Case Studies

The employment relationship at Foxconn China

The Taiwanese-owned Foxconn Longhua factory (or campus, as it is often referred to), located in Shenzhen in China, is reported as being one of the largest contract manufacturers for electronic goods – and indeed the largest factory – in the world (Branigan 2010). Covering more than a square mile, the facility provides dormitories for workers as well as other everyday facilities such as shops, banks and swimming pools. In 2010 more than 8,000 people a day were reported to apply for jobs (Moore 2010) and in 2012 around 240,000 people were employed there (Economist 2012). Across China, Foxconn is a huge employer, employing around 1.4 million workers at 28 different sites (Economist 2012). The workers in these factories are mainly migrant workers from rural areas. At the time of this case study, wages were said to be above the National Minimum Wage (NMW) at 900 Yuan (approximately £91) per month in 2010 (Branigan 2010) and this was later reported to have increased, with one report suggesting an average 21.2 per cent increase in 2011 (Reuters 2012).
In 2010 news broke on a worldwide scale of suicides taking place in the factory. Reports suggested that around 18 workers had attempted suicide with 14 actually dying (Zhang 2012). Despite the tragic nature of these suicides, they might have gone relatively unnoticed, except for the fact that Foxconn was manufacturing Apple products such as the iPhone and iPad. Hence, we have ‘newsworthiness’.
News reports suggested that factory staff were working very long hours in repetitive and monotonous jobs to make enough money to live. Although above the NMW, wages were insufficient and people were working vast amounts of overtime to make enough money to survive, often working up to 120 hours extra a month and averaging 70 hours of work per week (Moore 2010). It was reported that staff were ‘burning out’ due to the long hours and repetitive nature of the work (Moore 2010). Workers were forbidden to talk during their long shifts and often felt lonely and isolated, working on a compound a long way from home (Zhang 2012), and there were reports of under-age workers (Smedley 2013).
Nevertheless, despite these apparently appalling conditions, some workers say that conditions and wages compare well with other manufacturers (Moore 2010), and writing in 2012 the Economist reported that workers appeared relatively content, despite sleeping eight to a dormitory and there being safety nets to prevent suicide attempts (Economist 2012). The ‘better than average’ working conditions may well provide a clue as to why people continue to apply for jobs there. It may also be due to the looseness of the labour market (Torrington et al. 2008, as discussed above) in rural areas of China; people desperate for employment will take what work they are able to get.
Since the suicides in 2010, there have been a number of protests at Foxconn campuses across China, with workers demanding better pay and working conditions. These protests have ranged from suicide threats (Reuters 2012; Zhang 2012) to demonstrations and strikes (Zhang 2012). Reports of the situation at Foxconn were so bad and the publicity so incriminating that Apple asked the Fair Labor Association (FLA) to set about investigating the set-up there. The FLA spent almost a month gathering both quantitative and qualitative data, including making site visits. In March 2012, the FLA produced a wide-ranging report identifying four main areas for improvement (Fair Labor Association 2012a):
  1. Working hours: these were reported as exceeding the ‘FLA Code Standard and Chinese legal limits’ (2012a: 2) with some workers working more than seven consecutive days without a 24-hour break.
  2. Health and safety: workers ‘felt generally insecure’ (2012a: 2) and there was a concern about aluminium dust.
  3. Industrial relations and worker integration: the FLA found that workers were ‘largely alienated, in fact or in perception, from factories’ safety and health committees’. The FLA also suggested that as managers nominate the candidates for the worker representatives, the committees, which tend to be reactive rather than proactive, ‘may not be truly representative of the workers’ (2012a: 3).
  4. Compensation and social security insurance: although wages were above the legal minimum, the FLA found that ‘14 percent of the workers may not receive fair compensation for unscheduled overtime’ (2012a: 3) as overtime was paid in 30-minute blocks. Therefore, 29 minutes and less went unpaid and workers completing 58 minutes would be paid for only 30 of these.
In August 2012, the FLA announced that progress had been made and that ‘[O]ver 280 action items [had been] completed on time or ahead of schedule’ (Fair Labor Association 2012b). In September 2012, however, there had been more news of unrest at the company when fighting broke out among workers in the Taiyuan factory in Northern China, which employs around 79,000 workers, and the plant was temporarily closed (Arthur 2012). Managers and police were reported as saying that this was not work-related, however it followed an earlier ‘rampage’ by workers in the Chengdu plant (Arthur 2012) and a refusal to work (the company denied reports of a strike) at its approximately 200,000-strong factory in Zhengzhou in October (Hille 2012).
In 2013, Foxconn announced that it was introducing measures to increase employee representatives (China Post 2013) and it was described as the first Chinese company to introduce a truly independent labour union, the Foxconn Federation of Labour Unions Committee (Hille and Jacob 2013). For Foxconn workers, this might be seen as a positive step forward, however it is debatable to what extent this new initiative will improve their representation in any meaningful way due to management involvement in the way in which representatives are chosen (China Post 2013; Reuters 2013). This is not unusual in China. We discussed earlier in the chapter how Chinese trade unions are embedded within the organization and there is little (if any) encouragement to resist management initiatives. Although the company was said to be seeking the help of the FLA to train workers in how to vote for their union representatives, there is still some doubt as to the independence of the union. As Hille and Jacob (2013) point out, the chairman of the union is apparently a close and trusted member of the management team.
The saga of Foxconn in China refuses to go away. Apple has been affected by the bad publicity and the media refuse to give up their pursuit of a ‘shocking’ and newsworthy story. In December 2014, a BBC TV documentary reported that the working condition standards for Foxconn workers put in place by Apple following the well-publicised suicides were in fact still being breached and, in general, conditions at Foxconn had not improved. The footage cited examples of long working hours, extended shifts without breaks and exhausted workers (BBC 2014). Apple was quick to refute these claims with its senior vice-president reported as saying that the company is ‘deeply offended by the suggestion that Apple would break a promise to the workers in our supply chain or mislead our customers in any way’ (quoted in The Guardian 2014). Nonetheless, Apple and Foxconn remain in the gaze of the public, perhaps demonstrating the power of the press.
Source: author
Q1. Why do you think there is unrest at the Foxconn factories in China?
Q2. Discuss the extent to which having the following might improve workplace relations:
  • a works council
  • a trade union
Q3. Consider the discussion of trade unions earlier in the chapter. To what extent does the Foxconn Federation of Labour Unions Committee fit with this description? Give examples in your answer.
Q4. Drawing upon your understanding of ideological perspectives discussed, how can you interpret the policies and practices of the Chinese Government? Provide examples in your answer.
Q5. What role, if any, do the media play in pressurizing management to improve working conditions?
Q6. What might you as a HR manager do to improve the relationship between workers and management?

