HUAWEI has denied speculations that the company is circumventing a new labor law by promising 1 billion yuan (US$133 million) in compensation to thousands of long-serving employees who voluntarily resigned, Chinese-language media reported yesterday.

The Labor Contract Law, which was adopted in June and becomes effective Jan. 1, 2008, offers more protection for employees. Under the new law, employees are entitled to permanent contracts if they have worked for a company for more than 10 years or have completed more than two consecutive fixed contracts with the company.

Employees with permanent contracts are much harder to dismiss under the law.

“No resignation was made under force. It was conducted on a voluntary basis,” Huawei, China’s largest telecom equipment maker, said in a statement Monday.

“The move is just a human resources reform which was carried out under the guidance of the labor law.”

Since the end of September, Huawei has persuaded about 7,000 employees with at least eight years of service to voluntarily resign. In return, the company offered a compensation package of 20,000 to 160,000 yuan according to the length of service to the company, an earlier report by the Southern Metropolis Daily said.

The employees were allowed to reapply to the company for a job after they resigned.

Huawei said in the statement that the reform was to curb confusion in the employment process due to the company’s fast expansion over the past few years. It now has more than 70,000 employees, but many of their labor contracts were signed with Huawei’s subsidiaries and joint ventures with foreign investors.

“The employment relationship was creating problems in administrative management. It is in line with the previous (reforms) the company has taken over the past few years, aiming at enhancing its competitiveness in the global market,” it said.

The move is suspected of exploiting a legal loophole to lower the company’s labor costs which would otherwise be substantially higher next year. It has also attracted great concern from national, provincial and local authorities. The municipal labor and social security bureau is conducting an investigation into the issue and will soon produce a report, the newspaper reported yesterday.

“Two department chiefs of the bureau are in discussions with Huawei to further understand the issue as part of the official investigation,” the newspaper said. (Wei Jie)