At Fusion Consulting, our services work to reduce the wage gap we find in our factories.
What is the wage gap?
In the CSR industry, the wage gap is the term used to describe the difference between the salary an employee is supposed to receive and the amount actually received.
Sometimes people discuss the ‘minimum wage gap,’ which is the government’s minimum wage minus the actual paid. Other times there is a discussion of the ‘overtime wage gap,’ and finally, some people discuss just the ‘total wage gap.’
Why should factories work to eliminate the wage gap?
A satisfied worker is a productive worker. When employees are paid in full they generate higher profits for factories by producing better quality products in higher quantities. They are also less likely to quit, which can minimize or eliminate costs associated with hiring new employees like funding training programs or dealing with poor work quality, not to mention the impact on delivery dates, quality control, etc.
Fusion Success:
Minimum wage gap has been and continues to be one of the more commonly seen compliance issues in factories. Fusion consultants have experience closing the gap between actual wages and legal wages in ways that keep factory costs low and do not impede profitability.
In this case, closing the factory’s wage gap (by using the factories self-implemented payroll system) would have required a 64.4% and 35.3% cost increase in the first two months of Fusion’s consulting at the factory. However, Fusion consultants were able to reduce payroll costs in a legal way that allowed full compliance while only increasing costs 8.4% and 1.7% respectively – without reducing wages for the workers.
When Fusion consultants first began working in the factory, the monthly “wage gap” (the difference between the legal labor cost per month and the actual wages the factory paid per month) ranged from 80,000 RMB to 160,000 RMB ($12,000 to $23,500). Factually speaking, there was no way the factory could feasibly pay its workers full wages and remain in business.
Fusion consultants analyzed the factory’s HR (human resources) processes, paying special attention to the factory wage system. The wage system in place was generating excessive overtime and did not properly regulate hour swapping. As a result, some workers inside a single department received a lot of overtime, while others were not working full-time. Fusion consultants reorganized the wage system, and trained personnel responsible for hour distribution to assign hours in a more balanced, economical fashion.
Fusion consultants also noticed inefficient production scheduling practices that created interdepartmental lags. During normal working hours, some departments were regularly generating output surpluses, while others were struggling to keep pace even with daily overtime. Fusion consultants redistributed workers between departments and implemented new scheduling techniques to reduce the amount of works in progress and to increase coordination. Communication systems were also put into place to clarify individual department’s needs and to better inform management and related departments of expected production completion dates.
In conclusion, not only was the factory better organized and more productive, but the factory was also able to pay their employees in accordance with the legal minimum wage. Fusion consultants reduced the total legal labor costs of the factory by 36% (from 409,872 RMB to 260,395 RMB) in the first month. In the second month, legal labor costs were reduced 18.3% – 170,450 RMB to 123,140 RMB. Furthermore, the above statistics do not include the impact of other improvements like greater employee satisfaction and reduced employee turnover.
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