The Labor Law of the People’s Republic of China (PRC) is the primary law governing labor relations in China. It was promulgated on December 29, 1994, and took effect on July 1, 1995. The Labor Law has been amended several times since then, most recently in 2012.
The Labor Law is designed to protect the legitimate rights and interests of workers, promote the harmonious development of labor relations, and safeguard social stability. It applies to all employers and employees in China, regardless of their nationality or place of incorporation.
Labor Law Structure in China
Employers and employees in China are obligated to adhere to the Labor Law of the People’s Republic of China. This comprehensive legal framework encompasses various aspects of employment, such as employment contracts, working hours, salaries, labor disputes, negotiations, and more. While these regulations are theoretically designed to safeguard the rights of workers, the historical reality is that strict enforcement has often been the exception rather than the norm.
The key components of China’s labor laws are comprised of several documents and resolutions, including:
- Chinese Constitution
- 1995 Labor Law of the People’s Republic of China
- 2008 Labor Contract Law of the People’s Republic of China
- Law of the People’s Republic of China on Labor Dispute Mediation and Arbitration
- Labor Union Law of the People’s Republic of China
- Law of the People’s Republic of China on Work Safety
- Social Security Law
- Regulations issued by the Ministry of Human Resources and Social Security (MOHRSS) and other state councils, ministries, and commissions.
It’s important to note that foreign-registered employers and employees are not subject to these Chinese labor laws and regulations. However, if you are an employer looking to hire within China, compliance with these rules is essential, and you must register your company with the Chinese Communist Party to avoid establishing a permanent presence.
Navigating the entity registration process in China can be intricate and time-consuming, involving various applications for registration, permits, and licenses. Furthermore, the dynamic nature of Chinese employment law means that regulations are frequently updated or changed by the government. Keeping abreast of these changes can be a daunting task.
Employee Rights in China
China boasts a comprehensive legal framework that grants employees a spectrum of rights and safeguards against exploitation and discriminatory practices.
Employees are entitled to:
- Minimum wage
- A formal employment agreement
- A standard 40-hour workweek with established overtime rates
- Comprehensive social security benefits, including pensions, healthcare, unemployment coverage, compensation for workplace injuries, and severance pay upon termination
- Access to a housing fund
- Annual leave provisions
To address these challenges, many foreign companies choose to collaborate with an employer of record who possesses in-depth knowledge of the current legal and labor standards in China. This partnership ensures compliance with the latest regulations, making it a prudent choice for businesses operating in this complex regulatory environment.
Employment Contracts
All employers in China are required to sign written employment contracts with their employees. The employment contract must specify the following information:
- The names of the employer and employee
- The start and end dates of the employment contract (if fixed-term)
- The job title and duties of the employee
- The employee’s salary and benefits
- The employee’s working hours and vacation days
- The terms for termination of the employment contract
In China, there are three types of employment contracts:
- Fixed-term labor contracts – They are the standard labor contracts in China. They establish an employer-employee relationship for a fixed length of time, whether it is for part-time or full-time work.
- Open-ended contracts – The date of termination is not determined on these contracts. Employers can only conclude the contract by mutual agreement.
- Project-based contract – These contracts are defined by a specific task or project, rather than by the length of time the employees will work for a company. Once the project is delivered, the contract ends.
| Part Time | Full Time |
|---|---|
| 4 hours/day | 8 hours/day |
| 20 hours/month | 40 hours/month |
| No severance pay | Compensation in case of termination |
| Only work-related injury insurance | Social security |
| Hourly-based remuneration | Monthly-based remuneration |
Regardless of the contract, it must satisfy statutory benefits and paid leave requirements, such as maternity leave, vacation time, holidays, sick leave, health coverage, workers’ compensation and pensions.
Working Hours and Overtime
Standard working hours in China are 8 hours per day, 40 hours per week. Employers may require employees to work overtime, but the total overtime worked should not exceed 36 hours per month. Employees must be paid at least 1.5 times their regular hourly wage for overtime work.
Social Security
All employers in China are required to contribute to their employees’ social security contributions. Social security in China includes the following benefits:
- Pension insurance
- Medical insurance
- Unemployment insurance
- Maternity insurance
- Work-related injury insurance
Employee Leaves
Employees in China are entitled to the following types of leave:
- Annual leave: Employees are entitled to at least 5 days of paid annual vacation after working for one year. The number of vacation days increases with the employee’s years of service.
- Sick leave: Employees are entitled to paid sick leave, but the specific amount of leave varies depending on the employer’s policies and the employee’s condition.
- Maternity leave: Female employees are entitled to 98 days of paid maternity leave.
- Paternity leave: Male employees are entitled to 15 days of paid paternity leave.
| Working Years | Annual Leave |
|---|---|
| More than 1 year but less than 10 years | 5 days |
| More than 10 years but less than 20 years | 10 days |
| More than 20 years | 15days |
Termination of Employment
Employers may terminate an employment contract for the following reasons:
- The employee has committed a serious violation of the employment contract or company rules and regulations.
- The employee is unable to perform their job duties due to illness or injury.
- The employer is closing down or relocating its business.
If an employer terminates an employment contract without a valid reason, the employee may be entitled to severance pay.
Dispute Resolution
If a dispute arises between an employer and employee, the parties may try to resolve the dispute through negotiation or mediation. If negotiation and mediation fail, the employee may file a complaint with the local labor bureau or labor arbitration tribunal.
Additional Information
In addition to the Labor Law, there are a number of other laws and regulations that govern labor relations in China. These include the following:
- Social Insurance Law
- Employment Promotion Law
- Vocational Skills Training Law
- Occupational Safety and Health Law
- Labor Dispute Resolution Law
Employers and employees in China should be familiar with the relevant laws and regulations to ensure that their rights and interests are protected.
Here are some additional details about the China Labor Law:
- Non-discrimination: The Labor Law prohibits discrimination in employment on the basis of race, ethnicity, gender, religion, or disability.
- Equal pay for equal work: Male and female employees performing the same work must be paid the same wage.
- Child labor: The Labor Law prohibits the employment of children under the age of 16.
- Forced labor: The Labor Law prohibits forced labor, including bonded labor and human trafficking.
- Trade unions: Employees have the right to form and join trade unions.
- Collective bargaining: Trade unions have the right to bargain collectively with employers on behalf of their members.
How to Hire Employees in China
The China Labor Law is a comprehensive law that protects the rights of workers and promotes harmonious labor relations.
Understanding China’s labor and contract laws is crucial for any company planning to hire employees in the country. However, merely understanding these laws is not sufficient. Establishing a business presence in China is a prerequisite for hiring employees, whether they are Chinese nationals or foreigners.
Navigating the complexities of starting a business in China, similar to dealing with labor laws, involves a series of intricate procedures that must be followed meticulously to ensure full compliance and the legal hiring of employees.
Many companies opt an Employer of Record (EOR), is a company that offers services allowing employers to delegate tasks related to employee management, such as payroll, employee benefits, and workers’ compensation.
In simple terms, a EOR legally employs your staff in China on your behalf, even if you do not have a legal entity established in the country, and then provides their services back to you through a service agreement. This approach enables foreign businesses to establish a presence or sales office in China while minimizing risks and avoiding the lengthy and costly process of direct in-house hiring.
China Payroll specializes in providing EOR services, managing HR, benefits, employees, and payroll, allowing you to concentrate on growing your business in China. Feel free to contact us for more information and assistance.
