Why Chinese State-Owned Enterprises Never Say “Layoff”

1

I once saw a transfer notice.

A4 paper. Song typeface. Size three. Red seal from Human Resources. It said: Due to work needs, Comrade Zhang San is transferred from Marketing to the Logistics Service Center. Position: General Affairs Officer. Salary will follow the new position standard. Date of issue: Friday. Report to work: Monday.

Zhang San had worked in Marketing for eleven years. When the notice arrived, he was revising a bid. He folded the paper twice, put it in his trouser pocket, and kept working. At eight that evening, he went downstairs to smoke. Halfway through the cigarette, he took the notice out and read it again. Then he texted his wife: Working late. Don’t wait for dinner.

He did not go back to Marketing. He went to Logistics. The office was in the basement. No windows. His desk sat next to the photocopier. Every ten minutes, the machine beeped. He listened to that beep from 8:30 to 5:30.

In the third week, he resigned.

No one forced him. The transfer was legal. The salary change followed the system. The work assignment was a normal need. He could not point to a single violation. He just felt that sitting beside the photocopier, listening to the beep, drained his life minute by minute.

2

How hard is a direct layoff in a central or state-owned enterprise?

Article 41 of the Labor Contract Law lays out four conditions. A company can conduct an economic layoff if it is reorganizing under the Enterprise Bankruptcy Law, faces serious production and operating difficulties, changes production or adopts major technological innovation, or adjusts its business model. If the company lays off twenty or more people, or fewer than twenty but ten percent or more of its workforce, it must explain the situation to the union or all employees thirty days in advance, listen to opinions, and report the plan to the labor administrative department.

That is the legal layer. In a central or state-owned enterprise, the process is longer. A department submits a request. Human Resources reviews it. A responsible leader signs. The general manager’s office discusses it. A superior unit approves it. There is a stability assessment and a public opinion contingency plan. A fast cycle takes three months. If any link stalls, the whole plan restarts.

Even after the process clears, there is the money.

Economic compensation follows years of service. One month’s wage for each full year. Six months or more but less than one year counts as one year. Less than six months, half a month’s wage. If the monthly wage is more than three times the local average monthly wage from the previous year, it is capped at three times, for a maximum of twelve years.

An employee with twenty years of service, laid off legally, receives twenty months’ wages. At ten thousand a month, that is two hundred thousand. Ten people, two million. One hundred people, twenty million. Add payment in lieu of notice if the company did not give thirty days’ warning. Add possible arbitration and litigation costs.

If the employee resigns, the company pays nothing.

That gap drives the behavior.

3

Money is one reason. Another is the system itself.

I worked in a municipal state-owned enterprise that had been restructured from a public institution. A group of old employees had followed the leaders out of the government agency. Their establishment status, relationships, and benefits were tangled together. One old comrade had thirty-five years of service and three years until retirement. Every day he came to the company, drank tea, read the newspaper, and went to the cafeteria for lunch. His position was called “Researcher.” He had no research tasks. His salary was twice that of an ordinary employee.

If you lay him off directly, what happens?

He will not sign. He will go to the old leader who brought him out. The old leader may be retired, but the old leader’s child still works in the company. The child will go to the current leader. The current leader will think: To remove one person, I offend a whole chain. Is it worth it?

No.

So he waits. He waits for retirement. After retirement, the position disappears. The establishment returns. No compensation. No offense.

Time trades for space.

4

Another reason stays off the record.

Leaders of central and state-owned enterprises carry administrative ranks. Their assessment covers profit, stability, public opinion, and a bottom line: no large labor disputes.

Have you seen people holding banners outside a state-owned enterprise? I have. A dozen people in work uniforms sat at the company gate. The banner read: “Give us back our hard-earned money.” Security stood nearby and did not move. Police came and did not move. Finally, the deputy general manager came out, invited them to a meeting room, and talked for six hours.

After that, the deputy general manager was transferred to a sinecure. His career was over.

Later leaders learned. Do not lay off. Do not touch. Do not intensify. If someone wants to leave, let them leave. If they do not leave, wear them down. Wear them down until they leave.

The system rewards the quieter path.

5

Reform has tightened the screws. The total wage bill is linked to profit. Profit rises, wages rise. Profit falls, wages fall.

One example. A secondary company of a central enterprise. Last year, profit fell fifteen percent. The total wage bill fell with it. Headcount did not. The year-end bonus for on-duty employees was half of the previous year.

This year, the company began “optimization.” No layoff notice. Only “last-place adjustment” in every department. Every department must name one person whose annual assessment is “needs improvement.” That person is transferred. After transfer, salary follows the new position. The new position is usually logistics, archives, or customer service. The salary is usually sixty percent of the original.

No one says “you are laid off.” Everyone knows the goal.

6

How do they push? These methods are common.

Performance ranking. Assessment standards tighten. Ninety points used to be excellent. Now ninety points is passing. The last place used to be safe. Now the last place must be adjusted. One talk, two warnings, then a transfer.

