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In an advertisement for a professional employment organization, it was stated: "Outsourcing can be a cost-effective alternative to the expense and administrative burden of a traditional employer-employee relationship." Evaluate the costs and benefits of outsourcing employees. What market-failure problems could be created or eliminated by outsourcing?

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Compare and contrast (find the similarities and differences) in the labor law of GCC countries, including the UAE, according to major legal issues such as priority of employment, similarities or differences in the treatment of women, minors, expatriates, working hours, wages, leaves, working hours, etc. You may search for additional information about the labor laws in these countries. Based on your readings, are there significant differences when compared to UAE Labor Law?

Specifics of Labor Law in GCC Countries

Bahrain

An employer is required to give priority of employment to Bahraini nationals and thereafter to other Arab nationals, wherever they are available and possess the requisite skills and competence for the role. For some businesses, there is a mandatory minimum ratio of the number of Bahraini nationals to the number of non-Bahraini nationals.

Employers are under a statutory duty not to discriminate between Bahraini and non-Bahraini nationals in particular with regard to pay (except to the extent necessary to attract foreign employees); or subject any employee to any other form of detrimental treatment.

The employment contract should include the terms of employment agreed by the parties and may be entered into for a fixed term, or for an indefinite duration terminable on notice; or for the execution of a specific project. The employment contract outlining the terms and conditions of employment must be in writing. It must comply with the Bahrain Labor Law for the Private Sector of 1967 as amended and any relevant laws, regulations and orders. Any term or condition in the contract which does not conform to the Bahraini law will be deemed null and void except to the extent it is more favorable to the employee.

Employers must register their employees in the Kingdom of Bahrain with the Ministry of Labor and Social Affairs and receive a certificate of registration. It must also register its employees with the General Organization for Social Insurance (GOSI) and contributions must be paid monthly for compulsory insurances against old age, disability and death (for Bahraini employees only), and against work-related injuries including death (for all employees). Employers may also want to consider non-compulsory insurances such as private medical or life insurance.

Wages are defined as total remuneration payable in cash or in kind to an employee under an employment contract and will include additional increments, gratuity payments and allowances, if any (bonuses, commissions, transport allowance, accommodation allowance, cost of living allowance and other allowances and benefits will all be included if they are paid by the employer to the employee as part of the employee’s wages). The general rule is that an employer cannot exclude specific payments from the calculation of the wages in the contract as any such exclusion will not be enforceable under local law. However certain payments such as phone bills, company car costs and rent (if paid directly to the Landlord rather than to the employee) may be excluded from the definition of wages. Orders are issued from time to time setting minimum wages in particular industry sectors. There is however no national minimum wage.

An employee cannot be required to work for more than six days in any given week and Fridays are deemed to be the weekly day of rest on full pay. The employee is also entitled to leave for official public holidays. Where such public holidays occur on a Friday, the employer must compensate the employee with one (1) further day of rest. The employer may require an employee to work on public holidays or on Fridays, subject to the provisions of local law. All employees are entitled to a minimum of 21 days paid annual leave rising to 28 days after 5 years of service. An employee may not waive this entitlement, postpone it, or receive payment in lieu except in accordance with the law and on termination of employment. In the event of illness which is certified by an approved doctor or hospital, an employee is entitled to a total of forty-five absences in each year of employment. A Muslim employee, employed for five consecutive years, will be entitled to leave of two weeks on full pay once during his/ her period of employment to perform his/ her ‘Haj’ pilgrimage duty.

Kuwait

An employee’s terms of service are contained in his employment contract, which may be for a fixed time or it may be indefinite. A fixed time may not exceed five years. The labor law specifies minimum limits below which terms of service may not fall, and if a clause in his contract gives an employee a lesser benefit than his right under the law, he is entitled to the minimum specified by law for that particular term.

An employment contract may be verbal or in writing. Where a contract is verbal then, in the event of a dispute, either side can use circumstantial evidence to prove what is in it. If the contract is in writing, it must be in Arabic. A translation into another language may be attached but the Arabic version is authoritative, i.e. only the Arabic version will be considered in resolving a dispute in a court of law.

