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Last updated: April 24, 2014 2:34 pm
A local government in China has determined that the world’s largest manufacturer of sports shoes which supplies Adidas and Nike should reimburse striking workers for underpaying their pension contributions over many years.
Thousands of workers at Yue Yuen Industrial, which also supplies Asics, Puma and New Balance, have been on strike for 10 days in the southern city of Dongguan over claims that the company has not been paying the legal level of contributions.
In a survey conducted by its official trade union, Dongguan government said Yue Yuen should reimburse workers who had claimed that it had calculated pension contributions as a percentage of their base wage instead of total income.
The scale of the strike in Dongguan, a huge manufacturing hub across the border from Hong Kong, has been unprecedented, with as many as 40,000 employees refusing to work on some days. The dispute comes at a difficult time for Dongguan, as the city’s image has recently been tarnished by an anti-prostitution campaign.
Last weekend, Yue Yuen said it would start paying pension contributions based on total pay, but the offer has not convinced many employees. While the Dongguan government view echoes the company’s own proposal, experts said it was a rare example of a Chinese trade union actually trying to help workers.
“This official response . . . creates an important precedent,” said Li Qiang, director of China Labour Watch, which obtained the document. “Unpaid social insurance is a pervasive issue in most Chinese factories, including suppliers to major international brand companies.”
Geoff Crothall of China Labour Bulletin, another rights group, also welcomed the move, saying that while trade union documents tended to be pro forma, “this one does at least try to address the actual issue”.
“The Dongguan trade union federation is to be commended for taking the issue seriously and looking for solutions. The company too seems to be engaging in good faith,” said Mr Crothall. “But at the same time, we have heard the police presence around the factory is increasing and there is more pressure on workers to accept the deal on the table. Looks like the authorities are using both carrot and stick.”
Two labour activists who were monitoring the situation were detained by authorities this week. Zhang Zhiru, head of the Chunfeng Labour Dispute Service Centre in Shenzhen, was released on Thursday after being held by state security agents. His colleague Lin Dong was detained by police and has not been seen since Tuesday.
Meanwhile, Adidas has started shifting orders away from the factory in south China to minimise the impact of the strike, but it stressed that it was “not pulling out” of the Dongguan facility. Nike and Asics did not respond to requests for comment. Puma said none of its products were made at the Dongguan plant.
The Dongguan unrest comes as the balance of power in the labour force gradually shifts away from factories which are finding it harder to hire workers. Demographic and social changes have made young Chinese less willing to work in factories, while social media and smart phones have made it easier for them to compare conditions and move to a better job when they are unhappy with one factory.
In recent months, Walmart and IBM have both faced strikes in China. A Toyota spokeswoman on Thursday confirmed that there had been a small strike at one of its suppliers in Guangzhou, but that the issue had been resolved by Thursday.
June 2013: As wealth and consumerism reach China’s most remote cities, foreign brands are venturing far from Shanghai and Beijing hoping to win over millions of new consumers. The FT’s Patti Waldmeir visits two lower tier cities in central China and looks at how Adidas is expanding in the far outposts of the Middle Kingdom
At Yue Yuen, George Liu, executive director, on Thursday said some production lines were operating again. But activists and workers said the strike was continuing as many employees refused to accept the offer.
“The factory has a black heart. We are asking for the money that belongs to us,” said one worker. “We didn’t ask them for anything extra. They set up the factory to make money, but we left our homes to come here to work and make money too.”
The Yue Yuen workers claim the company has not been paying the level of pension and housing allowance contributions required by Chinese law, saying payments should have been based on total pay. Most factory workers earn much more than their base pay because of overtime and other remuneration schemes.
Yue Yuen says regulations are vague on how contributions should be calculated, but several labour experts said base pay was not supposed to be the standard.
Jonathan Isaacs, a Chinese labour law expert at Baker & McKenzie, said Chinese law and local regulations made clear that factories in Dongguan should not be using base pay as the basis for calculating pension contributions.
An administrative notice from the Dongguan government makes clear that this is the case, and the Dongguan union survey appears to reach the same conclusion.
Additional reporting by Julie Zhu
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