At Kinyu, we understand that everyone’s China story is different. The same can be said for how each person finds their “man on the ground.” Sometimes, it’s through a mutual connection; other times, they may have worked for a factory you collaborated with. It could even be a connection on LinkedIn.
We work with many companies that have boots on the ground in some capacity. Often, they are paid as consultants to act as your eyes and ears on the ground, communicate with factories and shipping agents, and solve the occasional problem here and there. They also translate and book cars for you when you’re travelling here. This service is quite advantageous, offering flexibility and reliability most of the time.
However, there are risks associated with this model, and we believe the benefits of formal employment are not emphasized enough.
We have previously highlighted some benefits of employment over consultancy from the employee’s perspective, but this article focuses on its importance for the company and why it strengthens trust between the two parties.
In the consultancy model, you can terminate your arrangement with your person on the ground tomorrow if you choose to. While this flexibility may seem beneficial for you, it is less so for the consultant. The trade-off is that the consultant has significantly more freedom to act as their own agent. If you pay your consultant to source a factory, they will find one for you. However, what prevents them from receiving a commission from the factory for bringing in a new client?
Moreover, what stops a quality consultant from accepting a kickback from a factory for overlooking some defects?
We have encountered this issue with many businesses, and the answer to these questions lies in formal employment.
Even though a person may carry out the same jobs as an employee as they would as a consultant, there are three key differences.
Stability
A formal employment agreement is an investment in the individual. Labour law is employee-friendly; you cannot terminate the agreement unilaterally tomorrow, and they know that. This creates confidence and stability — they know they will receive a salary, social insurance, and housing fund at the end of every month.
Do not underestimate the power of that stability.
Employee Relations
Employee relations is a part of HR management that is not talked about enough — it is the management and cultivation of relationships between employees and the organization. Not only does it promote a positive relationship, but it also includes identifying negative issues early on before they become genuine problems.
When large problems are not addressed effectively, malintent can form among your team members on the ground. This is where consultants may look to supplement their role with a side gig to the detriment of your company.
Formal employment should include an element of employee relations, while it is easy for a company to consider the consultant as external and not worry about these issues. The China Desk can leverage its supply chain and manufacturing focus to offer employee relations as part of its package to foreign companies — we can track the work and progress of employees on the ground, helping to reward employees when they work hard and resolve issues with employees who are not satisfied.
Employee Handbook
The employee handbook is a critical document for establishing rules for employees. The China Desk employee handbook is four times longer than the employment contract, detailing company policies from intellectual property to codes of conduct, as well as policies on gifting and incentives. Employees must abide by the handbook, but consultants are not bound by the handbook’s policies.
Most importantly, employees must act on behalf of the company at all times, not for themselves. Employees can be legally responsible if their deliberate violation of the handbook’s policies results in a loss to the company. Employment agreements are subject to labour law, whereas the Civil Code governs consultancy agreements. These are two distinct laws with different terms.
Therefore, an employee has much more at stake in conflicts of interest than a consultant. Formal employment offers more “carrot and stick” motivational factors: the carrot being stability and employee relations, and the stick provided by the employee handbook.
This approach fosters trust and respect between the two parties. This is likely similar in any country, but it assumes a new level of importance when addressing conflicts of interest issues in China. Implementing this also requires comprehensive on-site management. Here, The China Desk goes beyond the employer-of-record industry standard by working much closer with team members employed on your behalf.
If you want to learn how The China Desk can work for you – download a case study or get in touch with one of our team members!
