24 June 2024

Labour and Employment Comparative Guide

Labour and Employment Comparative Guide for the jurisdiction of China, check out our comparative guides section to compare across multiple countries
China Employment and HR
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1 Legal framework

1.1 Are there statutory sources of labour and employment law?

The main statutory sources that govern employment relationships in China are:

  • the Employment Contract Law; and
  • the Employment Law.

Other key laws, interpretations and regulations include:

  • legislation such as:
    • the Social Insurance Law;
    • the Work Safety Law;
    • the Trade Union Law;
    • the Employment Dispute Mediation and Arbitration Law; and
    • the Employment Promotion Law;
  • judicial interpretations, which notably include:
    • the Interpretation (1) of the Supreme People's Court of Issues Concerning the Application of Law in the Trial of Employment Dispute Cases; and
    • the Provisions of the Supreme People's Court on Several Issues concerning the Trial of Administrative Cases on Work-Related Injury Insurance;
  • administrative regulations regarding salary, working hours, rest and leave, insurance and so on, including:
    • the Regulation on the Implementation of the Employment Contract Law;
    • the Regulation on Work-Related Injury Insurance;
    • the Regulation on Paid Annual Leave for Employees;
    • the Regulation on Employment Security Supervision;
    • the Special Rules on the Employment Protection of Female Employees; and
    • the Regulations on Unemployment Insurance;
  • departmental regulations which govern specific issues concerning the employment relationship, such as:
    • the Provisions on Minimum Salaries;
    • the Interim Provisions on Salary Payment;
    • the Administrative Measures for Diagnosis and Identification of Occupational Diseases; and
    • the Administrative Measures for Assessing the Work Capacity of Employees Sustaining Work-Related Injuries; and
  • local regulations, which are established by local governments and are enforceable within their specific regions.

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

In addition to the statutory sources, the contractual system plays a crucial role in shaping employment relationships.

The primary contractual document is the employment contract established between the employer and the employee. Contracting parties are free to negotiate the terms and conditions of employment, including:

  • job responsibilities;
  • working hours;
  • salaries; and
  • other relevant provisions.

In addition, collective employment contracts can be established between an employer and a trade union or employee representatives. Collective bargaining can also take place at both the industry level and the regional level. Collective contracts typically cover matters such as:

  • remuneration;
  • working hours;
  • rest and holidays;
  • occupational safety and health;
  • insurance and welfare; and
  • other benefits for a group of employees rather than an individual employee.

A collective contract will have binding effect only if:

  • the draft has been submitted to the employees' representative conference or all employees for discussion; and
  • the contract has been submitted to the employment administrative department and no objections to the contract have been raised within 15 days of receipt by the employment administrative department.

These contracts allow for the negotiation of terms which are more generous than the statutory requirements; they should not be less favourable than the statutory standards.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

Employment contracts are commonly used to govern employment relationships at all levels in China. Generally, employment contracts fall into three categories:

  • fixed-term employment contracts;
  • open-ended employment contracts; and
  • contracts that expire upon the completion of agreed work tasks.

Employers and employees can negotiate different types of employment contracts. However, in specific circumstances, employers must provide an open-ended employment contract unless a fixed-term contract is requested by the employee. For example, if an employee has 10 years of continuous service and seeks contract renewal, the employer should offer an open-ended employment contract.

Written employment contracts are usually required in China, although exceptions do exist. Employment can be classified into full-time employment and part-time employment based on employee status. The employer must provide a written employment contract to full-time employees within one month of the commencement of employment. Failure to provide a written employment contract can result in legal risks for employers, such as double salary payments. However, for part-time employees, a written contract is not essential and verbal forms are acceptable.

As per the Employment Contract Law, employment contracts should include:

  • the employer's details (eg, name, address);
  • the employee's details (eg, name, address);
  • the duration of the contract;
  • job responsibilities and work location;
  • working hours;
  • rest and leave;
  • remuneration;
  • social insurance;
  • employment protection and working conditions; and
  • other legally mandated clauses.

