· 4 min read · Features

The HR guide to emerging markets: Part three

Published:

The inside guide to doing business in China, India, Mexico and South Africa

China

Economic briefing
China is the world’s second-biggest economy, and the OECD predicts it will become the biggest in 2016. The Government’s 2013 growth target was 7.5%, and Moody’s rates it the fastest-growing economy in the G20. In November, China announced new social and economic policies, inviting private sector and foreign competition into previously controlled industries.

Potential ?talent pool
Chinese society is ageing faster than expected, and this will have an impact on the workforce. The number of workers aged 20 to 24 is projected to be 67 million by 2030, less than 60% of the 2010 figure. However, annual higher-education enrolments tripled between 2001 and 2010, suggesting no shortage of graduates just yet.

Legal lowdown
The concept of at-will employment does not exist in China. Termination must be voluntary (on the part of the employee) or for a cause. There are many changes in legislation going on – particularly around entry and exit laws – which HR must keep on top of.

From the HR frontline
“The way business is transacted is very different in China. You need a mix of locals and expats on management teams. There’s no shortage of graduates and the Government is doing a lot to get them into employment. Lots of those graduates might have been educated in the West, but you need to be careful to get a mix, or you will create resentment.”
Teresa Lamy, TMF Group

“Chinese workers are accustomed to hierarchy. People want a clearly defined role, whereas Western firms tend to be flexible. Western approaches to L&D don’t work: e-learning isn’t popular. Neither is mobile working. This generation of one-child families comes into the office for social networking. They don’t want to work from home.”
Mark Spears, global head of people and change, KPMG

India

Economic briefing
Economic growth slowed in early 2013, and recovery in developed markets hurt FDI. However, the latest quarterly figures show growth has picked up to 4.8%, up from 4.4% the previous quarter. Economic growth for 2013 is expected to be 5.3% in the world’s second-most populous country.

Potential ?talent pool
India already has a population of 1.2 billion people, and the World Bank predicts the country “will soon have the largest and youngest workforce the world has ever seen”. However, education levels remain relatively low and, according to Manpower’s survey, 61% of companies struggle with a skills shortage.

Legal lowdown
The sheer volume of Indian employment law is unusual: there are more than 50 central legislations and about 150 state-level legislations. It has some of the most complex labour regulations in the world. These include the Industrial Disputes Act, which has provisions relating to employee terminations, unfair labour practices, strikes and so on. Labour laws tend to be pro-employee.

From the HR frontline
“The workforce is clever and very willing. People are keen to study and take every opportunity to improve their education. Staff in our Indian offices love being part of the bigger organisation and getting involved with things such as values initiatives.”
Teresa Lamy, TMF

“The vast majority of our workforce are under 30, so career progression is important. They need to feel they are being fulfilled, the company is successful and they can see opportunity for growth. Our attrition rate is under 20% because we have done a lot of work on career development.”
Mark Sandham, SVP, organisational effectiveness & HR operations, Thomson Reuters

Mexico

Economic briefing
Mexico is one of the most important emerging markets. Grant Thornton puts it fifth after the BRIC countries on its ‘opportunity index’. After the financial crisis, the economy grew by an average of 4.3% between 2010 and 2012. Growth slowed to 1.8% in 2013.

Potential ?talent pool
According to research by CEB (formerly SHL), Mexico has the highest number of potential leaders ?in the world. However, OECD data finds that only 22% of people continue education after school. Mexico also has a large number of young NEETs, especially women.

Legal lowdown
All Mexican companies must employ a minimum of 90% Mexican workers in accordance with the Federal Labour Law, but this rule does not apply at management or director level. As of their second year of operation, all employers must pay staff an amount equal to 10% of pre-tax profits. At-will employment does not exist.

From the HR frontline
“The greatest challenge for foreign companies wanting to do business in Mexico is understanding the Federal Labour Law around minimum wages, vacations, profit sharing, Christmas bonus, equal pay for men and women and so on. Top talent isn’t hard to find and, on the whole, Mexican workers are reliable, hard-working and loyal.”
Malissa Bossardet, ?head of business development, Human Resources Mexico

South Africa

Economic briefing
The IMF recently warned that South Africa is trailing other emerging markets. Economic growth has slowed to a four-year low, with South Africa’s Reserve Bank having forecast modest 1.9% growth for 2013. FDI has also fallen, but South Africa is still seen as a springboard into the rest of Sub-Saharan Africa.

Potential ?talent pool
It’s young: the recent census found most of the 52 million people are aged under 39. Educational attainment is rising, with 11.8% of the population now completing higher education, up from 8.4% in 2001. Manpower’s survey said skills shortages aren’t a problem – only 6% of firms report an issue.

Legal lowdown
Black Economic Empowerment (BEE) attempts to redress the inequalities of apartheid by giving previously disadvantaged groups privileges, including employment preference. Amendments to the Basic Conditions of Employment Bill seek to increase employee protection and to tighten the prohibition of child labour. Noncompliance with these laws results in fines for employers.

From the HR frontline
“BEE dominates the business landscape and you can’t work here without a full understanding of it. It’s a double-edged sword as it means some people are appointed beyond their capability. There’s a degree of tokenism. Even the people who are capable can be labelled as token appointments, which creates resentment.”
Kieran Soughton, international interim HRD

“Many companies use South Africa as a conduit to Africa, and it’s a good springboard. But you need to watch it: we focus on Africa as being everything except South Africa. It is different. And you have ?to pay international salaries ?to people with international experience.”
Gordon Headley, ?Tullow Oil

To read part one of the guide, click here. To read part two, click here