Chinese Labor and Employment Law

Categories: BusinessLaw

In November 2001, China became a fully admitted member of the World Trade Organization and in n in international trade. China has not only become a major export power, but also an attractive investment target for world trade and investment continues to increase, its labor environment will likely attract more ? 2 1980. At least 130 million of these are migrant workers who move from relatively poor rural areas to urban and industrial centers to work.

Many of these migrant workers remit portions of their earnings back to family members in their hometown.

Until recently, China has typically had an oversupply of unskilled labor and a shortage of skilled and professional workers. However, in the past several years, some companies in the major industrial hubs have begun to complain about labor shortages. As a result, many companies now raise wages 10 percent or more annually to retain workers, while others have closed their doors and moved to poorer inland areas or countries with cheaper labor.

Interestingly, salaries for new university graduates have stagnated university system.

While university graduates start their careers with wages comparable to a factory worker, their salaries typically rise much more quickly than those factory workers. How have 35 years. Prior to the early 1980s, nearly all jobs were allocated to citizens through an administrative bureau. Employees could not choose their employer or terminate their employment. Further, regulations set an expectation that the employee would work for the same employer for her or his whole working life.

Companies in this era could only terminate employees for gross misconduct.

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This type of labor market and social safety net was called the Iron Rice Bowl because the employer guaranteed job security and benefits to employees In other words, the benefits could not be taken away 3 In 1983, the government introduced a contract system that attempted to address the low productivity of the labor market by replacing the Iron Rice Bowl with short-term labor contracts. At first, state-owned companies resisted this trend and the government succeeded only in minimal reforms.

In 1992, the N required all trade unions to be affiliated with the All-China Federation of Trade Unions (ACFTU). This effectively brought labor unions under greater control of the government. The Labor Law of 1994 liberalized the labor market. The labor law, when combined with economic reforms, resulted in more than 40 million lost jobs in government and state-owned enterprises. As a result of the reforms, the government shuttered inefficient businesses and the formerly economically dominant northeast turned into a rustbelt.

Meanwhile, Chinese entrepreneurs and Hong Kong investors transformed the formerly weak southeast province of Guangdong into the largest center of manufacturing in the world. In 2008, the government introduced a Labor Contract Law that rolled back some of the laissez-faire approaches to the workforce that the government introduced in the 1990s. This new law abolished the system of at-will employment for most full-time employees and required employers to provide employees with written contracts. Since 2008, the government has also revisited its policy of tight control over the All-China Federation of Trade Unions (ACFTU).

While all unions must still be approved by and affiliated with ACFTU, it appears that the government is allowing the ACFTU greater authority to advocate for the rights of workers than it did just a few years ago. That said, the government continues to imprison workers who advocate for the formation of independent trade unions. W A G ES Does China have a minimum wage? 4 Yes. There are two standards of minimum wage: monthly and hourly. Minimum wages are set at the provincial and municipal level.

The government prohibits employers from reaching an agreement with employees for wages that fall below the local minimum wage standard regardless of whether the employee is still in her or his probation period or internship. A probationary period occurs at the beginning of an employment relationship and allows employers to terminate employees without severance pay up to a maximum of six months, but usually just two months. The probation period allows the employer to make sure the employee is a good fit with the employer before being locked into the full term of the employment contract.

Provincial and municipal governments frequently adjust statutory minimum wages. For example, many municipalities have raised their minimum wages twice in the past year alone. Ho It depends on the locality. -time employees is RMB 1,120/month, or roughly $165. However, in the poorer inland city of Chongqing, the minimum wage is RMB 870/month, or roughly $130. Of course, purchasing wages. The relative cost of living in China is lower than in many developed countries, but even when wages are adjusted for relative prices they remain much lower than in highly developed countries.

How much do factory workers earn? It depends on the locality, industry, skill level, and a host of other factors. However, several sources keep broad indices of costs for general factory labor across many regions. Although the indices are only rough estimates, they are helpful in gauging wage differentials across the country. For example, a skilled manufacturing employee in Beijing can be hired for 5 RMB 3,000/month, or roughly $445. A similar worker in the poorer inland municipality of Chongqing can be hired for RMB 1,900/month, or roughly $280.

To illustrate how important geographic location is in determining wage rates, the average employee salary in Beijing is nearly three times higher than in the poor inland province of Jiangxi. Do Chinese workers get overtime? T , an employer must pay overtime compensation to any employee who works more than 40 hours per week. As a general rule, an employer cannot require overtime of more than one hour per day, or three hours per day under special circumstances, and no more than 36 hours per month.

As in many other countries, white collar workers like managers and sales staff are often exempt from the overtime pay rules. The following payment schedule illustrates the overtime pay requirements. E xtended Wor king Hours Typical working day Rest day (min. one per week) (i. e. , weekend) National holiday M inimum O vertime Pay (percent of regular wages) 150 percent 200 percent 300 percent Many migrant workers desperate to earn quick money agree with the employer to work beyond the maximum overtime requirements so they can send extra money home to their families.

This type of overtime work is frequently found in industrial hubs and is a contributing cause of recent labor strikes because employees who agree to these arrangements place downward price pressure on wages and upward pressure on hours. Employers are also able to maneuver around overtime regulations by applying to the local labor authorities and asking for approval to use an alternative system of working hours. What are the wage levels for workers who are paid piece-rate? 6 Piece-rate is a compensation system where the employer pays the employee for each unit produced or action performed, not on the basis of time.

Piece-rate wages are still a feature of to address the exploitation of employees through piece rates. For example, workers were exploited when employers paid workers at piece-rate, but then fined them for quality defects, tardiness, or no reason at all. These penalties effectively left workers with wages far below what the employer promised the workers during the hiring process. The first principle of piece-rate wages is that employers cannot set a work quota so high that it prevents an employee from completing the work within an eight-hour day or an average 40-hour week.

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Chinese Labor and Employment Law. (2018, Oct 11). Retrieved from

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