Certain statutory provisions setting out mandatory obligations for employers can be considered as implied terms, such as:

  • statutory termination grounds; and
  • minimum salary standards.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

According to the Special Provisions for Female Employees, female employees who give birth are entitled to maternity leave. Additionally, extended maternity leave is determined by local regulations, with the duration varying from city to city. During maternity leave, female employees can receive a maternity allowance, as outlined in question 2.2.

There are no national regulations on parental leave in China. The 2021 Population and Family Planning Law encourages local authorities to implement parental leave where feasible. As a result, parental leave is governed solely by local regulations. For example, according to the Regulations of Beijing Municipality on Population and Family Planning, couples who adhere to China's birth control policies are eligible for five days of fully paid parental leave each year until their child turns three.

2.2 How long does it last and what benefits are given during this time?

As mentioned in question 2.1, female employees are entitled to maternity leave at the national level. According to the Special Provisions for Female Employees, the duration of paid maternity leave is set at 98 days, 15 of which can be taken before delivery. The specific length of maternity leave varies based on factors such as:

  • the number of children; and
  • potential medical complications.

Furthermore, extended maternity leave can be determined by local regulations. For example, in Beijing, female employees are entitled to an extra 60 days of maternity leave on top of the mandated period.

During this period, female employees can receive a maternity allowance. Those who have participated in maternity insurance are eligible for the maternity allowance, which is funded by the Maternity Insurance Fund. If the maternity allowance falls below the employee's standard salary, the employer is responsible for covering the difference. If the maternity allowance exceeds the salary, no deductions should be made by the employer.

If employers have not contributed to female employees' maternity insurance, they will be required to provide salary during maternity leave.

Regulations regarding parental leave differ across cities. In most cities, employees are entitled to receive full salary during parental leave.

2.3 Are trade unions recognised and what rights do they have?

According to the Trade Union Law, trade unions are the only legally recognised organisations that can represent employees in China. Trade unions represent the interests of employees, advocating for their rights and welfare. The rights and responsibilities of trade unions are mainly as follows:

  • Protection of employee interests: Trade unions play a pivotal role in safeguarding the legitimate interests of employees by:
    • assisting and guiding employees in the formulation and fulfilment of employment contracts;
    • establishing effective mechanisms for collective bargaining with employers;
    • conducting negotiations and formalising collective agreements with employers; and
    • providing essential legal support and assistance to employees embroiled in employment disputes.
  • Employee representation in decision making: Trade unions facilitate employee involvement in democratic decision making, management and supervision through the organisation of employee representatives' congresses.
  • Oversight of employer: Trade unions are vested with the authority to oversee employers to ensure:
    • adherence to the terms outlined in employment contracts and collective agreements;
    • fair and lawful unilateral termination of employment contracts by employers; and
    • that any economic layoffs by employers are conducted fairly and according to legal standards.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

The Personal Information Protection Law provides comprehensive regulations and responsibilities that employers must follow when handling personal information. These regulations cover various stages of data management, such as:

  • storage;
  • processing;
  • transmission;
  • disclosure; and
  • deletion.

The implementation of data protection measures within the realm of employment grants employees enhanced privacy rights, covering the following key aspects:

  • Employees are entitled to be fully informed about:
    • the types of data being collected;
    • the intended purposes for which the data will be utilised; and
    • the entities or individuals authorised to access this information.
  • Employees have the right either to decline or to revoke their consent for the processing of their personal data.
  • Employees have the right to request the removal of their personal data once its preservation ceases to be necessary for the originally specified purposes.

2.5 Are contingent worker arrangements specifically regulated?

Chinese employment laws contain no specific provisions dedicated solely to contingent workers. The term 'contingent workers' generally includes two main categories:

  • part-time employees; and
  • workers engaged through service agreements.

Part-time employment is specifically regulated by the Employment Contract Law. Part-time employment typically involves compensation based on hourly rates. The average daily working hours of a part-time employee at the same employer usually should not exceed four hours; and the cumulative weekly working hours should not exceed 24 hours. In the context of part-time employment:

  • oral employment contracts can be established;
  • a probationary period cannot be stipulated;
  • either party (employer or employee) has the right to terminate the employment contract at any time without the requirement of economic compensation from the employer;
  • the hourly rate must meet or exceed the minimum hourly salary standard set by the local government; and
  • the payment cycle must not exceed 15 days.

