Now! China July 2025 - Strategic Workforce Optimisation During Corporate Restructuring

In today's complex and rapidly evolving business environment, companies face numerous internal and external challenges, including intensified market competition, technological innovation and strategic transformation. To adapt effectively, many enterprises must optimise operational efficiency through organisational adjustments, with personnel optimisation being a critical component. However, implementing personnel optimisation scientifically and reasonably, balancing corporate competitiveness and employee rights, is a key challenge for HR managers. Effective personnel optimisation not only enhances operational efficiency but also strengthens competitiveness and supports sustainable development. 

This article shares practical strategies and implementation approaches for personnel optimisation commonly used in Chinese company management, aimed at helping managers make efficient decisions and improve organisational effectiveness.

Staff Optimisation: Strategy and Execution Plans

Strategy Development: Clarifying Goals and Principles

 Business Needs Analysis: Conduct an in-depth analysis of the company's strategic goals and business processes to define personnel requirements for each business segment over the upcoming period. For example, businesses in expansion phases should plan recruitment in advance, while those facing contraction or transformation must determine the scope and direction of personnel adjustments.

 Personnel Status Inventory: Carry out a comprehensive inventory of current employees, including positions, skills, performance and career plans. Utilise Human Resource Information Systems (HRIS) and other tools to collect and analyse employee data to support optimisation decisions.

 Developing Optimisation Plan: Based on business needs and personnel inventory, develop a detailed personnel optimisation plan including objectives, scope, timeline and specific actions. For example, identify positions to eliminate or merge, employees requiring training and those to be reassigned.

How to Implement: A Balanced and Flexible Approach

Natural Attrition and Recruitment Freeze:

Reduce redundant personnel gradually through retirements and non-renewal of contracts, while freezing recruitment for non-core positions to ease the impact.

Internal Reallocation and Training:

For employees temporarily unsuitable for current roles but with potential, consider job adjustments or rotations to broaden skills and discover hidden value. Conduct targeted training aligned with future company needs and establish talent development programs to motivate career growth and self-improvement.

External Talent Reserves and Recruitment:

Maintain a talent pool including candidates with potential who do not yet meet current job requirements, keeping in regular contact to track development. Provide comprehensive onboarding and mentorship to new hires to facilitate integration and enhance loyalty. Focus on building diverse teams in terms of gender, age, background and culture to foster innovation and competitiveness. 

Performance Optimisation:

Use a scientific performance management system to set clear objectives and KPIs, conduct regular assessments and reward high performers with promotions, bonuses or honors. For underperformers, provide coaching or consider reassignment or separation if necessary. 

Layoffs and Compensation Plans:

In cases of overstaffing or financial difficulty, layoffs may be unavoidable. Layoffs require careful handling to comply with laws, minimise disputes and maintain morale: 

•  Compliance with Laws and Regulations:   Layoffs must be carried out in strict compliance with all relevant laws and regulations to ensure legal procedures are complete documentation. Companies need to understand local labour laws in advance, develop a detailed layoff plan, and consult legal advisors to ensure that the process is lawful and appropriately executed.
•  Reasonable Compensation: Providing fair and reasonable economic compensation is a critical component of the layoff process. Compensation should be based on factors such as the employees' length of service, position and salary, and must meet legal standards and align with market practices. At the same time, companies may also offer additional support, such as career counseling and re-employment training, to help affected employees transition smoothly into new opportunities.
•  Communication and Reassurance: Transparent and empathetic communication is essential during layoffs. Companies should clearly explain the reasons, procedures and compensation arrangements, listen to employee feedback and respond promptly to concerns. Emotional and psychological support, including counseling and employee care initiatives, should be provided to ease anxiety and reduce resistance or dissatisfaction.
•  Phased Implementation: Given the complexity of layoffs, a phased approach is advisable to minimise disruption and preserve employee morale. Breaking the process into stages allows for more thorough planning, better risk management, and alignment with the company’s broader strategic objectives, while mitigating reputational and operational risks.

