The Labor Law of the People’s Republic of China is the employment law China guide that lays down all the rules and regulations concerning the employer-employee relationship in the country. The body of rules encompasses everything from hiring candidates to the conditions for termination, and there are hardly any other amendments that companies can make to incorporate new regulations.
Although the rules are pretty simple, the legal authorities who look after the labor code in China are pretty stringent. The China Labor Law governs every organization seeking to hire local or international employees. Hence, if you are contemplating expanding your business here, you need to be aware of the labor code of China before hiring employees.
Who is Covered in the Employment Act?
The Labor Law China or the Employment Act governs all businesses, private non-profit organizations, individual economic organizations, and employment relationships under educational, government, and social institutions.
A written employment contract must be established when hiring employees to ensure smooth employment relationships. Hence, the labor act rules in China apply to all workers who have entered into a contractual relationship to receive work and compensation or remuneration from the employer in return for working in the People’s Republic of China area.
Employment Contract
An employment contract or employment agreement is a legal document that states the rules, regulations, and exact circumstances of the relationship between the employer and the employee.
In China, a written document lays down all the details of an employer-employee relationship with clearly stated terms. Even in cases where the parties do not enter into formal written contracts, they are to be considered bound by an employer-employee relationship.
The following are covered by the Employment contract of the Labor Code China:
- Employee’s scope of work
- Job description
- Term of Labor Contract
- Disciplinary matters
- Working conditions and worker rights
- Conditions for Employment Law China termination
- Wage
- Hours of work
- Place of work
- Social insurance
- Occupational Safety and Health
- Promotion of Employment
- Employee benefits security
- Code of conduct
The China Labor Law is characterized by stringent rules and regulations, which although simple are governed strictly, especially the laws that govern the termination issues. It is to be noted that the local labor regulations in China may vary on the same legal issues. The Implementing Regulations of the Labor Contract Law of the People’s Republic of China clarifies the China Labor Contract Law details.
Key Provisions of the Act
The China Labor Code embraces rules and regulations taken from several sources such as the Chinese Constitution, the Ministry of Human Resources and Social Security laws, the Labor Law and Labor Contract Law, administrative council laws, local laws & decrees, etc.
The main highlights and provisions of the Chinese labor law are:
Working hours:
The working hours in Chinese labor law are fixed at a maximum of eight hours in a day and 44 hours a week. Additional working hours can only be accepted under exceptional circumstances in consultation with the trade unions. It should not be more than three hours a day and 36 hours a month.
- There are three types of working hour systems under the labor act rules of China. They are Standard Working Hours System, Comprehensive Working Hours system, and Flexible Working Hours system. The Standard working hours system includes all the rules under the Chinese labor laws and states the daily and weekly working hours, overtime rates, and maximum overtime hours allowed. There is some flexibility given to employees as per the location and time of work.
- The Comprehensive working hours of the Chinese labor law comprise the overall calculation of hours of work is done based on cycles that are determined by weeks, months, or years. Under the Labor act rules of China, businesses pertaining to the railway, transportation, aviation, telecommunication, fishery, and seasonal industries are governed by Comprehensive Working Hours. The local Labor Bureau should first approve the same if it is to be implemented.
- Employees engaged as field personnel, senior management personnel, long-distance transportation personnel, on-duty personnel, etc., whose number of hours of work cannot be determined on a fixed working schedule due to their profession’s nature, can opt for the Fixed Working Hours system.
Worker’s rights:
The Chinese labor law decrees an array of laws that protect and safeguard workers’ rights. Accordingly, workers in China have the right to minimum wage, a 40-hour fixed working period with an overtime system, a written employment contract, social security (including pension, healthcare, unemployment, injuries, severance pay, etc.), Annual Leave, and Housing Fund.
Employment contracts:
There are three types of Employment Contracts as stated under Article 12 of the Labor Contract Law of 2008.
- A fixed-term labor contract entails employing candidates for a fixed tenure, whether they are hired as part-time or full-time workers.
- Open or indefinite contracts – There is no specified period or tenure of work. Termination may happen on a mutual agreement basis.
- Project-based contract – As the name suggests, these contracts are based on projects and their specific duration. Once the project is completed, the contract ends as well.
Probation period:
Under the Labor act rules in China, the probation period or the time taken to gauge the employee’s performance should not be six months.
Generally, only one probation period can be increased or renewed if there is a change in the employee’s position or nature of work.
Employee leaves:
The Employment Law China guide highlights the leaves according to the candidate’s tenure.
The maternity leave in China for foreigners and local workers is for 98 days, while the paternity leaves China is for 14 days. However, it varies from one province to another.
Minimum Wage:
The China Labor Law decrees the disbursement of wages according to the place and cost of living. Labor regulations in China have brought social insurance as a part of the monthly remuneration of both international and local workers.
Trade Unions:
The All-China Federation of Trade Unions is a government-recognized body that looks into the welfare of the employees while bargaining and mediating on their behalf.
Chinese Law on Termination
The China Labor Law decrees that employers must give at least 30 days of prior notice and pay severance for terminating an employee. For employees on probation period, the employer may terminate them by providing a three-day notice. Generally, the amount of money to be paid as severance is one month’s salary or half a month’s salary if the employee has worked with the organization for less than six months. Only in exceptional cases, where the termination is mutual, or the employee has been fired for a breach of conduct, will the employer be excused from offering severance pay.
The China labor code favors employees, and employers must offer solid proof/evidence to support their cause of termination of an employee. If an employee is wrongfully terminated, the penalty charges are double the compensation amount that’s to be usually paid.
Compliance Strategies for Employers
To comply with the labor code in China and avoid penalties and mistakes, employers should always hire employees through a written contract for a well-defined job role and salary structure. They should be ready to put forth any evidence of wrongdoing on the part of the employee if they have withheld the severance pay.
Also, the flexible working hours system should be approved first to avoid penalty charges for not paying overtime charges.
How Can Multiplier Help?
Owing to the strict law structure of the labor code in China, setting up your business and hiring employees in China can get complicated. It is a standard practice to create an employment contract to protect both the organization and employees. Employment contracts must also be reviewed and amended regularly (if necessary) to verify that the terms & conditions related to the employment relationship are compliant.
Thus, it is best to outsource the hiring and compliance chores to a reliable and reputable partner to relieve yourself of the stress. Your employees can also be relieved of preparing labor documents and conducting frequent compliance audits. You can outsource all aspects of employment to a corporate services provider to ensure full compliance and avoid penalties.
If you partner with Multiplier, we will guide you through the nitty-gritty of Chinese labor law so that you need not take any additional stress!