An employee may be hired on probation for 100 days at most. During this time he may be terminated without notice, though accrued indemnity but not holding pay must be paid. The same employer may not put an employee on probation more than once.

Remuneration includes basic pay, incentives, commissions, obligatory bonuses, gratuities from third parties and allowances from whichthe employee benefits (such as housing allowance), but excludes allowances on account of expenses and profit shares, Payment of a bonus is obligatory if it is stipulated in the contract of employment or in the by-laws of the firm or it has been paid in the same amount regularly every year. What is included in total remuneration is important, as this is the Figure that must be used when calculating terminal indemnity or compensation on account of injury. Where an employee is paid on a time basis the last salary payable is used, but if he is paid on a piece-work basis than the average wage actually payable to him during the previous three months is used.

There is no minimum wage. Salaried employees must be paid at least once a month. Piece-workers and those on hourly or weekly wages must be paid every two weeks.

Persons working for a subcontractor, who has failed to pay their salaries, may demand payment from their employer’s superior contract to the extent that the latter owner their employer money for work done. When an employer goes bankrupt the outstanding salaries and termination benefits of his employees must be paid before his other creditors.

An employee may not be obliged to buy products made by his employer, if he owes his employer money than not more than 10% of his salary may be deducted to pay off his debt and he may not be charged interest. Where an employee’s Salary is attached on account of debts to third parties, the deduction is limited to 25 % of his salary.

The working hours of an adult are limited to eight hours a day and 48 hours a week. A rest break of at least one-hour must be allowed after five consecutive hours of work. Rest periods are not included in the calculation of working hours. These standard hours may be increased or decreased by the MSA&L in certain cases, such as hotel works.

An employee is entitled to one full day off with-out pay a week. The traditional day off is Friday, but this is not a legal requirement in Kuwait. An employee with up to five years of continuous service is entitled to 14 days leave a year on full day, provided he has completed one year of services, and 21 days after more than 5 years of continuous service. Official holidays and days of sick leave may not be counted a part of annual leave. The employer has the right to fix the date of leave.

An employee must be given his holidays pay before he goes on leave and the last salary payable before the holidays must be used to calculate the amount due. If an employee’s services are terminated that he is entitled to acash payment in lieu of accumulated leave, irrespective of the number of years of leave due, and payment for the accumulated leave must be calculated on the basis of the last salary payable on the date of termination.

A women performing the same work as a man must be paid equal remuneration. The standard working hours for women are the same as for men. They may not work at night (7pm to 6 pm) except in clinics, pharmacies, hotels, nursery schools, homes for the handicapped, airline and tourist offices, theaters and Entertainment City. They may work up to midnight in cooperative societies and public utilities, beauty salons, tailoring shops, banks and offices. Night-time working hours may be extended by the MSA&L during Ramadan, and on Eids and public holidays. Employers are obliged to ar-range transport for women working at night. A woman is entitled to maternity leave to a maximum of 30 days prior to delivery and 40 days after delivery on full day. Thereafter she may be absent from work without pay for up to 100 consecutive or non-consecutive days, provided she presents a medical certificate stating that she is ill as result of gestation and parturition. The annual leave entitlements of a woman who makes use of her maternity for leave privileges in any year are forfeit on day-per-day basis until her annual leave entitlement for that year is extinguished.

When his employment is terminated, an employee is entitled to a lump sum payment called termination indemnity.

For those paid monthly, termination indemnity is 15 days remuneration for each complete year of service for first 5 years and 30 days for each complete year beyond 5 years, but the total indemnity is limited to one and a half year’s remigration. For piece-rate workers and those paid on an hourly, daily or weekly basis, the indemnity is 10 days remuneration for each complete year of service for the first 5 years, and 15 days pay for each complete year beyond 5 years, subject to a limit of one year’s remuneration. In both cases part years are calculated pro-rata.