Post-Optimisation Management

Personnel optimisation marks a new beginning rather than an end. After restructuring, companies must consolidate gains through refined management, invigorate team spirit and drive sustainable growth. 

•  Transparent Communication: Foster transparency by clearly explaining to employees the company's future strategic direction, business plans and each employee’s role and value within the organisation. Help employees understand how their individual career development path align with the company's long term vision. This not only eliminates misunderstandings and uncertainties but also builds trust within the team.
•  Establish a Fair Compensation and Benefits System: Ensure the compensation and benefits system is both fair and competitive. Beyond statutory entitlements, offer diversified benefit packages tailored to meet the needs of different employee groups. Such measures motivate employees, enhance productivity and quality, and help attract and retain top talent.
•  Strengthen Performance Management: Further strengthen performance management system to ensure its effective implementation. Establish timely and constructive feedback mechanisms to ensure that employees can understand their work performance and areas for improvement. Closely link performance outcomes to compensation, promotion, training and other incentives to ensure that high-performers are adequately recognised and rewarded.
•  Enhance Team Building and Communication: Organise regular team-building activities and training sessions to foster trust and collaboration across teams. Continuously optimise internal processes and provide targeted training to ensure the team remains agile and well-equipped to support business needs.
•  Shape a Positive Corporate Culture: Continue cultivating a positive and forward-looking corporate culture that strengthens employees' sense of belonging.

Case Study: A Compassionate Approach in Practice

A medium-sized traditional manufacturing enterprise faced industry disruption and competition, requiring large-scale business reorganisation and layoffs of about 20% of staff. Engaging our professional HR consulting team, the company undertook in-depth management discussions, detailed employee analysis and tailored negotiation strategies. The company provided a one-month buffer period and severance packages above the industry average.

The approach ensured departing employees felt respected and supported, boosting their confidence in future careers. Remaining employees appreciated the company's fairness, increasing loyalty and work enthusiasm. The company successfully adjusted its business direction, adopted new technologies and management models, and achieved steady performance growth within six months, all while maintaining a positive, humane corporate culture. 

Conclusion

Personnel optimisation is an inevitable but sensitive part of corporate development. We recognise the importance of protecting employee dignity and emotions while safeguarding company interests. Our commitment is to transform challenging moments into constructive, empathetic dialogue. 

This journey balances responsibility and care, ensuring stable development and respect for employees’ right. We believe such efforts create win-win outcomes, helping companies grow and employees embark on new opportunities. 

Contact us to customise the most suitable personnel optimisation path. Amid change, we remain your trusted partner in navigating transformation with confidence and care.

China Updates

Accounting and Taxation

Administrative Measures on Tax and Fee Payer Credit

STA Announcement [2025] No.12

The State Taxation Administration (STA) has issued the Administrative Measures on Tax and Fee Payer Credit, effective from 1 July 2025.

Key highlights - Article 16:

• Tax and fee payer credit ratings are classified into five grades: A, B, M, C and D.
• Grade A shall have an annual evaluation benchmark score of above 90 points;
• Grade B shall have an annual evaluation benchmark score of above 70 points but below 90 points;
• Grade M shall be a newly established business entity or entities with an annual evaluation benchmark score of above 70 points but has no operational income during the evaluation year;
• Grade C shall have an annual evaluation benchmark score of between 40 and 70 points;
• Grade D shall have an annual evaluation benchmark score of below 40 points or involvement in serious dishonest acts.

Businesses will not qualify for Grade A if they meet any of the following:

• Operating for less than 3 years;
• Rated Grade D in the previous evaluation year;
• Zero tax payable for 3 consecutive or 6 cumulative months without valid reason;
• Failure to maintain proper accounts or submit accurate tax information;
• Major tax violations (e.g., tax evasion, fraudulent refunds, false invoicing);
• Under investigation for tax-related offenses;
• Wilful tax refusal or obstruction of tax inspection;
• Identified as an abnormal or fugitive account, or associated with such entities;
• Listed as a major tax offender.

