China Update: What are the most important laws relating to labour & employment?



Author: 
Zhao Jingyi
Email:
jmp@jinmaopartners.com
Website: 
www.jinmaopartners.com

Over the past few decades, the People’s Republic of China (PRC) has been consolidating and finalising regulation regarding labour & employment. The main laws and regulations established in this area so far include:

  • PRC Labour Law;
  • PRC Labour Contract Law;
  • Enforcement Regulation of Labour Contract Law;
  • Labour Dispute Mediation and Arbitration Law;
  • Interim Provisions on Labour Dispatch.

 

Among the aforementioned laws and provisions, we would like to briefly highlight certain key points below.

 

Generally speaking, there are two types of employment relationships under the PRC labour law regime; namely, part-time employment and full-time employment. Under part-time employment, employees work no more than four hours per day and twenty-four hours per week for the same employer and are paid hourly. The laws give part-time employment more flexibility, with necessary restrictions including that the hourly salary paid to employees shall not be lower than the local minimum hourly wage rate. However, for full-time employment, a more stringent set of rules provided by laws shall be followed.

 

PRC Labour Contract Law requires employers, which mainly refer to companies and other organisations, to enter into written labour contracts with full-time employees, confirming the terms and conditions of the employment; failing to do so will give rise to compensation liabilities for the employees. Moreover, under most circumstances, it is compulsory for an employer to execute a non-fixed term labour contract with an employee, when he/she intends to renew the labour contract after he/she has consecutively concluded a fixed-term labour contract with the employer twice, which means the employer cannot terminate the employment relationship with such an employee simply due to the expiration of the labour contract.

 

In terms of working time, full-time employment may adopt either standard or special working hour systems (including flexible and comprehensive working hour systems), with the latter requiring filing with the local labour administrative authority before implementation. Overtime working fees are one and a half times the hourly salary on weekdays, two times the hourly salary on weekends, and three times the hourly salary on holidays. Annual leave relates to working years ranging from five to 15 days, while maternity leave/paternity leave and medical leave are also regulated under PRC labour law.

 

To strengthen employee protection—except when the employment relationship is terminated through amicable negotiation—employers can only unilaterally terminate the employment relationship legally with statutory termination clauses (for example, the employee seriously violates the rules and regulations of the employer, or the employee causes significant loss to the employer due to serious dereliction of duty). Otherwise, the employer must pay severance compensation for unilaterally terminating the employment contract without due cause, the amount of which depends on the length of employment between the employer and employee.

 

In respect to the non-competition obligation, since it is in fact a restriction of liberty in working, there are specific rules regulating this matter. Firstly, the non-competition obligation must be established by written contract. Secondly, only senior managerial staff, key technical staff and other employees with specific confidential duties are allowed by the laws to undertake the non-competition obligation. It is illegal for employers to impose such obligations on ordinary employees. Thirdly, the employer must financially compensate an employee undertaking non-competition obligations on a monthly basis during the term of the competition restriction after the labour contract is terminated. If the employee breaches the competition restriction stipulation, he/she shall pay a penalty to the employer as agreed in the non-competition agreement.

 

If the employer wishes to adopt the arrangement of labour dispatch, it shall in particular take into consideration the relevant provisions in Interim Provisions on Labour Dispatch. These include requirements on the qualifications of the labour dispatch company; the characteristics of the labour dispatch position (temporary, assistant and replaceable); the proportion of the labour dispatch employees in the total employees of the employer (no more than 10%); and the management restriction boundaries for the employer and labour dispatch company respectively.

 

Last but not least, the judicial procedure for labour disputes in China is unique by following the “arbitration before litigation” system, that is, the labour dispute shall be submitted to a competent labour-dispute arbitration commission for arbitration first, and if the parties are dissatisfied with the arbitral award, such a dispute can be submitted to a court. In other words, submitting a labour-dispute case to the court directly without a prepositive arbitration procedure will not be accepted by the court.

 

Additionally, China is currently taking measures to boost the national birthrate, replacing the previous population control policy, which we think may have an influence on labour law legislation in the future. This may include further protection for female employees during pregnancy, the puerperal or breast-feeding stage, and improvements on maternity leave (including the husband’s paternity leave) and maternity allowance. We will pay close attention to future changes in labour laws and regulations in China.