An employee who resigns with less than five years of service is not entitled to indemnity. One who resigns with five years or more of services is entitled to 50% indemnity. But employees are more made redundant (irrespective of length of service), who reach retirement age, who are disabled at work, or who die are entitled to full indemnity. And woman who marriage while she is an employee and who resigns within six months of marriage is entitled to full indemnity.

All employees’ related regulations must be issued as circulars or bulletins written in Arabic. Miscreant employees may be penalized provided the employee issued regulations specifying the acts that are punishable. Where an employment contract is for a fixed period, it terminates automatically at the end of the period, but if both parties then continue to implement it, it is deemed to be renewed indefinitely under the same terms and conditions. If both parties terminate the contract before the end of the fixed period and there is no clause in the contract to cover this, then the party terminating the contract must compensate the other. Where termination is made by the employer, compensation is limited to wage the employee would have earned from the day of termination to the expiry of his contract. Where it is the employee who quits, compensation is limited to the employer’s actual loss. Where an employment contract is for an unlimited period, either party may terminate it by notifying the other in writing at least 15 days prior to termination (Where the employee is paid more frequently). Either party may pay the other 15 or 7 days salary, as appropriate, in lieu of notice.

Oman

Investor Visa is granted to a foreigner who intends to invest his money in Oman and pursuant to a certification in this respect from the authority concerned. - This visa can be used within six months from the date of its issuance. - It is a multiple-entry visa valid for staying in the country for two years from the date it is inserted in the passport. This period is renewable.

Oman, like most other GCC states has adopted minimum employment quotas for companies in favor of Omani nationals (Omanisation). The required approval to employ foreign workers is generally only granted if the company meets the established quotas. The required quotas vary from industry to industry. The minimum wages payable to Omanis is RO 140 (about US $ 360) per month including house and transport allowances. Apart from that as per the Social Security Law private sector employer must make monthly contributions to the Public Authority for Social Insurance at the rate of 9.5 % of the monthly wage.

Qatar

The relationship between an employer (other than the government and its corporations) and its employee (skilled or unskilled) is regulated by the Labor Law. The Labor Law No. 14 of 2004 mandates that an employment contract must be drawn in the Arabic language. Another language may be used besides Arabic, but the Arabic text will prevail. A working week may consist of up to six business days. Ordinary working hours may not be more than eight hours a day, except during the Islamic month of Ramadan in which the normal working hours are reduced to no more than six a day. The term of an employment contract may be of an indefinite duration or of a limited period, provided that the term does not exceed 5 years. Any stipulations contrary to the provisions of the Labor Law are void unless more advantageous to the employee. The Law provides a framework for forming worker's committees in organizations in which the number of Qatari workers is not less than hundred.

Saudi Arabia

With regard to their employees, foreign contractors are subject to terms of employment of the Saudi Labor Law ("Labor Law"), which regulates all fundamental aspects of the relationship between employer and employee. These include in particular working hours and conditions, leave, termination and (relative) employment protection and various contracts and due diligence requirements of the employer. The labor laws in part directly relate to residence law provisions. Foreign workers only receive a (temporary) residence permit if, as in Germany, they have a work permit. The Labor Law sets exemptions to its application, especially for foreign workers who are sent earmarked for no more than two months to Saudi Arabia.

Employment law disputes can be carried forward by the employee to the Labor Inspection("LaborOffice"), if it is not possible to reach an amicable agreement, the Labor Office refers the case to the Labor Court ("Labor Dispute Committee").Trade unions and workers associations are prohibited by law, strikes are illegal.

The primary costs of FDI to host countries are:

Loss of sovereignty and patriotism

Adverse effects on competition and exports

Capital outflow

Loss of sovereignty, adverse effects on competition, and capital outflow

____ suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods or services.

The radical view

The free market view

Pragmatic nationalism

Expropriation

What are the benefits of FDI to home countries?

Repatriated earnings from profits from FDI.