Circumstances not impacting credit rating:

• Tax non-compliance due to tax authority errors or force majeure;
• Unintentional calculation or clerical errors leading to underpayment;
• No administrative penalties imposed in accordance with regulations;
• Other STA-recognised exceptions

Notice on Adjusting Relevant Management Measures for Processing Trade in Special Customs Supervision Zones, Bonded Supervision Places and Areas Outside the Zones

To strengthen the management of products involved in the implementation of tariff quota management, trade remedy measures, suspension of tariff reduction obligations and additional tariffs, including those imposed as retaliatory tariffs (collectively referred to as the “Four Types of Measures” ) within special customs supervision zones, bonded supervision places and areas outside these zones (collectively referred to as the “Three Major Zones” ) for processing trade, the General Administration of Customs, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the Ministry of Commerce, and the State Taxation Administration jointly issued Notice [2025]No. 83. The main contents of the notice are as follows:

• Scope of applicable products covered by the announcement.
• Products under tariff quota management: wheat, corn, rice, cotton, sugar, wool, woolen strips and chemical fertilisers based on the Protocol on the Accession of the PRC to the World Trade Organisation and relevant regulations.
• Products subject to other measures: those subject to trade remedy measures, suspension of tariff reduction obligations, additional tariffs and retaliatory tariffs. Products under trade remedy measures refer to those subject to anti-dumping, countervailing and safeguard measures according to applicable PRC laws and regulations.

Management measures

• Set up special account books.
• Restrictions on bonded circulation and domestic sales regulations.
• Management of products not subject to the Four Types of Measures.
• Leftover materials, defective products and by-products under special account books are not allowed to be sold domestically. They can be re-exported or destroyed according to existing regulations.
• Consignment processing business, may not use special account books within the zones.
• Cross-border e-commerce products are subject to the management of cross-border e-commerce account books.
• Implementation of special domestic sales taxation.

This notice will take effect from June 10, 2025. In the event of any inconsistencies between this notice and existing regulations, this notice shall prevail.

Human Resources

Notice on Implementing the "Three Supports and One Assistance" Plan for College Graduates in 2025

On May 26, 2025, the General Office of the Ministry of Human Resources and Social Security and the General Office of the Ministry of Finance jointly issued the "Notice on Doing a Good Job in the Implementation of the 'Three Supports and One Assistance' Program for College Graduates in 2025".

The notice clearly states that in 2025, college graduates will continue to be recruited to work at the grassroots level in areas such as teaching, agriculture, medical care, and rural revitalisation assistance. The central government will support the recruitment of 34,430 "Three Supports and One Assistance" personnel, and localities may expand the recruitment scale based on actual conditions. The notice highlights key tasks including:

• optimising recruitment and selection
• focusing on rural revitalisation and regional development strategies
• expanding service positions
• strengthening capacity enhancement through specialised training
• improving grassroots governance capacity
• standardising management and benefit guarantees
• enhancing the training mechanism
• promoting policies for targeted exams, recruitment and special hiring
• attracting and retaining talent in western regions
• supporting follow-up training and long term career growth
• increasing publicity and creating a favourable environment
• ensuring organisational leadership to implement the plan smoothly

Corporate Governance

Launch of pilot program for domestic investment information reporting by foreign-invested enterprises

Recently, the Ministry of Commerce (MOFCOM) issued Announcement No. 12 of 2025, launching a pilot program for domestic investment information reporting by foreign-invested enterprises. The first pilot regions include Jiangsu, Shanghai, Tianjin, Liaoning, Hebei, Hunan, Shaanxi, and Chongqing. The Announcement will take effect on 1 July 2025.

Foreign-invested enterprises, when establishing enterprises, increasing capital, or purchasing equity within China, are required to fulfill their information reporting obligations. Foreign-invested enterprises in the pilot regions shall submit initial and change reports through the enterprise registration system and report investment information to the competent commerce authorities. 

Other matters will continue to be governed by the Measures for Information Reporting of Foreign Investment and Announcement No. 62 of 2019.