McDonald's raising China pay after controversy

SHANGHAI (Reuters) - U.S. fast food giant McDonald's Corp. (MCD.N), facing accusations that it has been breaching China's minimum wage laws, said on Tuesday it would give its Chinese employees their first across-the-board pay rise.

From next month, McDonald's will increase workers' pay to levels 12 to 56 percent above local minimum wages, McDonald's China spokesman George Gu said.

He declined to be more specific about the rises but said that currently, some workers were paid "in line" with minimum levels.

McDonald's became embroiled in a public controversy in April, when Chinese newspapers reported it was paying some part-timers far below local minimums -- for example, 4 yuan (52 cents) an hour in the big southern city of Guangzhou, or just over half the city's minimum.

China's state-backed All-China Federation of Trade Unions called on McDonald's to adjust its pay and let its workers unionize.

"The wage issue partly helped us accelerate salary adjustments in China," Gu said. "But the main purpose is to let our local employees share the prosperity of McDonald's business."

The company will also introduce more incentive and training programs for its 50,000 staff in China, and aims to have all workers unionize by the end of this year, compared with 80 percent now, he added.

The controversy came at a sensitive time for McDonald's since China's state-backed unions have been stepping up efforts to expand at big foreign companies, and because of rising inflation. Chinese consumer price inflation hit a 33-month high of 4.4 percent in June and is believed to have risen further last month.

The pay rise will not hurt the profitability of McDonald's in China and the company has no near-term plans to increase its food prices, Gu said.

Chinese unions have also criticized the wage policies of Yum! Brands Inc.'s (YUM.N) Pizza Hut and KFC, while Wal-Mart Stores Inc. (WMT.N) last year let Chinese staff join unions after criticism that it exploited low-paid workers.

McDonald's has over 800 restaurants in China and plans to open 100 more every year.