With the in-depth understanding of the Chinese employment law, foreign employers can easily avoid so many grave issues. China has several laws and regulations concerning treatment of employees, including a Labor Law, a Regulation on Labor Management of Sino-foreign Joint Ventures, Regulations on Labor Management of Foreign Funded Enterprises, and Regulations on the Control of Resident Offices of Foreign Enterprises, as well as separate standards for details such as minimum wages, holidays, working conditions, etc. Labour contracts shall become legally binding once they are concluded in accordance with law. Here are few aspects that global employers should take care of while employing people in China.
A well-documented employment contract-
The parties involved shall fulfill obligations stipulated in labor contracts. In the employment system of China, it is the well-documented employment contracts that are the most important part. Unlike the United States of America, where an employer can fire an employee at any time during his/her service, in China, the sudden termination of an employee could trigger a legal battle for the foreign companies. If you are an employer in China, all the full-time employees of your company must have a written employment contract with you, otherwise you could face penalties and administrative fines. Another downside of not having a written contract with your employees is that, Chinese authorities may treat it is an open-term employment agreement without any definitive end date. You certainly don’t want to face this situation.
Employment contracts shall be concluded in written form and contain the following clauses:
- Content of work and location of the workplace
- Time limit of the labor contract
- Labor remunerations
- Working hours, rest and leave time
- Minimum wages
- Work permits and social insurance
- Labor safety and hygiene
- Holiday entitlement
- Liabilities for violations of the contract
- Applicable labor protections, labor conditions and protection against occupational hazards
If within one month of the commencement of the employment relationship an employee refuses or fails to sign a written employment contract with the employer, the employer must provide the employee with a written notice terminating the labor relationship. In this case, the employer is not required to pay any economic compensation but must compensate the employee for the time he or she actually worked. That’s why it is advised by the China lawyers to write down clearly the term of the employment contracts and probation period.
Working hour rules in China-
Working hours in China is a key issue. The Chinese government stipulates a five-day work week and the business hour is regulated as no more than 8 hours a day and no more than 44 hours a week in the Labor Law of People’s Republic of China. Take a look at the working hour system in China.
- Standard Working Hour System: According to this system an employee may work no more than 8 hours per day and, as such, working hours are capped at 40 hours per week and workers have at least one day off per week. Any work that exceeds the maximum limit of 8 hours per day, or 40 hours per week, is considered overtime.
- Flexible Working Hour System: Employees under Flexible Working Hour System (FWHS) are not limited by the daily overtime limit and monthly overtime limit. However, the Flexible Working Hour System is only applicable for the following positions (a) Senior management, outdoor staff, salesman and operator on duty, (b) Long-distance transport workers, taxi drivers and stevedores in railway station, port, or warehouse
- The Comprehensive Working Hour System: It signifies that an employee’s working hours are calculated periodically (e.g. per week, month, quarter or year) although the average working hours shall be generally the same as the Standard Working Hour System.
Rest Days, Holidays & Leaves in China-
The amount of statutory annual leave is generally based on an employee’s work experience/tenure. Employers may extend paid annual leave as a benefit to their employees, but they need to specify the additional days in the labor contract. Employers are required to make arrangements for employees to use their vacation time each year. An employer who does not allow an employee to take annual leave may be forced to pay that employee 300% of his or her daily wages for each unused vacation day.
The employment contract ends if the employer is declared bankrupt, its business license is revoked, it is ordered to close by the competent government authority, or it is dissolved by an investor.