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Important Facts to Know about Labor Dispute in China

Important Facts to Know about Labor Dispute in China

Employment conflicts are defined in Chinese law as disagreements with employees over issues such as termination or dismissal, wages and benefits, and adherence to working hours, leave, and other worker safeguards.

Labor disputes in China are becoming reasons for employers to terminate contracts with employees, but this will only exacerbate problems with Chinese law, which protects employees more than employers.

Avoiding the hazards of a labor conflict is becoming increasingly crucial for international businesses doing business in China.

What exactly is a Chinese labor dispute?

A labor dispute occurs when two parties in an organization, generally the employer and the employee, disagree.The labor dispute in China can involve different things but usually, it is related to salary, benefits, taxes, leaves, conditions of employment, hours worked.

Employers may save a lot of time and money if they stay up to date on China’s labor rules and take the required precautions to avoid labor disputes.

When companies first arrive in China, they are eager to hire workers and get their operations up and running.

Unfortunately, a company’s eagerness to hire individuals may lead to a failure to take the required safeguards when drafting employment contracts.

Including all necessary details in the contract will help to avoid misunderstandings and potentially costly labor disputes.

It is critical to understand that the burden of proof is always placed on the employer in the event of a dispute in China.

Types and causes of labor dispute in China

The majority of labor disputes fall into one of two categories:

Interest disputes: These are disagreements that arise as a result of differences in interests, such as pay, bonuses, and vacation time.

Workplace conflicts: These are disagreements that arise as a result of workplace expectations such as fair compensation, working conditions, and opportunity.

To resolve a labor dispute in China, it’s critical to first figure out what’s causing it. The following are some of the most common causes of labor disputes:

Economic causes: these are primarily related to pay, bonuses, and overall working conditions.

Psychological causes: These causes can also result in difficult situations for the employer to manage. These causes include differences in motivation, a lack of appreciation, and feelings of not being treated fairly.

Management causes labor disputes: communication problems with management, concerns about job security, and differences in leadership styles are all reasons why labor disputes begin.

One of the most common causes of labor disputes is disagreements over salary expectations.

The monetary value assigned to an employee’s work is referred to as compensation. Labor conflicts can arise when the employer and the employee have different remuneration expectations or appraisals.

How to Avoid Labor Conflicts

Any business owner does not want a labor dispute, especially when things are going well and sales are up.

You must understand that most labor disputes are the result of a breakdown in communication, and that a positive two-way dialogue will almost certainly help you reach an acceptable resolution.

Here are some pointers to help you avoid a labor dispute in China:

  • Assess wages and salaries

Check that they are in line with current market trends and that inflation patterns are adhered to.

  • Make a clear employment contract available.

Since 2008, employment contracts have been required in China, and failure to have them can result in legal and employee problems. You must also ensure that employment contracts are properly filed and stored.

  • Make sure your employees have the resources they need to complete their tasks.

Who is to blame if your employees are unable to complete the task due to a lack of tools (or training)? Check that all of the necessary equipment is on hand before moving on to the next task.

  • Make available the employee handbook.

The employee handbook is a document that is provided to new employees by the company before they begin work. It describes the company’s culture, rules, regulations, and processes, as well as employee rights and responsibilities.

  • Handle overtime and leaves properly.

Leaves and overtime work are frequently the source of labor disputes. Make these regulations clear in the contract and handbook, and put procedures in place to request approval for leaves and overtime.

Mediation is the first step in resolving a labor dispute.

In the event of a labor dispute within a company, either the employer or the employee may seek mediation assistance.

When a labor dispute arises, the parties may apply for mediation to the following mediation institutions, according to article 10 of Chapter 2 of the Labor Dispute Mediation and Arbitration Law:

Enterprise labor-dispute mediation commissions; grass-roots people’s mediation institutions established in accordance with law; organizations with the function of labor-dispute mediation established in towns, townships, or neighborhoods

An enterprise’s labor-dispute mediation commission must be made up of representatives from both the employees and the enterprise. Employee representatives must be trade union members or chosen by all employees, while enterprise representatives must be designated by the enterprise’s leader.

Any mediation agreement(s) must be documented in writing and signed (or stamped with an official seal) by the employer, the relevant employee, and the mediator in order for the parties to be legally bound.

China Arbitration

The parties to a labor dispute in China have the option of going straight to arbitration rather than going through the mediation process, according to Chinese labor dispute law.

Alternatively, if the following conditions are met, a labor dispute may be resolved first through mediation and then through arbitration:

The parties were unable to reach a mediation agreement within 15 days of the corresponding mediation committee’s acceptance of their mediation assistance application.

If any of the parties fails to fulfill their obligations under a Mediation Resolution, the Mediation Resolution will be null and void.

The New Labor Dispute Law makes the outcome of two types of labor disputes (the “Expedited Type,” as defined below) immediately effective and enforceable upon the issuance of the related arbitration ruling.

The Expedited Types of disputes are:

Labor disputes involving the failure to pay an employee’s earned work compensation or other incurred economic loss, or to pay for any damage corresponding to an employee’s work-related bodily injury or any related loss if the amount at issue is less than or equal to the local annual minimum wage.

Labor squabbles over the implementation of national work time, break time, vacation, and social insurance rules.

The Function of Trade Unions in China

Every worker in China has the right to form or join a trade union. This right, however, is severely limited because all enterprise unions must be affiliated with the All-China Federation of Trade Unions, a legally mandated organization (ACFTU).

The national trade union center of the People’s Republic of China is the All-China Federation of Trade Unions (ACFTU). It is the world’s largest trade union, with 302 million members in 1,713,000 primary trade union groups. The ACFTU is made up of 31 regional federations and ten national industrial unions.

The ACFTU is structured in a hierarchy of local and regional union federations, similar to how the Party and government are structured.

Local trade union officials usually form enterprise unions (the grassroots enterprise unions at the bottom of the above chart) in collaboration with management, rather than the employees.

Enterprise unions resemble social welfare organizations rather than true trade unions that serve the interests of their members.

In recent years, the Chinese government has noticed inequity in worker treatment and has called for reforms in the ACFTU to try to improve the organization and how officials carry out their duties.

The reform initiative had two main objectives:

Remove four impediments to the ACFTU’s work: regimentation, bureaucratization, elitism, and frivolity; and strengthen the organization’s three positive characteristics: political awareness, progressiveness, and public legitimacy.


To avoid labor disputes when doing business in China, it is critical for a company to plan for and implement a comprehensive personnel management system, which includes entering into official labor contracts with employees, obtaining certificates for international employees working in China, developing a clear employee handbook, and paying social security and housing funds for employees.

Contact us if you have any employment and payroll question for your employees in China!

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