If you have employees in China, it is critical that you understand Chinese labor laws. Working hours, breaks, workdays, annual leave, and overtime pay are all governed by Chinese labor law.
Overtime regulations in China are complicated and frequently viewed as contentious. Employers must therefore understand the legalities that govern overtime in China to avoid potential legal squabbles.
Laws Regulating Overtime in China
In China, overtime regulations are typically governed by the People’s Republic of China Labor Law. Employees can work no more than eight hours per working day, but they can work more under certain conditions. Employers must consult with trade unions in order to grant overtime, according to Article 41 of the China Labor Law. Employees may work more than the standard eight hours per day if permission is granted, but no more than an extra three. Furthermore, accumulated overtime cannot exceed 36 hours per month, or nine hours per week.
The specific rules regarding overtime pay in China are as followed:
- 8-hour workday
A typical workday should last no more than eight hours. Any work completed after this time limit must be compensated at 1.5 times the employee’s regular working wage.
- 3 hours of overtime
Overtime on a given day is also limited to 3 hours under the law.
- 36 hours of overtime
The total number of overtime hours per month is also limited by law to 36 hours per month.
- Extra pay for weekend overtime
Overtime hours worked on weekends must be compensated at twice the employee’s regular working wage.
- Holiday pay
If a Chinese employee is required to work on a Chinese national holiday, he or she must be paid three times the normal working wage.
Formal Overtime Pay Risk Management for Chinese employees
Although most employers are required to follow the above-mentioned rules, some employers can legally modify their employment contracts in order to comply with PRC labor laws.
These laws allow an employer to modify overtime pay rules using one of the methods discussed below, as long as the contract is approved by the local labor council and, if necessary, the Chinese government.
Employers are protected from potential liability because they have government-sanctioned approval to change overtime rules.
The first option is for Chinese employers to include any overtime pay clause that differs from the standard overtime pay rules in China in their employment contract or handbook.
The employee must agree to the modified terms for them to be enforceable. China Payroll can assist you in finding qualified employees as well as negotiating a favorable deviation from Chinese overtime pay rules that is appropriate for your business model.
One way to achieve this favorable approach is to implement a Comprehensive Working Hour system, which specifies the exact number of hours that must be worked before overtime payments are due under PRC labor law.
Flexible Working Hour
Another contractual modification is the Flexible Working Hours system, which allows the employer to have high-ranking management and sales staff personnel work more than 40 hours per week without being paid overtime, with local labor councils dictating when overtime must be paid. As a result, the local labor councils would be complicit in the terms of the employee contract regarding overtime pay. Of course, the real complexity stems from the fact that all of your company’s other required paperwork must also be current and in compliance in order to prevent any unexpected problems from derailing your carefully negotiated overtime pay plans. The risk of using this method is greatly reduced, but not eliminated.
Informal Overtime Pay Risk Management
Employers may also be able to implement informal overtime pay arrangements. However, they must exercise caution when employing such non-government sanctioned methods because employees may still file a claim for overtime pay.
One such informal method is to not pay an employee for working more than 8 hours on a single workday but to allow the employee to leave early on another day of the workweek to compensate for the extra time.
Another informal method is to pay an employee on a salary regardless of how many hours they work. These workarounds violate the intent of Chinese labor laws and expose employers to wage and hour claims.
Contact us now to know more about over time policy and how to manage employees’ working hour and payroll in China.