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Development of China's HR Service Industry:Major Existing Problems and Policy Options

By Lai Youwei & Yuan Dongming 2015-08-18

I. Development and Features of China's HR Service Industry

In recent years, with its diversifying service scopes and contents and its growing ability to serve the economic and social development, the HR (human resource) service industry has constantly expanded in China, playing an important role in boosting employment.

1. Expanding HR market service networks

As of the end of 2012, there had been 28,356 HR service agencies throughout the country, employing 336,400 people. By category, the number of public employment service agencies had reached 6,914, making up 24.4% of total human resource service agencies; the number of public personnel service agencies had reached 2,939, making up 10.4%; the number of state-owned human resource service companies had reached 1,204, making up 4.2%; the number of privately-operated human resource service companies had reached 17,087, making up 60.3%; and the number of Hong Kong, Macao, Taiwan and foreign-invested human resource service companies had reached 212, making up 0.7%. As of the end of 2012, all human resource service agencies across the country had set up a total of 21,000 fixed recruitment (exchange) venues and 9,206 HR market websites, thus greatly expanding the HR service networks.

2. Gradually improving employee quality

To beef up the quality construction among HR service workers, various provinces (autonomous regions and municipalities directly under the Central Government) have established and implemented relevant systems of professional qualifications. By the end of 2012, 111,012 HR service workers had obtained the professional qualifications, making up 33.0% of total HR workers, up 2.8 percentage points over the same period of 2011. In terms of educational background and the number of qualified workers, HR service workers see their overall qualities improving by a small margin.

3. A diversifying industry

HR service functions and service scopes are expanding constantly in China, and the HR service industry has been increasingly diversified. Multilevel and categorized service scopes, including job recruitment services, occupational guidance, consulting services, personnel appraisement, personnel training, search and interview of senior talents, recruitment fairs, HR information networks, human resource and social security agency services, have taken shape initially. Some HR service agencies have turned different services into industry chains to offer comprehensive HR outsourcing services to customers, thus facilitating the integration of different services and realizing the innovation of business models. In 2012, HR service agencies throughout the country offered services to 18.88 million employing units, with the non-public sector being the main recipient of the services; conducted 180,000 training courses of various types, covering 8.73 million people; offered personnel appraisement services to 2.79 million people; provided management advisory services for 1.45 million employing units; offered human resource outsourcing services to 430,000 employing units; headhunting services further developed, with 880,000 high-level talented people being introduced and recruited.

Some HR service agencies have been growing steadily and gradually in market competition, including such state-owned enterprises as FESCO, CIIC and China Star Corp that operate on big scale, as well as privately-operated firms and Sino-foreign joint ventures, such as JOBS-US, PWRD-US and ChinaHR.com, etc.

4. An important role played by HR service agencies in boosting employment

With the occurrence of "labor shortage" and "employment straits" and the sharpening of structural contradictions in HR market, the role played by HR service agencies in human resource market distribution has been further strengthened and the HR market has become a major channel for job recruitment that has played an important role in boosting employment. In 2012, the HR service agencies nationwide received a total of 429.78 million floating personnel, with 245.32 million people asking for registration; conducted 208,000 field recruitment fairs (exchanges) in various types (of which 65,000 fairs were specifically for college graduates and 59,000 fairs were specially for migrant farmer workers), an increase of 18,000 over 2011; 111.82 million job seekers and 7.9 million working units attended the fairs, with 104.21 million job messages being provided. In 2012, 95.47 million people got or changed jobs with the help of HR service agencies countrywide, up 26% as compared to 2011; the agencies provided labor dispatch services for 350,000 employing units, with 13.45 million people becoming labor dispatch workers and 5.2 million people signing up for labor dispatch.

II. Major Problems Existing in China's HR Service Industry

Currently, some problems needing prompt solution still exist in China's HR service industry, which are being exposed in following aspects:

1. Integration of the personnel market and the labor market remains unfulfilled

The public human resource service agencies focus mostly on traditional public service items, such as recruitment, archives management, personnel agency and training. With the advancement of market integration, public services in original personnel and labor markets have been gradually integrated in some regions, bringing about the regrouping and optimization of the service processes. Nonetheless, the integration of the personnel market and the labor market are not yet in place in many places, incurring segmentation among regional markets in varying degrees and causing waste of public service resources. At present, the functional positioning of the public HR service agencies remains ambiguous, offices and service facilities are being constructed in an unbalanced way and the public service efficiency is unable to fully meet the ever-growing needs for public employment and personnel services.

2. The environment for the development of the HR service industry needs to be further optimized

Firstly, policies formulated by governments at various levels in favor of the HR service industry are few and far between. On the whole, China's overall policy system for promoting HR service industry remains imperfect, and policies formulated by governments at various levels in favor of the HR service industry are quite limited and the government investment in public employment and personnel service institutions remains inadequate. Secondly, the unified market system remains imperfect. When conducting trans-regional operations, the HR service agencies often face a number of problems, such as failure to recognize qualifications mutually and the requirement for reapplying for business permits, which causes local protectionism and business monopoly to a certain extent, impeding HR service agencies' trans-regional operation and business development. Thirdly, the market order should be further standardized. Domestically, some HR service agencies conduct rule-breaking operations and are involved in vicious competitions, and some companies even offer false messages to deceive job seekers, infringing the legitimate rights and interests of the employing units and the job seekers and undermining the market order. Rule-breaking operations are an especially glaring problem in labor dispatches. Fourthly, there is no unified HR service standardization system, and the standardization level needs prompt improvement.

3. Construction of the legal system and the regulatory system for HR market lags behind

Firstly, construction of the legal system for the HR market lags behind. HR rules and regulations are not enacted on a higher level, being less normative and instructional to the industry and incurring an inadequacy of bases for the supervision of the HR market. Secondly, HR market supervisor team construction got off to a late start in various provinces and municipalities, with incomplete staff establishment in terms of supervisors. Some cities have no full-time HR market management and law enforcement personnel. Thirdly, trade organizations are mostly "government-incubated", with weak service awareness and short of funds, and they play little role in industry self-regulation, operational guidance and formulation of service standards.

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