Foxconn, Samsung face dilemma with plan to cut overtime at Chinese factories

Both companies plan to bring down worker's overtime at their factories to within China's legal limits

Assembly line workers are logging 12-hour days to churn out the latest handsets for Samsung Electronics at a factory in Huizhou, China.

24-year-old Wang Hong Wei knows what it's like: He and about four to six others would collectively assemble 2,700 Samsung Galaxy S III phones each day at the factory run by HTNS Shenzhen Co. But they could never finish the job within normal working hours.

"They told us we could complete it in ten hours, but ten hours was not enough," Wang said when interviewed in late November. "Every day we kept working, but we couldn't finish."

Long working hours are often cited as one of the major labor law violations occurring at electronic manufacturers in China. But for many workers in the country, the excessive overtime is simply the norm, and even sought after. In exchange, employees receive higher salaries, and companies such as Samsung and Apple supplier Foxconn can ship out more product. But after facing increased scrutiny over working conditions in China, both Samsung and Foxconn have pledged to bring down workers' overtime hours over the next two years.

By July 2013, Foxconn plans to limit the overtime at its factories to the Chinese legal limit of 36 hours per month. Samsung also plans to do the same by the end of 2014 for its supplier factories in the country.

But meeting the goal will mean overcoming serious challenges, which if mishandled could lower the salaries for workers, many of whom are dependent on the extra wages to make a living.

"It will definitely be bad for us if they cut overtime," said Li Xiaoan, a Foxconn worker. "Then our money will be less."

At the Foxconn factory in Zhengzhou, China, workers are assembling Apple's iPhone 5. But already, employees such as Li said on Tuesday that demand for overtime hours at the factory has dried up.

"It's the low season," he said, referring to how demand for shipments of the iPhone 5 has fallen. Now Li works only eight hours a day, and occasionally sees overtime hours and every now and then. During the next few months, he expects his monthly wage will be around 2000 yuan (US$318), a little above the 1800 yuan base wage.

"When I first came here, I was making 3200 yuan, and working 10 hours each day, including two hours overtime," he said.

Labor protection groups are also aware that many workers want to keep their overtime, even as the groups have continually criticized Foxconn and Samsung for the long working hours. "I remember one worker told me, don't report on the overtime. If you talk about overtime, the companies will cut it," said Li Qiang, the founder of New York-based China Labor Watch.

But Li Qiang and others argue that the more serious problem is that workers' base wages are so low, they have no choice but to work long hours.

"It's not enough to live off of, so they have to do the overtime," Li Qiang said. "If Foxconn raised the base wages, and workers still did the overtime, then that would be a better alternative. Some workers may want the overtime, but others could choose to do something else, and have a life."

Foxconn appears to be aware of the dilemma, and is expected to raise workers' wages to mitigate the effects of the reduced overtime. Already the company is working on a "compensation package" to protect workers' pay, according to the Fair Labor Association, which has been auditing the factories for labor law violations.

Samsung is also researching measures to eliminate excessive overtime, but declined to offer details.

Despite the two companies' pledges, labor experts said they were skeptical Foxconn and Samsung will be able to fully reduce the overtime at their factories.

Not only do the factories have to take action, but so do vendors such as Apple, said Kalen Hua, a coordinator with the China Labor Research Center. To help bring down demand for overtime, Apple will have to give the factories a longer window to complete shipment orders, he added.

But another problem is that many workers tend to leave the factories in search for other jobs once the low season arrives. Often times this can exacerbate overtime hours for the remaining workers when shipments ramp up again.

"I don't know if they can guarantee that they will come through on this, but if they do succeed, then Foxconn and Samsung will be the first ," Hua said. "If they can take the lead on this, then they could influence other companies. Workers would also want to stay at Foxconn and Samsung."

Some hope to see changes soon.

"They should really think about the workers, and not just about the supply," said Wang Hong Wei, who left the Samsung supplier in Huizhou after only working at the factory for five days. Among his complaints were the exhausting work, the disrespect from management, unpaid wages, and the need to stand all day.

"It felt like the management there was almost inhumane," he said. "I hope the conditions get better for the workers who haven't left."

Copyright © 2012 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon