in both Hong Kong and China, it was perhaps no surprise that HR practitioners were eager to get the lowdown on recent legal changes and their ramifications for HR. With a focus on compliance, topics included the recently introduced Minimum Wage Ordinance, the brand new Social Insurance Law, grooming sales staff to be compliant and ‘downsell’ and a host of tips on engaging staff while ensuring compliance and creating sustainable talent pipelines. If you didn’t get the chance to attend—you missed a lot—here we summarise key advice from the seven keynote speakers of the day.

Edmund Lam, Vice President, Training & Development, Human Resources,
Fubon Bank (Hong Kong) Limited
Topic: Strategies to groom ‘qualified’ frontline personnel for selling investment products to ensure full compliance.
Lam, the first speaker of the day, provided HR with advice to help them achieve best practices relating to compliance. Beginning with a brief overview of the last financial crisis, and how governments and regulators globally are calling for greater compliance and developing stricter regulations. As these regulations more or less change the game, employers need to ensure their employees are up-to-date with compliance and regulations. In order to do this, the employees need training. Lam noted, “Training is now closer than ever to the sales line. We looked at our old framework for training and found that the training was not working. We had to come up with a new model to ensure required needs were being met.” What transpired was a four-phase pyramid plan.

Phase one—training preparation:
regulators are concerned that all training materials be reviewed by relevant parties. Lam explained, “We set up a rule that all material developed by the product managers has to be reviewed by relevant parties for their endorsement before it can be used. If there is no endorsement, it can’t be used.” He added, “It used to be that another salesperson would do the training, but now those conducting the training must be professionally qualified.”

Phase two—staff assessment:
regulators have asked companies to prove that their staff are receiving and completing training. Lam commented, “We have a quiz after each product training that employees must pass with a mark of 100%. If staff get more than 20% wrong, they will have to retake the whole quiz. If they get less than 20% wrong, they have to retake the questions they got wrong.”

Phase three—implementation review: after the training, an evaluation summary is sent to all stakeholders for review and to ensure that the training was compliant and the needs were met.

Phase four—qualified sales staff:
through all training procedures, the Bank ensures that staff are qualified. Lam stressed, “We do this because our biggest interest is to ensure that our customers’ interests are safeguarded. The situation has changed for sales staff—in the past year, our staff have been asked by management to not upsell to clients, but try to ‘downsell’ and offer tailored products instead. Staff are encouraged to really listen to what the customer needs and then provide just that.”
Lam concluded, “Regulators are paying great attention to training and its effectiveness. Because of this, training is becoming a much closer partner to day-to-day operations.”

Stephen Leung, Country Manager, Pfizer Corporation Hong Kong Limited
Topic: Compliance—a hurdle or a competitive edge?
Leung presented on the importance of compliance and how it can be used as a competitive advantage. He started by comparing past and current business strategies. He pointed out, “In the past ‘money’ was the buzzword, now ‘compliance’ is. When you go to different businesses—what are they talking about? Compliance. Compliance with all the different laws, regulations and demands; it seems like companies are surrounded by the need for compliance.”

Recounting a story about a manager whose chair had broken, and instead of following company policy he went out and bought a new chair. Leung emphasised the importance of compliance in every company. He noted, “This story is about time management of which there are three types: firstly, system-imposed time—the time it takes to work with the system such as filling in forms; the secondly, boss-imposed time—if you do everything the boss tells you to, he will leave you alone; and thirdly, self-imposed time—time you allocate to your job and any extra activities. In this case, the manager used his own time to buy the chair—and not only wasted his own time, but also that of the boss, who had to then contend with the break in compliance.” Leung noted that if the manager had simply complied with the rules, the company could have saved a huge amount of time.

Turning to how leaders can leverage compliance into a competitive advantage, Leung referred to the Chinese term, 領袖, (leadership). Explaining the constituent characters, he said, “領 (collar) represents being ‘firm’ and that sometimes HR managers need to be firm and ensure everybody is disciplined and does not violate the rules. At the same time, 袖 (sleeve) represents the idea of flexibility and that leaders need to be adaptable and caring.”

He noted that as business leaders, it was a key HR responsibility to have integrity themselves and ensure compliance in that their staff never violate company rules. He explained, “Compliance is similar to the laws of nature, everything requires a system and has to follow that system.

It is the same for companies, they have to follow the system and be compliant if they want to be successful.” Leung concluded that by following the system, ensuring leaders act with integrity, and ensuring all staff follow the rules, companies can easily clear compliance hurdles.

Florence Cheung, Vice President of Human Resources, Wharf T&T Limited
Topic: HR trends and use of HR technology to ensure compliance.
The role of HR has changed dramatically in recent years and the need to adopt appropriate technology has become much more significant in terms of HR data analysis. Cheung explained, “HR managers have to ensure legal compliance—essential for the protection of our employees. HR managers have to understand personal data privacy, equal opportunity practices, the MPF and most recently the Minimum Wage Ordinance. All this can be very painful to managers—technology can help make our jobs easier.”

