However, as Kinyu is the foremost EOR focused on China and the supply chain, it’s essential to contextualize this within China and the supply chain. This includes how you can use an EOR and the essential considerations involved. So, let’s begin:

What is an Employer of Record?

An EOR serves as a third-party service provider, taking on the legal responsibilities associated with being an employer. This outsourcing arrangement aims to relieve companies of administrative burdens, enabling them to concentrate on core business functions.

At its core, an EOR handles various aspects of employment, ranging from payroll processing and tax compliance to benefits administration. This comprehensive approach ensures that the workforce complies with local, regional, and national labor laws and regulations.

Engaging an EOR mitigates risks associated with legal compliance, which is one of the primary advantages. By entrusting the EOR with HR administration tasks, companies can navigate employment issues, maintain accurate record-keeping, and uphold contractual compliance.

How can Supply Chain Leaders Utilise an EOR in China?

The EOR model facilitates international expansion by providing a scalable and flexible solution. This is particularly beneficial for companies looking to place personnel near key parts of their supply chain globally without the need to establish legal entities in each country.

Since China’s labour laws are unfamiliar to most overseas businesses, and considering the language barriers and geographical distance, the benefits of using an EOR in China are even more significant.

A key example of this is hiring across different regions in China. You must have an entity in the city where you wish to employ someone to pay the right social insurance. To support a team across China’s vast geography, a competent EOR will have entities in various regions.

Furthermore, there are small but significant differences in labour regulations across different regions of China. Managing these variations can be simplified by using the right EOR.

What Else do I Need to Consider with an EOR?

Some points need to be considered when choosing an EOR.

First and foremost, there is a cost associated with EORs. They can charge substantial fees in addition to the payroll of the people you wish to hire.

It’s important to understand employee security in these outsourced employment relationships. Many EORs have automated platforms, which have taken the human element out of the HR function. While this has allowed for a scalable business model for the EORs, in our experience, Chinese employees can feel a bit insecure about being employed by a company that has little relevance to their work. After all, their salary and social insurance are key factors in their livelihood – so trust in your employer must be addressed when using an EOR.

Industry relevance is another important factor for HR. The business model of global EORs is an adaptation of business process outsourcing, which revolves around many people sitting in an office environment with homogeneous HR issues. However, many industries expose employees to different risks and scenarios, requiring a tailored HR strategy.

Suppose supply chain and manufacturing are examples: China-based employees may need to travel regularly and visit factories. Just these two differences in the working environment should prompt the following impact analysis:

• Employer liability insurance: Is there adequate coverage for such activities?
• Travel expenses policy: Do we have the right policy to support this?
• Health and safety: Have we identified the environment we are sending our employees to and ensured they follow the correct procedures?
• The employee handbook: Does the handbook provide adequate coverage of the above and more about visiting factories?
• Overtime: Do we have the appropriate policy in place to control and compensate for overtime when traveling to factories?

If your China team member, employed under an EOR, engages in product development, it also implies addressing intellectual property implications.

What is Different about The China Desk by Kinyu?

The China Desk by Kinyu is a product and supply chain-focused EOR, which enables us to address the above challenges with the following strategy:

• Adding value instead of increasing cost: The China Desk includes a Virtual General Manager, where we engage with the employees and monitor client operations. China Desk employees also have access to The Kinyu Resource Platform, a network of strategic supply chain service partners and consultants to support their operations.
• Building a strong relationship with all employees hired under The China Desk: Given Kinyu’s focus on China and the supply chain, we understand and empathize with the personal, societal, and professional challenges that your team members may encounter. We prioritize engagement events to foster a sense of belonging and ensure that they are familiar with and trust the organization that employs them.
• Industry-focused approach: We have policies in place for product managers, engineers, and Quality personnel. We also can flag issues within the supply chain based on regular calls with the team members and address them promptly.
• Concentrated talent pools: Before using an EOR, you need the talent. With our industry focus, Kinyu can promote itself in the labour market by offering attractive products, supply chain, and manufacturing jobs. We are able to attract top talent for the benefit of our clients.
• Targeted HR strategy: Most Employers of Record will have a salary calculator to inform you about the administrative costs of employing staff on the ground. But Kinyu goes a step further, with a salary calculator that not only highlights administrative costs but also analyses your product sector and role requirements, and suggests the right salary package for the position you want to hire.
• Flexible Options: Not everyone is ready to hire full time. The China Desk has a Streamline option to allow companies to hire part-time personnel for trials and project work. This unique offering is only possible due to our supply chain focus.

