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backGLOBALtalk July, 2012
Comparative Employment Risks in the BRIC Countries
In the previous issue of HR Connect, Asia Pacific, we presented the first of our three-part series examining the People Risk encountered by companies operating in BRIC countries1. In Part 1, we discussed the People Risk associated with recruitment in BRIC countries. This month we present Part 2 in our series and focus on the People Risks encountered in employing and redeploying people in BRIC.
Employment Risks
The risks of employing people in BRIC countries can best be understood by taking a close look at employment regulations, labor relations, workforce productivity, and employee engagement and retention in these countries.
Among the BRIC cities analyzed in our research, the Russian cities appear to have substantially higher employment risk when compared to the other three countries while China has the lowest risk. Figure 1 shows the overall employment risk for the major cities in each of the BRIC countries.
Government Effectiveness, Laws and Regulations
Among factors affecting employment risk, government effectiveness and the legal and regulatory system appear to be the most important. All four countries are plagued by corruption and opaque government policies and regulations. Consequently, high risks in employing people in these locations arise due to the lack of clarity and inconsistencies in employment regulations. Often times, external counsels or consultations are required in order for companies, especially the foreign ones, to navigate their way through myriad complicated and inconsistent employment laws.
While ineffective government is often a norm in most developing countries, some developing countries are making it an exception, counting on government effectiveness to improve their overall development. Chile, for instance, has both an investor-friendly policy as well as an effective government. The small African nation of Botswana is another example of a lowly developed country with a less corrupt and much effective government than their neighbors.
Nationalism. Nationalist sentiment is another issue that could work against foreign companies in BRIC, where foreign companies may find themselves at a disadvantage as compared with local firms. Such sentiment seems stronger in Russia, which has a long history of strong nationalism as reflected in a series of violent anti-migrants incidents in recent months. Nevertheless, nationalist sentiment is almost as worrying in other BRIC countries. In India, for instance, regional political power sometimes pressures companies to hire "sons of the soil" ahead of workers from other regions. China has also witnessed public protests aimed at foreign businesses under the pretext of nationalism. In addition, politically-motivated interference in labor disputes is also common in BRIC.
Overall, current evidence of corruption and government ineffectiveness is considered to be most prevalent in the Russian cities; whereas Mumbai, Shanghai and Beijing received lower risk ratings (see Figure 2).
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Source: Aon Hewitt - GAI
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