In order to help HR managers cope, analytics can be used to analyse the status quo; develop plans and solutions on how to meet staff, management and recruitment needs; and to support the decision making process. Cheung explained, “HR data needs to be valid, reliable, useful with regard to key decisions, compliant and comprehensive.” She then highlighted the main types of analytics HR managers should be looking at:

• Human-capital facts: enterprise-level data including headcount, recruiting, turnover and absenteeism—to help evaluate the health and wellness of the organisation.
• Human-capital investment: HR data including employee satisfaction rate, retention rate, productivity and effectiveness—to understand, measure and manage which actions have the greatest impact on business performance.
• HR data by segments: insight into specific departments/functions—to identify areas for improvement.
• Workforce forecasts: historical HR data including turnover, business opportunity data and staffing costs—to identify potential shortages/excesses of key capabilities, knowledge management risk and overall labour availability.
• Talent value: analysis of performance data and job satisfaction levels—to develop personalised performance incentives, assess competitiveness of current offers and decide which persons should be promoted.
• Talent supply chain: ‘what if’ scenarios can be visualised with hypothetical HR data, e.g. predicting the volume and workforce needed and the individual’s performance pattern to help make real-time decisions about talent demand and supply.

Cheung summarised, “The HR role is becoming more challenging and multi-faceted. Decisions should be made based on scientific analysis not on past experience and rules of thumb. Analytical tools can help with this.”

Jonathan Isaacs, Senior Associate, Baker & McKenzie
Topic: China Labour Law issues
Isaacs updated attendees on three major issues that HR managers responsible for staff working in China need to be aware of concerning the newly introduced Social Insurance Law. Noting that the issue, like many in China, was a complicated one, Isaacs stressed the importance for HR to ensure compliance with this issue in order to avoid significant legal problems later on. He noted, the new law is actually an amalgamation of laws already in place to form one national law, and there are three main issues that HR managers should be aware of:

• Portability: in the past, social insurance was regionally bound, and could not be transferred for staff who moved to another city or region. With the new law, pension insurance will be nationally portable and the relevant employee funds can move to follow each employee. Medical funds are now also portable, however, they can only be moved within the province concerned. Isaacs cautioned, “It should be noted that at this stage these are ‘goals’ and there is still a transition in progress. There is one major thing to be aware of with this new law: employees can no longer withdraw their contributions early. Being aware of this and being sure your employees are aware of this is important.”
• Penalties: penalties for non-compliance have been increased. Each month companies are required to submit the amount of social insurance payable to each employee. If they are late, the fine could be as high as 110% of the original amount. If companies have failed to register, the government can impose a fine of up to three times the amount of contribution owed. Isaacs noted, “On top of this, the manager can also be held personally liable. It is key that you, at least, register. Not just the penalties have been increased, but the enforcement power of the social insurance authority has also been increased. They now have the power to search your bank accounts, require you to provide a guarantee if you don’t have the funds to pay and/or get a court order to auction off or freeze your assets if you still don’t pay. However, it remains to be seen if the authorities, given their past history, will enforce this Law.”
• Foreign nationals: the new Law is difficult to interpret. There were draft measures suggested in June stating that all foreigners, including expatriates and employees on secondment, would have to pay into social insurance. These measures were supposed to be in place by 1 July 2011, however, to date they have not been adopted.

Isaacs, concluded with a word of advice to HR managing staff in China, “Chinese employees are becoming increasingly aware of their rights, leading to increased labour unrest when their expectations are not fulfilled.”

Eng Hwee Ong, Director of Corporate Training & Development, Shangri-La International
Hotel Management Limited
Topic: HR trends in engaging leaders and compliance strategies
Ong began by explaining that her organisation looks at employees as ‘valuable assets of the organisation’ who need to be engaged in order to feel fulfilled in carrying out their duties. She stressed that in order to do this, HR needs to ensure that the leaders in the organisation can create engaged employees—and went on to define ‘engagement’ from two perspectives. She said, “Leaders will define engagement as—colleagues who perform, are productive, innovative and team players. But, when you look at the employee point of view, they define engagement as—pay and benefits, training, career aspects and work life balance.” She explained that, in reality, engagement occurs when both parties believe their wants are being fulfilled. As the views of leaders and employees frequently differ on engagement, Ong stressed the need for HR to look at both ‘performance’ and ‘satisfaction’ perspectives in order to roll out successful staff engagement strategies.

Some managers may ask why organisations need engaged employees, Ong explained, “If you look at an engaged workforce you will see high productivity, teams that work together, and employees who know how to contribute to the success of the organisation. If you can get employees to understand that even the simplest task can contribute to the success of the organisation, you have an engaged workforce which will be more profitable.”

