Generally speaking as an expatriate you are entitled to the exact same rights and provisions as your Chinese counterparts under the Labour Contract Law of the People’s Republic of China. However there are a couple of caveats which are important to consider which shall be covered below.
The general aspects governed by Chinese employment law are employment contracts, remuneration, workplace safety, procedures for negotiations, labor disputes, working hours, protection from discrimination, compensation or wage regulations, training, social insurance, and other legal responsibilities the employer must follow according to law.
China employment law is deemed to have the following characteristics:
- a very strict termination system;
- the existence of local policies and rules, in addition to the national laws, which differ in the approach to the same issues; and,
- a varying court and arbitral tribunal interpretations of the same legal issues. (important)
The two employment people should familiarise themselves with are as follows:
- Labour Law of the People’s Republic of China; and,
- Labour Contract Law of the People’s Republic of China.
These are the two primary sources of China’s employment law. However, these are not the only ones that should be considered since there are several other China employment law and supplementing policies applicable to any business in the country, including the following:
- Law of the People’s Republic of China on Labour Dispute Mediation and Arbitration;
- Employment Promotion Law of the People’s Republic of China;
- Labour Union Law of the People’s Republic of China;
- Law of the People’s Republic of China on Work Safety;
- Social Security Law;
- Opinion on Several Questions Regarding the Implementation of the Labour Law of the People’s Republic of China; and,
- Implementing Regulations for the Law of the People’s Republic of China on Employment Contracts.
There are three types of employment contracts, which are as follows:
- fixed-term labor contracts;
- open-term labor contracts; (somewhat limited by immigration requirements)
- specific-task labor contract, which set the completion of specific tasks as the term to end the contract.
There are no “employment at will” policies in China and as such companies may not terminate an employee without due cause. However, the company can force an employee out by paying at least double the severance entitlements.
Severance in China is calculated at 1 month for every year worked, for periods of less than 6 months, you are entitled to 1/2 a month salary compensation. However there is a VERY IMPORTANT CAVEAT here, in Shanghai the people’s courts reasoned that an foreign employee is only entitled to severance payments which are specified in the labour contract, ergo if there is no mention to severance in the termination section of the labour contract, the courts will find that you are not entitled to anything, so it is important to insist upon either a specific formula or figure for severance after termination.
Other entitlements in China
These entitlements rarely pose issues in China as expatriate contracts ususally offer above the minimum.
Annual leave is a paid benefit in China, and is required if an employee has worked more than one year cumulatively for all employers (not just the current employer). For cumulative employment of 1-10 years there is five days of annual leave, and twice that amount for service of 10-20 years.
Public holidays are in addition to the Annual leave entitlements.
The minimum sick leave entitlement in China is three months (for employees with less than 10 years cumulative work experience). Sick leave is paid on a schedule that depends on the number of years of work, ranging from 60% to 100% of salary.
There are three types of working hours systems applicable to full-time employees:
- Standard working hours system.
- Comprehensively calculated working hours system.
- Flexible working hours system.
Under the standard working hours system, an employee should work no more than eight hours per day and 40 hours per week. The employee is entitled to at least one rest day every week. If the employee is required to work over the above limits, they will be entitled to overtime pay to be calculated as follows:
- For overtime worked on a working day, the employee is entitled to 150% of their normal salary for the overtime worked.
- For overtime worked on a rest day (normally Saturday and Sunday), the employee is entitled to alternative rest time, or 200% of their normal salary for the overtime worked if the alternative rest time cannot be arranged by the employer.
- For overtime worked on a public holiday, the employee is entitled to 300% of their normal salary for the overtime worked.
Under the comprehensively calculated working hours system, working hours are calculated within a certain calculation period (for example, a month, a quarter or a year). The average daily working hours and the average weekly working hours must not exceed the statutory maximum (no more than eight hours a day and no more than 40 hours a week). The comprehensively calculated working hours system is generally applicable to certain special industries requiring long shifts (for example, employees in transportation, airlines, fishery industry, offshore oil exploration and so on). The employees working under this working hours system usually work intensively for one period and then take continuous days of rest. The employer must obtain approval from the competent authorities before adopting the comprehensively calculated working hours system.Under the flexible working hours system, an employee can perform their duties on a flexible schedule, provided that they properly complete the work assignment in a timely manner. The flexible working hours system is only applicable to certain job positions (for example, executives, sales personnel, taxi drivers and so on). Similarly, the employer must obtain approval from the competent authorities before adopting the flexible working hours system.
Women are entitled to maternity leave of 98 days (which includes 15 days of antenatal leave). Female employees who have more than one baby in a single pregnancy will be granted an extra 15 days’ maternity leave for each additional baby born.
For one year after the child is born, the female employee is given a one-hour break each day for breastfeeding. Female employees who bear more than one baby in a single birth are granted an extra one-hour break for each additional baby born.
During the pregnancy, maternity and breastfeeding period, the female employee’s salary must not be changed by the employer. Additionally, the employer cannot unilaterally terminate her employment during these periods, unless one of the circumstances provided in Article 39 of the PRC Employment Contract Law applies .
Some local regulations provide that the father of a newly born child can enjoy a certain number of paid days’ leave. There is no national provision covering paternity rights.
Continuity of employment following the sale of company
In the event of a company merger or division, the employees’ existing employment contracts remain valid and will continue to be performed by the succeeding employer, who takes on the rights and obligations of the previous employer. The employees are therefore automatically transferred to the new employer after the merger or division.
If the business transfer only involves a share transfer, the employer and employees remain the same and there is no automatic transfer of employees.
Protection against dismissal
Generally, on a business transfer (for example, a merger, division or share transfer) the employees are protected against dismissal.
However, a business transfer other than a merger, division or share transfer (for example, an asset transfer or a sale of a business division) can lead to a major change to the objective circumstances under which the employment contract was executed, rendering the employment contract unenforceable. In that instance, if, after consultations, the employer and the employees are unable to agree on amending the employment contract, the employer can unilaterally terminate the employees by giving 30 days’ prior written notice, or one-month pay in lieu of notice. In that case, the terminated employees are entitled to statutory severance pay.
Harmonisation of employment terms
The new employer and the transferred employees can negotiate between themselves on harmonising the terms of employment with that of the new employer’s existing employees.