Workers engaged through service agreements are not protected by the Employment Contract Law. Service agreements are regulated by the Civil Code. However, workers operating under service agreements can seek to classify their contractual relationship as an employment relationship if certain criteria indicative of such a relationship are present. As such, this can grant the service providers employee status and protection under the Employment Contract Law. Key elements contributing to the determination of an employment relationship include:

  • both parties satisfying legal qualifications (eg, the employee has not reached retirement age);
  • personal subordination (eg, the employer's rules and regulations apply to the employee);
  • economic subordination (eg, the employer provides regular compensation to the employee); and
  • organisational subordination (eg, the services provided by the employee are integral to the employer's key business operations).

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

At the national level, there is a comprehensive system for general minimum salary standards; although the specific benchmarks for these minimum salaries are determined on a regional basis. The Provisions on Minimum Salaries dictates that individual local governments are responsible for defining their own minimum salary criteria, including both monthly and hourly rates. The monthly minimum salary pertains to full-time employees; whereas the hourly minimum salary applies to part-time employees. Furthermore, the Provisions outlines a mandatory minimum salary adjustment at least once every two years.

The exact minimum salary standards vary across different cities. For instance, in Beijing, the current minimum hourly salary stands at RMB 26.40, alongside a minimum monthly salary of RMB 2,420. In addition, Shanghai's minimum hourly salary is set at RMB 24, accompanied by a minimum monthly salary of RMB 2,690. These minimum salary standards are subject to revisions once every few years based on the local practice.

Moreover, the elements included within the minimum salary standards may vary from city to city. Local governments have the authority to specify the elements for both hourly and monthly minimum salaries. For example, in Shanghai, the hourly minimum salary should not include the social insurance contributions that employees and employers are required to make.

3.2 Is there an entitlement to payment for overtime?

If employees work under standard working hours system (ie, no more than eight hours a day and 40 hours a week), when employers require employees to work beyond their regular hours, they are obliged to provide overtime compensation. The Employment Law and the Interim Provisions on Salary Payment have established specific guidelines for overtime pay, as follows:

  • For extended working hours on a workday, employees should receive compensation at a rate of at least 150% of their standard salary;
  • If employees are scheduled to work on a rest day and it is impossible to offer alternative days off, they are entitled to compensation at a rate of no less than 200% of their standard salary; and
  • If employees are assigned to work on a statutory holiday, they shall be paid at a rate of no less than 300% of their standard salary.

On the contrary, there is no concept of overtime for employees working under the flexible working hours system, in that they are considered to be able to arrange their own schedule and are not required to be present in the office each day. However, in certain regions, such as Shanghai and Shenzhen, local government regulations mandate that employees under a flexible working hours system also qualify for overtime compensation if they work on statutory holidays.

For employees operating under the comprehensive working hours system, employers should be aware that if employees' working hours exceed the total hours approved within a given period, employers are obliged to provide overtime pay for these excess hours. For extended working hours on a workday or a rest day, employees should receive compensation at a rate of at least 150% of their standard salary; for extended working hours on a statutory holiday, employees should be paid at a rate of no less than 300% of their standard salary.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

Yes. According to the Employment Law and the Regulation on Paid Annual Leave for Employees, employees who have worked for their employer for more than one year are entitled to paid annual leave. During annual leave, employees are entitled to receive salary. The specific duration of paid annual leave is based on the length of their years of employment, calculated cumulatively ('service years'):

  • Employees with one to nine years' experience are entitled to five days of annual leave;
  • Employees with 10 to 19 years' experience are entitled to 10 days of annual leave; and
  • Employees with more than 20 years' experience are entitled to 15 days of annual leave.

Certain periods are excluded when calculating the length of employees' annual leave – for example:

  • statutory holidays;
  • rest days (eg, weekends); and
  • leaves such as marriage or bereavement leave, maternity leave.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Sick leave is supported under Chinese law.

