China: What´s New For Employers In The People´s Republic Of China In 2008?

Last Updated: 21 January 2008
Article by Pattie Walsh and Lihui Zhou

2008 brings with it some major changes for labour related laws and regulations in the People's Republic of China (PRC) which has important implications for employers. Below is a summary of these changes so that employers can obtain a better understanding of what to expect this year.

New Labour Contract Law

The new Labour Contract Law (LCL) was initially issued in draft form on 20 March 2006. Since then, it has been widely documented and the subject of extensive debate. However, it did finally come into effect on 1 January 2008. With 98 Articles, this is a complex piece of legislation and unfortunately we are still waiting for the highly anticipated guidance at the State level from the Ministry of Labour and Social Security or from the State Council. Until this is issued, there are a number of unanswered questions in relation to the manner in which this legislation will impact on employers on a day-to-day basis. For example, the applicability of the law to hiring by representative offices, and how the views of the employees or trade union impact on an employer's ability to issue company rules, are still unclear. As soon as we have received the guidance we will update you further. We have written a number of articles explaining the details of LCL and these are available on request.

Employment Promotion Law

The Standing Committee of the National People's Congress passed a new law on 30 August 2007 - the PRC Employment Promotion Law (EPL) which came into effect on the same day as the LCL, 1 January 2008. With 69 articles, the EPL's stated objective is to achieve a harmonious society by, among other things, requesting that the government and employers provide equal employment opportunities to all their employees.

The EPL maintains the relevant provisions in the PRC Labour Law in respect of the protection of women's employment rights, and goes further from the previous position to include a prohibition on employers including the labour contract terms to restrict female staff from getting married or giving birth.

In addition to the equal employment rights, the EPL states that when recruiting staff, an employer is required to give appropriate attention to the ethnic minorities in accordance with the law. The EPL also prohibits employers from discriminating against disabled people, and refusing to recruit certain individuals because they are carriers of infectious diseases (but who are otherwise healthy and whose condition does not affect their ability to work). Further, rural workers who are employed in cities are granted the right of employment equal to that of urban workers, without discriminatory limits on their employment. A proposal to prohibit discrimination on the basis of age was rejected from the final draft of the EPL.

Perhaps most importantly, pursuant to the provisions of the EPL, employees are now given a legal basis to bring a civil claim against their employers in the People's Court for unlawful discrimination. While the potential remedies for unlawful discrimination are not stated, this provides employees with a clear right to pursue possible discrimination claims in a way that they have not been able to do so before.

Public Holidays And Annual Leave

The Regulation on Public Holidays for National Annual Festivals and Memorial Days and the Regulation of Paid Annual Leave for Employees came into force with effect from 1 January 2008 in relation to public holiday and annual leave entitlements. In summary, the number of public holidays has increased from 10 to 11 days and the Labour Day Golden Week has been eliminated. All PRC citizens will be entitled to the following public holidays: 1 January; Lunar New Year (eve and the first two days of first lunar month); Tomb-Sweeping Day; Labour Day (1 May); Dragon Boat Festival (fifth of the fifth lunar month); Mid-Autumn Festival; and National Day (1 October to 3 October). If a public holiday falls on a weekend, it shall be moved to the previous or next working day.

In addition, women will be entitled to a half day's holiday on Women's Day (8 March) and young people will be entitled to a half day's holiday on Youth Day (4 May). There is no clear definition of 'young people'. If one of these two holiday days falls on a weekend, there is no entitlement to a substituted day.

As a result of the new regulations on annual leave entitlements, it is now clear that employees who have at least one year's continuous service with an employer will be entitled to annual leave in addition to public holidays during which they will be paid at the same salary that they would have been paid had they worked on that day. Employees will now be entitled to annual leave as follows:

Continuous Service

Annual Leave Entitlement

1 year or more but less than 10 years

5 days

10 years or more but less than 20 years

10 days

More than 20 years

15 days

There are also some express exclusions setting out when employees will not be entitled to annual leave. These include when employees are entitled to a winter and summer vacation and the total days' vacation is greater than their annual leave entitlement; where employees have taken at least 20 days' personal leave paid in full in any leave year; and where employees have taken a certain period of sick leave (depending on the length of continuous service).

Employers are now obliged to compensate employees if they are unable to take their annual leave entitlement due to business needs. In such cases, employers are required to pay to employees 300% of the employees' daily salary for each day of annual leave.

In the draft regulations, there were provisions whereby the annual leave entitlement could be deducted from any home leave entitlement. However, there are no such provisions in the final regulations; while the position is not clear, the obvious suggestion is that annual leave entitlements are in addition to home leave entitlements.

Mediation And Arbitration Of Labour Disputes

The Law of the People's Republic of China on Mediation and Arbitration of Labour Disputes was adopted on 29 December 2007 and will come into effect on 1 May 2008.

The law provides that the arbitration award for the following labour disputes will now be the final award and will be binding from the date that the award is issued:

  • disputes in relation to labour remuneration, work-related injury medical fees, economic compensation or damages which do not exceed 12 months of the standard local monthly wage; and
  • disputes arising from implementation of the State labour standards such as working hours, rest and leave entitlements and social insurance etc.

This alters the current position which allows such claims to be brought before the People's Court, as a matter of right, within 15 days' upon receipt of the arbitration award -if either the employer or the employee is dissatisfied with the arbitration award. Under the new law, only employees will have this automatic right if dissatisfied, whereas employers are restricted to certain circumstances which are linked to legal or judicial errors or defective procedures.

In relation to the evidence submission responsibilities, the law identifies that where a labour dispute arises, the parties are responsible for giving evidence in relation to their own claim. However, where the evidence relevant to the dispute is handled and managed by the employer, the employer shall give evidence and, if it fails to do so, it will be responsible for any adverse consequences caused by its failure.

The law also specifies that where there is a labour dispute between a labour accepting unit and an employee, or between a labour agency and an employee, the labour accepting unit and the labour agency are joint parties to the dispute.

The law also eliminates arbitration fees, extends the limitation period for all labour disputes from 60 days to one year, and reduces the arbitration period (which is the period from the date the claim is accepted until the arbitration award or mediation agreement is issued) from 60 days to 45 days.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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