Each country in the APAC region has a unique history, culture, business customs and legislation.
It’s vital that multinational organizations remember this when planning a restructuring exercise across the region; what can be pragmatic and lawful in one country can be completely unacceptable in another.
Whilst there’s no substitute for expert local legal advice and cultural insight, we’ve developed ten tips to help you navigate the complex employment landscape when considering a workforce restructure in APAC.
1. BE AWARE OF THE CULTURAL CONTEXT AT THE OUTSET: What might appear to be a reasonable and appropriate approach, communication or document during the restructuring program in more employer-friendly jurisdictions like Hong Kong and Singapore, could be considered unacceptable, inflammatory and (in the worst case) legally invalid in more employee-friendly jurisdictions like China and Vietnam.
It’s important to take your time to understand cultural nuances across APAC, and ensure your workforce restructuring program is legally compliant and culturally appropriate.
2. RESTRUCTURE STRATEGY – COMPLIANT PROCESS OR ALTERNATIVE APPROACH? Any workforce restructuring program which requires a headcount reduction essentially gives you the choice of either following a strictly compliant legal process (or some form of alternative process, accepting the risks that this might trigger) and/or seek a commercially negotiated exit with the affected individuals.
The requirements for a compliant legal process vary significantly across APAC, from a light-touch in Singapore, to strict prohibitions on termination (unless the situation falls neatly within a permitted reason) in South Korea, and everything else in between. You therefore need to consider your restructure strategy carefully, decide on your appetite for risk and consider whether a regional, consistent, approach or a bespoke country-by-country program is most appropriate in the circumstances.
3. GETTING YOUR OWN HOUSE IN ORDER: Encountering unexpected administrative formalities can take time to address and frustrate your intended timelines, so it is important to ensure every aspect of the restructure that is within your control is considered and prepared before starting the restructure program.
For example, a Power of Attorney may be required, so that the people on the ground executing documents and holding employee meetings have the necessary authority from the local employing entity to do so. It is common in Thailand and Indonesia to have a Power of Attorney signed, stamped with the company seal/chop and potentially even notarized/authorized by the local authorities (and/or a foreign embassy, depending on where the signatory resides) to ensure the relevant people are legally authorized.
4. DECIDING WHO SHOULD COMMUNICATE THE RESTRUCTURE PROGRAM: This might simply come down to who is the best person to actually communicate the message to the employees in each country. Often, HR personnel are the most experienced people to handle restructuring meetings and ensure they run smoothly.
In many Asian cultures, however, employees should be shown the appropriate level of respect by having their manager or someone senior in the organization (or even both) attend the meetings to explain the business rationale for the restructuring. This is particularly pertinent in Japan or any APAC country where there are plans to exit a senior leader.
5. ENSURING THE RIGHT PEOPLE ARE ON THE GROUND: Getting the right person or people in the country, with the necessary legal authority to actually carry out the restructuring, is imperative. In Indonesia for example, there must be an Indonesian national present with the requisite legal authority (potentially acting under a Power of Attorney) to implement any termination, whether through a legal process or commercially negotiated exit.
Flying-in and flying-out (‘fifo’) of countries is common for business leaders and HR personnel across APAC, but it is not necessarily legally compliant. Some countries, like Thailand, have criminal sanctions for conducting any kind of work within their borders without a work permit.
6. ENGAGE WITH THE LOCAL AUTHORITIES WHERE NECESSARY: It can either be legally required or recommended, for businesses to engage with local labor authorities when implementing or even considering a restructuring program. In Malaysia for example, you must give the Labor Authorities advance notice of any redundancies. In China, it can be a legal requirement (depending on the number of employees being terminated), or recommended from a relationship point of view, to report a redundancy plan to the local labor authorities, and the process will vary from Province to Province.
These obligations can sometimes extend beyond the present restructuring program; in Singapore, certain businesses are required to notify the Ministry of Manpower once they have retrenched five or more employees in any six-month period.
7. NUMBER CRUNCHING: Whilst mandatory severance payments are the starting point for terminations, there are other factors which can influence the total exit package. For example, we have seen individual enhanced severance agreements in China which provide for severance amounts that far exceed statutory minimums for certain individuals. Moreover, if you choose to negotiate a mutual termination with the employee, then an additional or “ex gratia” payment is usually required to close the deal.
In countries where unilateral termination is a low risk alternative, such as Singapore, you can expect to pay a lower ex gratia amount than in countries like South Korea, where unilateral termination is strictly limited. The actual payment date of any termination payments also needs to be borne in mind – in Thailand, late payment can result in criminal sanctions.
8. 翻译(“TRANSLATIONS”): Whilst your business might operate in English on a day to day level, any communications and especially legal documentation relating to the restructure program may need to be translated into local language in order to be legally valid. This consideration is particularly pertinent in countries where English is not the official language, such as China, Thailand, Indonesia and Malaysia.
This requirement often dictates the creation of bi-lingual documents, with the local language prevailing, to ensure that local legal requirements are met but an English-speaking HQ from can still maintain oversight.
9. COMMUNICATIONS ARE KEY: A uniform message is often helpful for consistency when communicating regional or global restructuring exercises, but using the same wording in each jurisdiction may expose you to risk, depending on the content of the message.
It can be important to keep the language less definite in countries where consultation is required, like South Korea, and explain that you are proposing to reduce headcount, so that the decision cannot be said to be predetermined. In others, such as Singapore, there is less risk in stating that a certain number of redundancies will be taking place.
10 UNDERSTAND YOUR KEY OBJECTIVES AND THEN BE FLEXIBLE: Whilst your preferred Plan A can often be successful (and it is more likely to be if it has clear goals, outcomes and processes), you will need to be flexible to meet local legal, cultural and practical requirements. Sometimes a Plan B is needed in the event of unforeseen circumstances, or should be there in the background as a viable alternative.
Think about the local business, the personalities involved, and what the potential risks could be in each location. If the corporate world has learnt anything from the COVID-19 pandemic, then it is that the best laid plans need to be adaptable to the world in which we actually find ourselves
For global organisations, undertaking a RIF (Reduction in Force) is an arduous and potentially risk-prone task. Having a structured workflow that covers all the critical stages in the process will save you time and help you mitigate risk.
We have created a workflow roadmap to guide you through planning and implementing your Reduction in Force (RIF). It covers the four key stages: Strategy, Preparation, Implementation and Post-Completion.
Our roadmap includes practical recommendations for the essential processes in each stage, along with useful insights for your chosen region (e.g. APAC or Europe) drawn from the extensive experience of our global HR team.