The length of sick leave that can be allowed depends on the local regulations relating to the medical treatment period, which is determined based on:

  • the employee's employment history; and
  • the severity of the illness.

For example, in Beijing, if an employee has cancer, it is possible that he or she may be considered to have a 24-month medical treatment period. Further sick leave beyond the medical treatment period can still be approved by employers, although they are not obliged to do so.

There are also regulations governing minimum salary entitlements during periods of sick leave, at both the national and regional levels.

3.5 Is there a statutory retirement age? If so, what is it?

Yes. In China, a statutory retirement age applies to employees. For male employees, the statutory retirement age stands at 60 years.

When it comes to female employees, the situation may differ depending on the specific circumstances and the job role. For female employees in management positions, the retirement age is set at 55. Female employees in non-management positions are subject to a retirement age of 50.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

The Employment Promotion Law and the Employment Contract Law in China explicitly prohibit various forms of discrimination in the workplace. Employers are strictly prohibited from engaging in discriminatory practices based on factors such as:

  • ethnicity;
  • race;
  • gender;
  • geographical origin; and
  • religious beliefs.

It is considered a violation of the law for employers to discriminate based on:

  • gender;
  • age;
  • health condition, encompassing disabilities or illnesses;
  • ethnicity, race or nationality;
  • religious beliefs;
  • geographical origin;
  • pregnancy or maternity status;
  • sexual orientation and gender identity; and
  • physical appearance, weight, height or general appearance.

Moreover, any attempts by employers to restrict female employees from marrying or starting a family are also deemed discriminatory and are strictly prohibited.

4.2 Are there specified groups or classifications entitled to protection?

Generally speaking, there are no specified groups or classifications. As outlined in question 4.1, discrimination based on certain factors is banned, but there is no mention of specific groups or classifications.

4.3 What protections are employed against discrimination in the workforce?

As mentioned in question 4.1, the Employment Promotion Law and the Employment Contract Law contain provisions that prohibit discriminatory practices throughout various employment-related processes, such as:

  • hiring;
  • promotions; and
  • compensation.

However, the laws and regulations that set out the exact penalties for violations and the extent of protection against discrimination are insufficient.

Employers can consider taking measures to prevent employees from being discriminated against in the workforce – for example:

  • formulating comprehensive anti-discrimination policies;
  • conducting employee training sessions aimed at fostering a culture of non-discrimination; and
  • establishing effective protocols to promptly address and resolve discrimination-related complaints.

4.4 How is a discrimination claim processed?

In China, if an employee experiences employment-related discrimination, he or she has two options for dispute resolution:

  • initiating a tort lawsuit; or
  • initiating an employment dispute through the Employment Arbitration Committee.

With regard to the burden of proof, an employee is initially responsible for presenting prima facie evidence demonstrating the presence of discriminatory conduct by an employer. Subsequently, the burden shifts to the employer, which must provide evidence to demonstrate that its actions do not amount to discrimination. Where the employer fails to provide compelling evidence or satisfactory justification, it will be held responsible for the consequences.

4.5 What remedies are available?

The remedies available to employees differ based on:

  • the nature of the offence; and
  • the extent of the infringement.

The available remedies encompass:

  • payment of damages to compensate for economic loss, such as:
    • salary loss;
    • loss of benefits; and
    • other pertinent damages;
  • payment of damages to compensate for emotional distress under specific circumstances; and
  • cessation of the employer's discriminatory action.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

The law requires that employers take the following actions to address sexual harassment:

  • Establish comprehensive regulations and protocols to prohibit sexual harassment;
  • Establish a designated department or appoint an individual to oversee these matters;
  • Provide training to prevent and address sexual harassment;
  • Take necessary security measures;
  • Create accessible complaints channels, including telephone numbers and mailboxes, to establish unhindered avenues for reporting;
  • Formulate and refine investigation and resolution procedures, ensuring prompt dispute resolution while safeguarding the privacy of the parties involved; and
  • Offer support, assistance and psychological counselling as needed for affected women who pursue their rights within lawful frameworks.

If an employer fails to take reasonable steps to prevent and address sexual harassment, resulting in the infringement of women's rights, detrimental societal implications or both, the competent authorities have the authority to mandate corrective actions or impose penalties.

