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6/3/2010
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Foxconn Hikes Wages After Suicides

The China-based supplier to Apple, HP, and Nokia denies that the 30% pay increase is directly related to a rash of employee suicides.

Stung by a rash of worker suicides at a Shenzhen factory and the ensuing PR backlash, the world's largest electronics contract manufacturer is promising 30 percent increases in worker wages, more than originally anticipated.

Hon Hai Precision Industry, also known as Foxconn, is the world's largest EMS company and a key supplier to Apple, HP, Dell and Sony, making everything from PCs to PSPs. During the past several months, 10 workers have tried killing themselves in what is being called a "suicide cluster." Eight have succeeded.

Company spokesman Liu Kun said wage hikes will also be considered for other plants in China, with the increase in Shenzhen being used a reference. Other major Taiwan ODMs were quick to weigh in yesterday, noting that they would not offer additional pay hikes, in some cases because they had already done so last year when staff shortages affected southern China.

At Foxconn, the pay rise will focus on three groups of workers. Initial estimates are that 450,000 workers at various plants in China will receive an annual wage increase of at least $700. The move will increase Foxconn's yearly labor expenses by at least $333 million.

Foxconn said the basic salary for operators was increased from $131 a month to $175, or about a 33% increase. Workers already earning more than $131 and assembly line managers and group leaders will receive a hike of at least 30 percent, with details to be released later.

Workers at Foxconn receive a wage comprised of a monthly base salary, housing subsidy (around $22) and overtime. Before the wage hike, the typical worker earned around $220 to $235. With the change, that should rise to almost $295.

The company denies that the increase is directly related to the suicides at its Shenzhen plant, which employees more than 300,000 workers, many of which come from the countryside and are unfamiliar with China's fast-paced urban environment.

Foxconn issued a late night press release on June 1 stating the company would issue a pay rise because consumer prices and the cost of living had gone up. It said Foxconn empathized with its workers and wanted to give them a chance to raise their salaries while also reducing their overtime. Nevertheless, the international outcry over alleged poor labor practices seems to have played a role in the timing.

Foxconn had been considering an increase of at least 20 percent. But with the minimum wage in Shenzhen set to increase by 10-20 percent at the start of next month, it may have found a larger increase necessary to placate workers.

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