‘No constant accessibility’: The Volkswagen Group company agreement

This case study presents a company agreement between the managers and the works council at Volkswagen (VW) Wolfsburg in 2011, and the strategic importance of this is discussed. The case study starts by providing an overview of the basic set-up at the headquarters of VW in Wolfsburg before going on to present the main features of a company agreement in 2011 between the managers and the WC around the issue of restricting the constant, out-of-work hours, availability of employees.

Set-up of the VW production site in Wolfsburg

The Volkswagen Group, with its headquarters in Wolfsburg, Germany, is one of the leading automobile manufacturers in the world and has a worldwide brand known for its reliability and safety. In 2014, VW’s share of the world car market amounted to 12.9 per cent and group sales revenues totalled €202 billion, with profit after tax reported as €11.1 billion (VW 2014). The company employs approximately 592,600 people worldwide, who are either involved in producing nearly 41,000 vehicles or work in other fields of the business (VW 2015).
The production site in Wolfsburg employs around 67,000 people and the works council consists of 75 members. In March 2014, the election for the WC showed the following results based on a voter turnout of 64 per cent:
  • 67 of the members of the works council are members of the Industrial Union of Metalworkers (IG Metall)
  • 3 members are members of the Christian Union Metal Industry
  • 5 members are organized in a non-union capacity, in the Employees Interest Group
  • 18 (24 per cent) of the new elected members are women. (Wolfsburger Allgemeine Zeitung 2014)
As discussed above, although trade union membership is not a prerequisite for works council membership, these figures demonstrate that a large proportion of WC members at the VW Wolfsburg site are trade union members. We now turn to the issue of out-of-hours accessibility at VW Wolfsburg.

