Reality check at China’s Huawei boosts wages
BEIJING (Caixin Online) — Competition for fresh-faced university graduates is heating up in China’s telecom sector now that electronics equipment giant Huawei Technologies Co. has significantly hiked salaries for certain white collar employees.
The pay decision is also a signal that the world’s largest manufacturer of telecom gear remains committed to an ongoing expansion that encompasses new arenas, such as consumer smartphones.
First-year worker and junior executive paychecks were pushed up by as much as 35% in August following a July 29 announcement by the Shenzhen-based company.
Just a week earlier, Huawei’s biggest domestic rival, ZTE Communications HK:763 -0.13% CN:000063 -2.18% ZTCOY -0.27% , unveiled a new equity incentive plan designed to retain key white collar workers. The company said it would distribute about 103 million company shares as bonus compensation for 1,531 select employees.
Huawei’s pay hikes not only upstaged ZTE’s highly touted incentives program but also brought its salary scale a notch closer to levels offered in the country by foreign competitors including telecom multinationals Ericsson, Nokia NOK +0.25% FI:NOK1V +1.08% , Siemens XE:SIE +0.26% SI +0.12% and Samsung KR:005930 +0.97% SSNLF +2.50%
Probationary salaries for 2014 college graduates hired by Huawei will rise to more than 9,000 yuan ($1,470) per month from 6,500 yuan USDCNY -0.01% . Master’s degree graduates will be offered more than 10,000 yuan a month to start, up from 8,000 yuan, the company said.
Altogether, Huawei said it would boost the companywide payroll by more than 1 billion yuan. Performance-related pay hikes will range from 25% to 30%, depending on the type of work.
Management thus hopes to attract and retain employees in a competitive labor environment where Nokia, Siemens and other foreign companies generally offer new bachelor’s degree graduates at their China divisions between 8,000 and 10,000 yuan per month, said Wei Xiaokang, a headhunter for Beijing-based Offercome, which focuses on matching jobs and job seekers in the Internet industry.
“Huawei’s workplace environment is more intense than that of Ericsson and other multinational companies,” Wei said. “But the pay is lower.”
Huawei has also been fishing for talent in ZTE. Indeed, according to a ZTE source, the Huawei pay increases “drove ZTE (management) crazy” because in the first half of 2013 “a number of people” left ZTE for jobs at Huawei.
ZTE employs an estimated 50,000 to 60,000 people, one-third as many as Huawei.
“Raising junior executive salaries on such a large scale, as Huawei has done, undoubtedly marks a significant change in remuneration policy,” said Wei.
And it’s a surprising change for the company’s labor policy considering the weak business atmosphere in the telecom industry, where of late many companies have been downsizing, trimming costs and reducing product lineups.
Financial strength
Huawei was apparently in a better position to raise wages than its rivals thanks to high revenue growth during the first half of 2013, says Deutsche Telekom International Consulting’s director in China, Fang Honggang.
Privately held Huawei, which releases only sales revenue and net profit margin figures in its financial statements, reported “relatively optimistic… accounts receivable, bad debt treatment and possible risks,” Fang said.
Huawei reported sales of 113.8 billion yuan for the first six months of the year, up 10.8% over the same period of 2012. Moreover, company management forecast a 2013 net profit margin of 7% to 8%.
A Renmin University professor who also serves as a Huawei corporate management adviser, Wu Chunbo, said the company’s first half 2013 net profit was 14.3 billion yuan.
With the company on a sound financial footing, management was well prepared to turn attention to making junior executive salaries more competitive, a Huawei representative said.