The recent series of high-profile labor events has thrown a spotlight on the protection of workers’ rights in China. Several foreign multinationals, including FoxConn, McDonald’s and Yum! Brands Inc - which owns the KFC brand, had been investigated for providing poor working conditions, underpaying their part-time workers and engaging in other unfair labor practices. The rescue of slave workers from the brick kilns and mines in Henan and Shanxi provinces had also made headlines in many local and international news media. These events and the recent enactment of the revised China labor law on June 29th, 2007 - after 18 months of heated debates, are reminding foreign investors to be mindful of their legal obligations as an employer in China.
Obligations of Foreign Employers
China has its own unique labor system and regulations. Apart from the usual employment requirements, such as signing contracts with workers, meeting wage standards and issuing salary timely, employers in China are also obliged to:
1. File their staff employment and dismissal with relevant government bureaus
2. Maintain employees’ personnel file – a unique Chinese document that records all academic and employment history of an employee, and the responsibility of maintaining the file is transferred from one employer to another when the employee changes jobs
3. Withhold and pay individual income tax on behalf of their employees
4. Make monthly contributions to their employees’ social benefits and housing funds Most of the above processes are complicated by the involvement of several government bureaus and tedious paperwork. For the unfamiliar, staffing their China operations may pose a challenge.
What follows is a useful list of “must-knows” for employers in China.
Employment contract
Official employment contracts written in Chinese must be provided to all employees. While there is no standard contract format, the agreement should bear critical information including term of contract, probation period, job responsibilities, labor protection and working conditions, compensation, termination conditions, disciplinary rules and breach of contract provisions. Depending on individual needs of companies, it is also common to include other contract terms such as non-compete clause, non-disclosure agreements and training bond period.
Term of contracts
Three legal forms of employment terms exist in China:
• Fixed Term Employment – contract terminates once the stated time period lapse. Upon expiration, the contract can be renewed with mutual consent from both contracting parties.
• Open-Ended Employment – contract without termination date.
• Project-based Employment – contract terminates upon completion of a stated project.
Due to the common abuse of fixed-term contracts by companies to avoid long-term employment commitments, the new labor law includes several provisions to curb such practice and better protect workers’ rights. Now, companies can sign at most two fixed-term contracts with an employee and are obliged to pay severance compensation if they do not renew the contract. ( commented by AJ Hu)
Wages
The wage standards vary across different regions of China, depending upon economic conditions and job requirements. For Shanghai, the current minimum required wage stands at RMB 840.
Protect Your Employees, Protect Your Business - A Practical Guide to Labor Law Compliance in China
