So here you are, at the end of the line.

You have taken all the steps you can take to reduce your costs, as illustrated by the recent  Watson Wyatt survey on HR programs (below).

Business continues to fall, and now comes the next step: downsizing and staff termination.

This is likely to be the most difficult task facing HR professionals in China right now, especially when staff termination, or its euphemism ‘employee separation’, is something that you can get really wrong if you take a simplistic approach to it.

The issue is the strong tendency in China for personal and professional lives to overlap. Often there is little difference between the two, but this is one area where a strict demarcation is required between your role in HR, and your friendship with the staff that you will be letting go.

This is especially true since the introduction of the new China Labor Law. If you don’t think this one through, not only will you cause yourself psychological distress, you will also take the risk of a fine from the government, or a protracted legal disagreement with former employee(s).

Letting Go

The new labor law is informative on the subject of terminations. It specifies two types: termination with notice, and termination without notice.

Termination without notice is permitted if an employee breaches company discipline, such as if they break written employment rules, commit a crime, or damage the company in some way through their own actions.

Termination with notice is allowed if the staff member cannot perform their job, and has been moved to another role, or has been given training which has not improved their performance. But what is more important here is the fact that the new China labor law allows companies to terminate staff with notice when major changes have occurred in the “objective circumstances” of the company.

No one seems to be that clear about what this means exactly but it certainly would apply if you are facing the possibility of bankruptcy.

Planning Ahead

The issue of terminating staff is like any other issue that you have to deal with. It needs to be thought out beforehand, and it needs a plan, or should I say two plans.

The first plan simply specifies who exactly is going to be terminated. The process that you use to arrive at a cut list is entirely an internal matter, and this is something that can be dealt with by HR in conjunction with line managers and management.

This process needs little introduction but it should be noted that when you undertake mass layoffs of more than 20 people, or 20% of your total staffing, you need to inform the union beforehand, consult with employees, give 30 days notice, and report your plans to the local government authorities.

If you have dealt with the administration issues then you can move on to the second plan, which is the more important one. This is the plan that you will use for the day that you will do the actual firing.

You need to anticipate the various contingencies, and sense the responses that you will receive. The objective is to have a professionally managed meeting that ends the business relationship with the staff member, without the angst involved in a long-winded explanation of the whys and the wherefores.

It may sound callous but professionals who have done this before will tell you that the cut has to be clean and swift, for the sake of both parties, not just to relieve the management of any potential distress. It’s a two way street; one that I have journeyed before, on the receiving end. The company should definitely look to avoid a costly labor dispute, but at the same time staff should be spared the pain of hoping against hope for a possible reprieve.

The best advice that I have seen on this is to call the staff together in one place, and break the news to them one by one in a separate private area. Your objective should be to listen to what they have to say but not get involved in a defense of the company’s decision.

Recognize their pain without engaging in too much cloying sympathy. Absorb their emotions and allow them to express themselves. This is not about you so no one should have to hear about how this happened to you in the past. At all times maintain a positive tone, but tell them that it is definitely over. Emphasize how they will be able to get past this, and get a new job. Once they appear calm then discuss the severance package.

Finally, get them to sign the separation agreement on the spot. If they are not happy with the amount, send them to the finance department, and move on to the next person.

If you do it this way you will get through what I would hope would be the roughest day of your life.