Taipei, Tuesday, September 23, 2014 16:28 (GMT+8)
Commentary: Foxconn faces more labor problems
Ninelu Tu, Taipei; Jackie Chang, DIGITIMES [Friday 21 June 2013]

To show the importance of labor rights, Apple became the first IT company to join the Fair Labor Association (FLA) in 2012 and through the association, Apple began inspections of its major supply chain partner, Foxconn Electronics (Hon Hai Precision Industry). Although Foxconn has been enthusiastic about cooperating with the inspections and implementing changes, the firm now faces the problem of lowering weekly work hours to 49 per week, including over time, before July 2013.

For Foxconn, cutting work hours to 49 hours per week is not easy, as production has been steady and lowering working hours means the firm needs to hire more workers to fill shifts. This could pose a problem for the firm as the labor market in China has been changing and it has been challenging to find production line workers. In addition, workers actually do not care about working overtime as long as they get paid. But with lower working hours, firms need to find strategies to maintain salary levels for workers.

In fact, overtime pay is an important part of the salary structure among Foxconn workers. Commonly overtime in China on weekdays is 100% of standard pay and 200% on weekends. Overtime pay during national holidays such as the Lunar New Year holidays is 300%. Lowering the number of working hours means falling salaries for workers, hence it would be difficult for Foxconn to keep workers from quitting. To maintain cooperation with Apple, Foxconn has to lower working hours. The problem lies on the profit-sharing between Apple and Foxconn. If Apple is not willing to share more profits, Foxconn has to sacrifice its own profits to lower working hours and maintain salaries to keep employees. But to do so is difficult as ODM firms usually have slim profit margins.

Although automated processes may be able to take some pressure off Foxconn, it cannot fully replace human resources. In addition, if Foxconn adopts fully automated processes, then the firm cannot create employment opportunities and may not be welcomed by local governments in China.

With growing globalization, labor relations have become a complicated issue. Firms cannot use a universal strategy to deal with local workforces.