Increased exports of components and services to host countries.

Learning via FDI from operations abroad.

All of these answers

When one firm enters a foreign country through FDI, its rivals are likely to follow by undertaking additional FDI in a host country to:

Create knowledge spillover

Discover a new market for its goods

Overcome and combat market failure through FDI

Acquire location advantages or neutralize the first mover’s location advantages

Most countries practice:

Pragmatic nationalism

Free market based FDI

Government embracing radical view

French patriotism

FDI may be viewed as a reflection of firm motivation to extend firm-specific capabilities abroad and their responses to overcome imperfections and failures.

True

False

Most countries practice a totally "free market" view.

True

False

8. Outsourcing is the process of turning over an organizational activity to an outside supplier, located in a foreign country, which will perform it on behalf of the local firm.

True

False

Financial, physical, and technological resources and capabilities are all tangible assets.

True

False

A firm's resources and capabilities are tangible assets a firm uses to choose and implement its strategies.

True

False

An example of low power distance would be when subordinates address their bosses on a first-name basis.

True

False

Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.

True

False

A country with low-masculinity has a more subtle differentiation between the gender roles.

True

False

Setting up subsidiaries abroad so the work can be performed in-house but in the foreign location is also called captive sourcing.

True

False

Managers in low uncertainty avoidance countries rely more on experience and training than managers in high uncertainty avoidance countries who rely more on rules.

True

False

Informal institutions include laws, regulations, and rules.

True

False

The United States is often classified as a collective society.

True

False

A pure market economy characterized by the "invisible hand" of market forces is noted by

John Stuart Mill

Adam Smith

Aristotle

Amatya Zen

Culture is defined in the text as:

The communication between members of similar location.

The collective programming of the mind, which distinguishes the members of one group or category of people from another.

The main component of formal institutions.

The attitudes and behaviors characteristic of a particular social group or organization.

When an expat employee returns to her or his current employer but the employer does not provide attractive opportunities, she/he often may be hired by a competitor firm. Why?

Competitor firms are also interested in globalizing their business.

Former expats bring instant expertise and experience.

Competing firms will pay a higher premium for expertise.

All of these answers

The government taking a "hands-off approach" is known as:

Laissez faire

Command economy

Mixed economy

Liberal approach

Expatriate managers make ideal candidates for top management positions.

True

False

____ are defined as rights associated with the ownership of intellectual property.

Patents

Copyrights

Trademarks

Intellectual property rights

In a collective society:

Family units are highly valued.

Being an entrepreneur is a popular mindset

Being different than your neighbor is important.

Outsiders are easily trusted.

Which of the following definitions best defines an expatriate manager?

