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Chinese shoe manufacturer Yue Yuen Industrial (Holdings), a supplier for Nike and Adidas, said the recent labour dispute that stopped some of its production this month will cost it nearly $60 million initially and the bill could increase.
The footwear maker said direct losses from a strike at a plant in southern China cost it an estimated $27 million, while increased benefits to workers will cost it $31 million in 2014 alone.
Workers walked off the job at the company's Gaobu factory in Dongguan, Guangdong province, early this month in a dispute over what they alleged were insufficient social-insurance and housing payments.
More than 80% of the employees at the Gaobu factory have returned to work, Yue Yuen said. The factory employs about 45,000 workers and its production volume accounts for about 10% of Yue Yuen's total, the shoemaker said.
The company has agreed to provide workers at the factory with an adjustment to employee benefits, including an additional monthly living allowance of RMB230 ($37).
Yue Yuen also said it will make back payments for contributions owed to the employee-benefit program but that the amount can't be quantified now. It said it will make a further announcement "in due course."
Yue Yuen, which had promised to make all social-insurance back payments, starting May 1, had previously reported a profit of $434.8 million for 2013, down 7.1% from the previous 12 months.
The average monthly wage at Yue Yuen is about RMB3,000 ($479) but payments to social insurance were based on income of about RMB1,810 ($289) for most employees, workers have said. In China, both employees and employers are required to pay into their workers' social-insurance accounts.
Source: Wall Street Journal