The problem of having to be constantly available

In today’s world, with the growing number of mobile devices, employees can be accessible to management around the clock. There is a growing flexibility in working hours and workplace, especially for those employees who are in a position to decide where and when they want to work and enjoy the advantages of working away from the office. There is, however, another side to the flexibility coin as managers are able to access their employees outside of normal working hours; in fact, through company mobile phones and Blackberrys they can be contacted 24/7. While self-determined flexibility is welcomed by many people as they see it as a way to create a better work–life balance, employer access to staff is further criticized as work–life boundaries become blurred (see Chapter 6). It is not always clear whether companies want their employees to be accessible all of the time or whether employees want to be informed and able to react all the time.
A study by the University of Freiburg found that constant availability can lead to increasing pressure on employees; conflicts between work and life are growing and lead to more stress (Pangert and Schüpbach 2013). It is, however, not only employers forcing employees to be available all the time, but it is also employees who are checking their work emails at home, over the weekend and while on holiday. Leslie Perow from Harvard University asked around 1,600 managers and professionals about their smartphone use habits: 70 per cent checked their smartphone each day within an hour of getting up, 56 per cent did so within an hour before going to bed and 48 per cent checked it over the weekend (Perow 2012). A study drawn by the German Trade Union Association (DGB) showed in 2012 that around 27 per cent of all employees have to be available in their free time (Carstensen 2015).
The Trade Union for Metal Workers in Germany asked around 500,000 employees about the flexibility of working hours. In the study, most employees wanted flexible work arrangements but with clear and transparent regulations and limitations (IG Metall 2013). It is perhaps worth noting that this is the union with the largest representation on VW Wolfsburg’s works council.
At VW Wolfsburg, it is reported that employees were angry and frustrated by a ‘blurring of the dividing line between workplace and home’ (FT 2011). The works council spokesperson, Hans-Joachim Thust, commented on how family life might be disrupted by Blackberrys and mobile phones and might also lead to employee ‘burnout’ (Independent 2011). He was quoted as suggesting that ‘new possibilities of communication also contain inherent dangers’ (Thust, quoted in Independent 2011). It is within this context that the WC raised the issue with managers at VW Wolfsburg.

The company agreement on employee accessibility at VW Wolfsburg

In December 2011, the managers and works council at VW Wolfsburg were party to a formal company agreement regarding the accessibility of employees through their company smartphones. With this company agreement, all employees who come within the remit of the works council (i.e. not executives of the organization and other senior personnel) and who have a company smartphone are no longer accessible 24/7. The smartphones have been programmed so that employees are only able to receive company emails between the hours of 07.00 and 18.15, although the telephone function is always working. Heinz-Joachim Thust, from the WC, stated: ‘the new options for communication also harbor certain dangers and we want to meet these challenges. The company agreement has already been positively received’ (quoted by Heise 2011). As for the works council, it is now satisfied that employees do not have to be available around the clock and can rest once the job is done (Heise 2011). They are no doubt pleased that a VW spokesperson, Markus Schlesag, is reported to have said that VW has to ensure a balance between reaching staff all the time and protecting their private lives (Bloomberg 2011). On the face of it, this would appear to be a good result for the employees.
At the time of writing this case study and despite more recent issues faced by VW (such as the notorious carbon omissions ‘scandal’ in 2014), the company agreement was still valid. In 2011 when it was signed, the coverage of the agreement was about 3,000 employees (of 590,000 worldwide), that is, all pay-scale employees in possession of a company smartphone at six different sites in Germany. The number seems small, but the strategic impact is not only about the number of employees covered, it is also about the commitment of the management and the scope of this step.
Source: author
Q1. How would you describe the employment relationship in this case study (remember Germany is seen as a successful economy, despite having employment relations practices, as described above, in place for many years!)?
Q2. With regard to people management:
i. To what extent do you think an active works council impacts on strategic HRM decision-making and on the formulation of policies and practices?
ii. Thinking about the different actors (especially HR managers and WC members), can you identify their parallel and/or rival interests in the field of people management?
Q3. The number of employees who are covered directly by this company agreement is relatively small. With this in mind, to what extent do you think that company agreements like this have a strategic impact at national and/or international business levels? Give reasons for your answer.