A manager who works outside his or her native country

A manager of great expertise

An ex-manager rehired for advisory purposes

None of these answers

Xerox: Adapting to the Turbulent Marketing Environment Xerox introduced the first plain-paper office copier more than 50 years ago. In the decades that followed, the company that invented photocopying flat-out dominated the industry it had created. The name Xerox became almost generic for copying (as in Xerox this for you€). Through the years, Xerox fought off round after round of rivals to stay atop the fiercely competitive copier industry. Through the late 1990s, Xerox's profits and stock price were soaring. Then things went terribly wrong for Xerox. The legendary company's stock and fortunes took a stomach-churning dive. In only 18 months, Xerox lost some $38 billion in market value. Its stock price plunged from almost $70 in 1999 to under $5 by mid-2001. The once-dominant market leader found itself on the brink of bankruptcy. What happened? Blame it on change or rather on Xerox's failure to adapt to its rapidly changing marketing environment. The world was quickly going digital, but Xerox hadn't kept up. In the new digital environment, Xerox customers no longer relied on the company's flagship products' standalone copiers to share information and documents. Rather than pumping out and distributing stacks of black-and-white copies, they created digital documents and shared them electronically. Or they printed out multiple copies on their nearby networked printer. On a broader level, while Xerox was busy perfecting copy machines, customers were looking for more sophisticated document management solutions. They wanted systems that would let them scan documents in Frankfurt, weave them into colorful, customized showpieces in San Francisco, and print them on-demand in London even altering for American spelling. This left Xerox on the edge of financial disaster. We didn't have any cash and few prospects for making an,€ says current Xerox CEO, Ursula Burns.The one thing you wanted was good and strong leaders that were aligned and could get us through things and we didn't have that. Burns didn't realize it back then, but she would one day lead the company she began working for as a summer intern in 1981. In fact, Burns almost left the company in 2000, but her colleague and friend, Anne Mulcahy, became CEO and convinced her to stay. Burns was named a senior vice president and was then charged with cleaning the house. The Turnaround Begins Task number one: Outsource Xerox's manufacturing. An often criticized and unpopular move, outsourcing was critical to Xerox's cost-saving efforts. Burns oversaw the process in a way that preserved quality while achieving the desired cost benefits. And she did so with the blessing of Xerox's employee union by convincing the union that it was either lose some jobs or have no jobs at all. With the restructuring of manufacturing, in only four years, Xerox's workforce dropped from 100,000 employees to 55,000. Although this and other efforts returned Xerox to profitability within a few years, the bigger question still remained: What business is Xerox really in? To answer this question, Xerox renewed its focus on the customer. Xerox had always focused on copier hardware. But we were being dragged by our customers into managing large, complex business processes for them,€ says Burns. Before developing new products, Xerox researchers held seemingly endless customer focus groups. Sophie Vandebroek, Xerox's chief technology officer, called this dreaming with the customer.€ The goal, she argued, was involving [Xerox] experts who know the technology with customers who know the pain points. . . . Ultimately innovation is about delighting the customer. In the process, Xerox discovered that understanding customers is just as important as understanding technology. What Xerox learned is that customers didn't want just copiers; they wanted easier, faster, and less costly ways to share documents and information. As a result, the company had to rethink, redefine, and reinvent itself. Xerox underwent a remarkable transformation. It stopped defining itself as a copier company.€ In fact, it even stopped making standalone copiers. Instead, Xerox began billing itself as the world's leading document management technology and services enterprise. The company's newly minted mission was to help companies be smarter about their documents.€ This shift in emphasis created new customer relationships, as well as new competitors. Instead of selling copiers to equipment purchasing managers, Xerox found itself developing and selling document management systems to high-level information technology managers. Instead of competing head-on with copy machine competitors like Sharp, Canon, and Ricoh, Xerox was now squaring off against information technology companies like HP and IBM. Although it encountered many potholes along the way, the company once known as the iconic copier company became increasingly comfortable with its new identity as a document-management company. Building New Strengths Xerox's revenue, profits, and stock price began to show signs of recovery. But before it could declare its troubles over, yet another challenging environmental force arose the Great Recession. The recession severely depressed Xerox's core printing and copying equipment and services business, and the company's sales and the stock price tumbled once again. So in a major move to maintain its transition momentum, Xerox acquired Affiliated Computer Services (ACS), a $6.4 billion information technology (IT) services powerhouse with a foot in the door of seemingly every back office in the world. The expertise, capabilities, and established channels of ACS were just what Xerox needed to take its new business plan to fruition. The synergy between Xerox, ACS, and other acquired companies has resulted in a broad portfolio of customer-focused products, software, and services that help Xerox's customers manage documents and information. In fact, Xerox has introduced more than 130 innovative new products in the past four years. It now offers digital products and systems ranging from network printers and multifunction devices to color printing and publishing systems, digital presses, and book factories.