Transfer and pay cut. From a core department to a marginal one. From management to operations. From a role with bonuses to a role with basic salary only. The gap in treatment pushes most people out within three months.

Cold violence. Meetings exclude you. Important work skips you. Colleagues stop inviting you to lunch. You sit at your desk, and no one speaks to you all day. You become invisible. That feeling bites harder than a pay cut.

Competitive re-hiring. All positions reopen. A high elimination rate is set. Those who do not win enter “waiting for assignment.” During that period, they receive basic living expenses: eighty percent of the local minimum wage. After three months, they find a job themselves.

Talent pool. You enter an “internal talent pool.” It sounds like a reserve cadre program. In reality, there is no position. You report to the company every day, sit in a designated area, read, study, and wait. How long? Unknown. Until you leave.

Each method looks legal alone. Transfer is an operational need. A pay cut follows the position. Waiting for assignment follows the rules. Competitive re-hiring is fair competition. Together, they wear you down.

7

I know a man who worked in a central enterprise for twelve years. He was transferred three times. First from technical to marketing. He said, “I obey the arrangement.” Second from marketing to customer service. He said, “I cooperate with the company.” Third from customer service to logistics. He said nothing.

The day he reported to logistics, he stood in the corridor for ten minutes. Then he walked into Human Resources and handed in his resignation.

HR asked: Have you thought it through?

He said: I have.

HR said: Then go through the process.

He signed. No compensation. No argument. No arbitration. Twelve years. What he took away was a cardboard box. Inside: a water cup, a notebook, and a pot of pothos.

He bought the pothos when he joined. He kept it for twelve years. The leaves were still green.

8

If this is happening to you, remember one thing: do not resign voluntarily.

Article 38 of the Labor Contract Law says a worker may terminate the labor contract if the employer fails to provide labor protection or labor conditions as agreed, fails to pay labor remuneration in full and on time, fails to pay social insurance premiums according to law, has rules that violate laws and harm the worker’s rights, or causes the contract to be invalid under Article 26, paragraph 1.

That is constructive dismissal. In plain language: if the unit uses unreasonable means to push you out, you can terminate the contract on the grounds that the unit is illegal, and demand economic compensation.

The key is evidence.

Keep the transfer notice. Print salary bank statements. Screenshot assessment records. Back up chat records. Forward emails to your personal account. Keep recordings. Leave your phone on.

Then send a written letter. Title it “Letter Regarding Disagreement with Transfer and Pay Cut.” State clearly: I disagree with the company’s unilateral decision to transfer and cut pay. I request restoration of my original position and salary. If the company does not restore them, I will terminate the labor contract under Article 38 of the Labor Contract Law on the grounds that the company failed to provide the agreed labor conditions, and I will demand economic compensation.

Send it by EMS. On the courier slip, write “Letter of Disagreement with Transfer and Pay Cut.” Keep the receipt.

Then go to labor arbitration.

The time limit is one year. It starts the day you know your rights were infringed. Do not delay.

9

Someone asks: Will this offend people? Will it affect my next job?

You have already been pushed into a corner. If you do not offend people, people are offending you. If you save face, you lose substance.

Labor arbitration is confidential. It does not go online. It does not enter your file. Your next employer cannot find it.

What affects your next job is three years in a company that does not respect you, a three-year gap on your resume, an empty bank account, and resentment you carry into every interview.

10

The day I left the state-owned enterprise was winter.

After the paperwork, I carried the cardboard box downstairs. Inside: a thermos I had used for five years, a work notebook full of notes, and a department group photo.

The photo was from the year before last. Twelve people from my department stood at the company gate, smiling. Now seven of the twelve have left. Some left on their own. Some left after a transfer. Some left after waiting for assignment.

No one was laid off.

Everyone left.

I walked to the company gate and looked back. The building was the same. The sign was the same. The guard had changed. The new guard did not know me. He asked: Who are you looking for?

I said: No one. I am leaving.

He said: Oh. Then he looked down at his phone.

I carried the box to the bus stop. While I waited, I took out the group photo and looked at it. Then I put it back and got on the bus.

The bus started. Through the window, the company building shrank to a dot and disappeared into the gray sky.

I did not look back.

A note on your rights

If the employer proposes mutual termination, you can get N or N+1. If the employer illegally terminates, you can get 2N. If the employer fails to give notice in advance, you can get N+1. If you are forced to resign, you can get N. If the employer fails to pay social insurance, you can get N and demand back payment. If the employer owes wages, you can get N and demand back pay.

N equals your years of service multiplied by your average monthly wage over the previous twelve months.

Keep evidence: labor contract, salary bank statements, social insurance records, transfer notice, pay cut notice, assessment records, chat records, emails, recordings, work badge, work uniform, attendance records.

Arbitration time limit: one year.

Legal aid: local labor inspection brigade, trade union, legal aid center.

Do not carry it alone.