Ong went on to note that 55% of organisations do not have engaged employees, and country-wide China has one of the lowest levels of employee engagement in the world. She added, “You may not be surprised to learn that [among these employees] Gen-Y are the least engaged, while the Baby Boomers are the most engaged. Some refer to Gen-Y as the ‘Strawberry Generation’, because they can’t be touched—and if you do, you will bruise them.”

With reference to China, Ong noted, “Companies that develop the right solution to attract, develop and maintain Gen-Y will be successful in the future. They want international experience, managers who will engage them and help them grow, and will ask what the company can do for them.”

NiQ Lai, CFO and Head of Talent Engagement, City Telecom (Hong Kong) Limited
Topic: CXO of the future—15 years forward succession planning HR trends in succession planning: upgrading talent to become the next generation of CEOs, CFOs & CTOs.
Lai took the stage to present his organisation’s view on finding the best talent. He began by stating, “When you look at most American companies, they run by quarters. We believe that is no way to run a company. We need to take a long term view of our investments, when we invest in people it is like growing trees, it takes time. In ten years when you have fantastic home-grown talent and people ask how you did it. The answer is easy, you start 10 years ago. This is the approach we follow.” This was apparent as Lai pointed out that a lot of people thought of CTI as a high-tech company, but in fact, they are actually a people company. He added, “Our single largest expense is people.”

In his company, leaders and employees are given a large amount of autonomy—and need to be able to handle the authority granted to them. To illustrate this, Lai pointed out that for management level staff 77% have, or are currently pursuing, a post graduate degree. He added, “The lower ranks have by no means been forgotten, in fact we have started a study programme for 55 such employees to eventually obtain a degree from the University of Wales. We hope these employees will inspire the other 3,000 to do likewise. Peers have asked me: how can we justify the cost and return on capital? The answer is you can’t, sometimes you just have to believe in it and go for it. When you get it right, the return is going to be massive. If you get it wrong, you will have to absorb the downsides.”

To plan for succession Lai’s company runs the CXO of the Future Programme. Lai highlighted, “We hope that the next generation will stay ahead of us, what took me twenty years to learn and twenty years of mistakes to earn, the next generation can achieve in ten.” To showcase the programme, two of the most recent successful applicants who made it onto the CXO Programme took to the stage to share their experiences. A major benefit of the Programme was that the rigorous selection process allowed the company to learn a lot more about candidates than they ever could in a one-hour interview. Through a series of challenges—think Ironman meets the Apprentice—the company gets to see an insight into potential employees’ mentality, productivity and persistence. Lai summarised, “The bottom line is, talent engagement has to be integrated with investor engagement. We invest in our employees because we believe there will be financial benefits from this.”

Bernard Ng, Registered Foreign Lawyer, Baker & McKenzie, Hong Kong
Topic: the Minimum Wage Ordinance—what HR needs to know to make sure they are compliant
Ng, the last speaker of the day, focused on the Hong Kong legislation that has been on every HR manager’s mind recently—the Minimum Wage Ordinance (MWO). Ng began by explaining which employee categories do not come under the remit of the MWO. He explained, “People who may be excluded include: student interns, work experience students, certain apprentices under the Apprenticeship Ordinance, live-in domestic workers and other minor exceptions such as people who are working for their family.”

Ng cautioned those in HR, “Compliance is really quite a significant issue here. If you don’t comply with the Ordinance and keep proper staff payment records, the ramifications can be quite substantial. If the issue is about non-payment of minimum wages: directors, partners and other managers may be held personally liable. While the company may not be immediately charged, the Labour Department will start making enquiries and it is likely to lead to some major issues for those in HR. There is, of course, also the potential for huge negative publicity.”

The basic formula used to calculate the minimum wage is, as follows: wages payable divided by total hours worked must be bigger or equal to HKD28 per hour.

Complications arise in the definition of the terms: ‘wages payable’ and ‘hours worked’. Ng defined ‘wages payable’ as, “Salary, most overtime, most commission, bonuses and tips.” He added that annual bonuses are not considered wages and that ‘wages payable’ cannot be more than ‘total wages’, so HR needs to exclude certain aspects from the wages payable. These exclusions include: wages attributed to hours which are not hours worked such as leave pay, weekends, days not worked and meal breaks.

Ng then defined hours worked as, “The hours an employee is at a usual place of employment because it is contractual, the manager has told them to be there, or the manager has agreed for the employee to be there.” He added that travel time between an employee’s residence and their workplace is not included, except when employees are required to travel out of Hong Kong to conduct work duties.

So, how do HR managers keep track of their employees pay schedules? Ng highlighted the best way he has found to date is a two-pronged approach. He said, “Firstly, take a high wage threshold: HKD20,000–30,000 per month and then ensure that you keep track of hours worked by all employees that fall below this threshold. Secondly, keep track of employees’ leave days. If, taking into account leave, any employee’s wage is less than HKD11,500 per month, then HR should keep track of hours worked and wages paid as well.”

This article is published in HR Magazine Autumn 2011 issue.