€ It also offers an impressive array of print management consulting and outsourcing services that help businesses develop online document archives, operating in-house print shops or mailrooms, analyze how employees can most efficiently share documents and knowledge, and build Internet-based processes for personalizing direct mail, invoices, and brochures. These new products have allowed Xerox to supply solutions to clients, not just hardware. For example, Xerox has a new device for insurance company customers, a compact computer with scanning, printing, and Internet capabilities. Instead of relying on the U.S. Postal Service to transport hard copies of claims, these and related documents are scanned on-site, sorted, routed, and put immediately into a workflow system. This isn't just a fancy new gadget for the insurance companies. They are seeing real benefits. Error rates have plummeted along with processing times, and that means increases in revenues and customer satisfaction. Dreaming Beyond Its Boundaries Riding the combination of Xerox's former strengths and its new acquisitions, Burns and the Xerox team now have a utopian image of what lies ahead. They believe the tools and services they offer clients are getting smarter. It's not just processing Medicaid payments,€ says Stephen Hoover, director of Xerox's research facilities. It's using our social cognition research to add wellness support that helps people better manage conditions like diabetes. Hoover adds that the future may see a new generation of Xerox devices, such as those that can analyze real-time parking and traffic data for municipal customers, allowing them to help citizens locate parking spots or automatically ticket them when they are going too fast. Already, Xerox is market testing parking meters that are capable of calling 911 or taking photos when a button is pushed. Not all products such as these will hit the market, but Xerox now has a model that allows it to dream beyond its known boundaries. In another example of smarter tools for clients, Xerox will soon rollout Ignite, a software and Web-based service that turns its copiers/scanners/printers already in service at schools around the world into paper-grading machines. Previous automated grading technologies (such as Scantron) worked only on multiple-choice responses filled out on special forms. But Ignite will grade work where answers are written in by students even numeric math problems. The real revolutionary potential of Ignite, however, is not just in automated grading, but in taking the results and turning them into Web-accessible data that allow teachers to identify problem areas and make improvements to their techniques. Throughout this corporate metamorphosis, Xerox isn't focused on trying to make better copiers. Rather, it is focused on improving any process that a business or government customer needs to perform and performing it more efficiently. Xerox's new machines have learned to read and understand the documents they scan, reducing complex tasks that once took weeks down to minutes or even seconds. From now on, Xerox wants to be leading global document management and business-process technology and services, provider. With all the dazzling technologies emerging today, Burns acknowledges that the business services industry in which Xerox now operates is decidedly unsexy. But she also points out that these are processes that companies need to run their businesses. They do it as a sideline; it's not their main thing.€ But running these seemingly mundane business processes is now Xerox's main thing. Xerox provides these basic document and IT services to customers so that customers can focus on what matters most to their real businesses. Xerox's transition is still a work in progress. Over the last four years, the company's revenues are up 47 percent and profits have more than doubled. Its stock price, however, has struggled (it has yet to top $12), a sign that Xerox isn't doing as well as Wall Street thinks it should be. Part of the reason is that Xerox still relies to some extent on its copier and printer products for its success, even with its recent diversification strategy. And just as e-mail and desktop software killed photocopying, smartphones and tablets are killing inkjet and photo printers. But Xerox depends much less on such products than competitors such as Hewlett-Packard and Lexmark International do. Thus, experts predict, Xerox will rebound much more quickly than its rivals. Burns and crew are also confident that as Xerox continues its transition to a solutions provider, the seeds it has planted over the past few years will soon bear fruit. Xerox knows that change and renewal are ongoing and never-ending. The one thing that's predictable about business is that it's fundamentally unpredictable says the company's annual report. Macro forces such as globalization, emerging technologies, and, most recently, depressed financial markets bring new challenges every day to businesses of all sizes.€ The message is clear. Even the most dominant companies can be vulnerable to the often turbulent and changing marketing environment. Companies that understand and adapt well to their environments can thrive. Those that don't risk their very survival. Questions for discussion:

1. What microenvironmental factors have affected Xerox's performance since the late 1990s?

2. What macroenvironmental factors have affected Xerox's performance during that period?

3. By focusing on the business services industry, has Xerox pursued the best strategy? Why or why not?

4. What alternative strategy might Xerox have pursued following the first signs of declining revenues and profits?

5. Given Xerox's current situation, what recommendations would you make to Burns for the future of Xerox?

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