Specific regulations concerning workplace bullying and retaliation/victimisation are lacking. If an employee encounters such actions, he or she can seek remedies by initiating a tort lawsuit.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

In China, termination of an employment contract requires that the employee be informed of the grounds for termination – for example:

  • gross misconduct;
  • dereliction of duties; or
  • incompetence.

Without valid grounds, the termination will be considered unlawful and the employer will be held responsible for the consequences.

5.2 Is a minimum notice period required?

This depends on the grounds for termination – for example:

  • if the termination is based on one of the grounds listed in Article 39 of the Employment Contract Law, such as gross misconduct, there is no notice period required and the employer can terminate employment with immediate effect; or
  • if the termination is based on one of the grounds listed in Article 40 of the Employment Contract Law, such as incompetence, 30 days' prior notice should be given or payment in lieu of notice should be made.

5.3 What rights do employees have when arguing unfair dismissal?

If an employee believes that he or she has been unfairly dismissed, he or she has the right to initiate arbitration and litigation. If the employee's claim is upheld, he or she will be entitled to:

  • reinstatement with back pay; or
  • double severance payment.

Details of the calculation method and the specific amount of the statutory severance payment can be found in question 5.4.

5.4 What rights, if any, are there to statutory severance pay?

In general, statutory severance pay is calculated as follows: the employee's average monthly income over the 12 months prior to termination multiplied by the employee's years of service with the employer.

Employees are entitled to statutory severance pay if they are terminated under certain grounds of the Employment Contract Law – for example:

  • if the termination is based on one of the grounds listed in Article 39 of the Employment Contract Law, such as gross misconduct, there is no statutory severance required; or
  • if the termination is based on one of the grounds listed in Article 40 of the Employment Contract Law, such as incompetence, statutory severance payment is required plus 30 days' prior notice or payment in lieu of notice.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

The dispute resolution process consists of:

  • employment arbitration;
  • first-instance court proceedings; and
  • appellate court proceedings.

Employment arbitration is a mandatory pre-litigation stage; if either party is unhappy with the arbitral award, first-instance court proceedings can be initiated, followed by appellate court proceedings.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

The duration of arbitration and litigation proceedings differs greatly from city to city, depending on the workloads of the arbitration commissions and courts. For example, in Chaoyang District in Beijing, which usually handles a significant number of cases on a daily basis, the three procedures in total can take around 1.5 to two years to complete. In smaller cities, however, the three procedures can be completed within one year.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

During the COVID-19 pandemic, many employers cut down on expenses through redundancies, seeking to utilise the least possible amount of manpower to achieve the same operational targets. This trend has endured post-pandemic. Once-active industries such as real estate, which have a significant impact on the economic landscape, are now heavily regulated; and supporting industries such as steel and building materials have taken a serious hit. These industries are labour intensive, which is by no means good news for the labour market.

In recent decades, China earned itself the title of 'factory of the world'. However, this is now changing as Southeast Asia cements its status as a global manufacturing hub. This is also having a dramatic influence on China's labour market: redundancies remain commonplace and the number of employment arbitration and litigation proceedings is increasing.

The lifting of travel restrictions post-COVID-19 may to some extent help to restore faith in the market; and the thriving platform economy – which seems to be less burdensome for employers – may turn out to be a key driver of economic recovery. That said, it is difficult to anticipate that trends in the currently underperforming labour market will change quickly in the near future. We anticipate that the number of employment arbitration and litigation proceedings will continue to increase, and employers and employees may witness a peak in employment dispute cases in the coming years.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

  • Be sure to have an employee handbook in place that is valid under Chinese law.
  • Demotions and salary reductions should be done carefully and in most cases should be agreed by employees.
  • Unilateral termination of employees should be supported by statutory grounds with solid evidence, and under most circumstances mutual termination should be considered prior to carrying out unilateral termination.
  • Dispute resolution need not be confrontational per se; instead, it is a good opportunity to seek reconciliation with employees, so do not be afraid to initiate it.
  • Pay attention to emerging trends such as non-compete agreements and employee privacy.

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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