Choosing the right EOR partner is paramount, ensuring compliance and effective workforce management. When implemented effectively, the EOR model empowers companies to streamline operations, reduce administrative complexities, and strategically manage their global workforce.

China and the supply chain are integral to Kinyu’s DNA. Beyond the administrative function, The China Desk aims to act as a comprehensive solution in the region. As an EOR, strategic advisor, and resource platform, it enables supply chain leaders to enhance supply chain efficiency and effectiveness on the ground.

What Should You Do Next?

• Work out your hiring budget with our supply chain-focused salary calculator.
• Download a case study to discover how The China Desk has benefited companies similar to yours.
• Schedule a meeting to speak with one of our team members.

The post How Outsourcing Hiring in China Can Add Value to Your Business appeared first on Kinyu.

The partnership sees Kno Global utilising The China Desk by Kinyu for operational support in China. Additionally, it leverages Kinyu’s manufacturing and supply chain network for business development purposes.

Clients using The China Desk will gain preferential access to Kno Global’s technology. This access will further enhance their social compliance efforts on the ground in China.

“Using the China Desk by Kinyu has given us renewed confidence in our China operations. Not only is it a great platform to support our existing operations, but Kinyu is embedded within China’s supply chain ecosystem, so we have been able to engage with factories and supply chain companies to further develop our business in what can be a challenging market,” said Marianne Hughes, CEO of Kno Global.

Kno Global’s platform is an effective tool for reducing “social audit fatigue” among suppliers. Factory workers can use the Kno Global platform to report grievances and suggest improvements to their work environment. Additionally, they can access learning modules for stress management. The platform not only enhances social responsibility and transparency for major Western brands but also improves worker retention in factories. This helps limit staff turnover, saving on recruitment costs and ensuring consistent quality levels in production.

Companies can also employ the platform in an office setting, providing a safe environment for whistleblowers – an increasingly important issue.

“We are really excited to deepen our cooperation with Kno Global in China, as social compliance and worker retention are such tricky areas for both brands and factories. This partnership advances Kinyu’s goal of becoming a people-centric supply chain company by providing the transparency and data that brands and plant managers crave,” said Benjamin King, CEO of Kinyu SCM.

The partnership with Kno Global strengthens Kinyu’s position as a leading supply chain-focused employer of record in China. Kinyu focuses on the people who operate global supply chains and offers a holistic HR solution via The China Desk to foreign companies, utilising its offices across China.

Contact us today to discover more about how The China Desk and the Kno Global solution can benefit you!

The post Kinyu Announces Partnership with Kno Global appeared first on Kinyu.

This post explores the “social” component of ESG, shedding light on the intricacies of social compliance in manufacturing, and emphasizing the need for changes in the current system.

What is Social Compliance?

Social compliance refers to the adherence of manufacturing practices to ethical, legal, and societal standards. It encompasses a range of factors, including labour conditions, human rights, workplace safety, and the overall well-being of workers. Essentially, it seeks to ensure that the social impact of manufacturing aligns with ethical and responsible principles.

So, What Does This Actually Mean?

First, the word “compliance” can have mixed meanings. Legal compliance is straightforward, as each country has its own labour laws, and it’s important to check if your suppliers are conforming to them. Examples of this include laws around statutory holidays, child labour, overtime, minimum wage, and age requirements. These are all aspects of HR administration and apply to every company in China.

However, ethical and societal compliance is adherence to standards beyond the explicit requirements of local labour laws. Such standards have been developed as part of programs by industry associations, key examples being BSCI by Amfori and SMETA by Sedex.

Above and Beyond the Legal Requirements

Let’s take factory dormitories as an example. There is no clear requirement within Chinese labour law about the provision of dormitories and their standards. However, most companies agree that overcrowding a dormitory with many workers is unethical. Therefore, the initiatives mentioned earlier may include requirements for the maximum number of workers per dormitory.

Worker safety and welfare is another key area of focus in social compliance audits, providing holistic monitoring where the crossover of labour laws and industry safety regulations may leave gaps. For example, consider fire safety: although there are specific regulations around fire safety for factories – and there is much talk of providing a safe working environment in Chinese labour law – adherence to these practices can be hard for buyers to assess. Social compliance audits include specific assessment areas to determine whether factories are meeting these regulations, ensuring worker safety. This approach helps to eliminate any grey areas regarding what should be done to maintain social compliance.

What Are the Challenges?

Challenge 1: The Box-Ticking Approach

One of the key challenges in China is that factories often view social compliance audits as yearly box-ticking exercises to satisfy foreign buyers’ requirements. Therefore, they focus more on passing the test than on providing holistic improvements to worker welfare.

Moreover, workers’ needs can vary massively in China, influenced by location, industry, and demographics. As a result, the budget allocated for audits could often be more effectively spent on targeted improvements for workers on site.

Challenge 2: Reneging on Improvements

In our experience, some improvements made to pass audits are often reversed shortly thereafter. The programs governing ethical and societal compliance are not nationally recognized or accredited, unlike certifications such as the ISO 9001. This means that compliance with these initiatives must be continuously assessed. Many brands incur additional costs beyond the audits to ensure factories continuously implement practices that score them a pass.

This means that only companies with considerable budgets can monitor consistent adherence to standards.

Challenge 3: No Mechanism for Whistleblowing

During social compliance audits, auditors interview workers to verify if they are following the factory’s policies. For example, if the factory states that they adhere to overtime regulations, the response from the workers on their average working hours may contradict this.

However, only a small random sample of workers are interviewed during audits. Although the interviewee responses are not revealed to the factory, their identities will be known to the factory management. Therefore, it does not provide a safe environment for the workers to speak out about non-compliant practices or serious problems such as workplace harassment and bullying.

Challenge 4: Who Pays?

As mentioned above, achieving social compliance comes with costs. Companies may incur expenses related to enhanced monitoring, audits, and implementing necessary improvements. Major brands, previously keen to showcase their corporate social responsibility (CSR) credentials, are now facing budget constraints due to rising interest rates and inflation. This may be on top of extra environmental initiatives that have started to become mandatory. This has led to many brands putting the onus of compliance onto their suppliers and using new EU regulations to reinforce this. Factories often find it challenging to absorb additional compliance costs due to already tight factory margins and the prospect of increasing wages in China.

Innovative Solutions

Fortunately, industry leaders are responding to these challenges. By focusing on the economic benefits of heightened worker welfare, businesses such as Kno Global, using their reporting software, are working with factories to improve worker retention and transparency on worker conditions at the same time.

For example, in China, growing economic prospects have presented new employment options for workers, such as becoming delivery drivers for companies like Meituan, which is popular due to its flexibility. This is leading to a mixed supply of labour, with increased worker turnover in factories proving costly. Therefore, to attract and retain workers, factories need to understand the needs and requirements of their workers. The push and pull factors can be unique in each factory environment. Therefore, using Kno Global’s reporting software is an effective way to tailor questions to each specific factory setting.

Removing the Audit Stigma

Overcoming audit fatigue is crucial for improving transparency within the supply chain. The Social & Labor Convergence Program (SLCP), a non-profit organisation, brings together brands, manufacturers, sourcing agents, and solution providers across multiple industries to improve data-sharing and realistic benchmarking. The signatories to the SLCP agreement have developed the “Converged Assessment Framework,” complete with guidance, tools, and verification technology, putting the power and responsibility into the hands of factories.

Although challenges remain, there is a proactive movement towards better self-management of worker welfare within the industry. Moving away from box-ticking and exam-style audits is crucial for transforming the perception of social compliance into one with real incentives and economic benefits. This “win-win” model is likely to appeal to manufacturers throughout China.

If you would like to know more about Kinyu’s involvement with worker safety, welfare, and our cooperation with Kno Global, feel free to reach out here or download a case study!

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