The China labor law revision is an issue concerned by most dicision-makers of wholly foreigned-owned companies(WFOE), joint ventures(JV) and representitive offices(RO) of foreign companies in China. The new labor contract law which became effective on January 1st, 2008 will greatly influence the industrial relations in China. This article will give some general analysis on the modifications in new labor contract law and its implications.
Change No. 1 The definition of employer
The new labor contract law's definition of employers: enterprises, individual economic organizations, non-enterprise private entities and other entities, while the old labor law don't include non-enterprise private entities as employers. The new law has broader application scope.
Change No. 2 Unfair employment relationship
The new labor contract law prohibit the employers to detain employees'ID cards, other certificates or ask for guaranty or collect property when hiring workers, those tricks are often used by the employers to control their employees in the past. The penalty for violation of this provision is a fine of 500RMB to 2000RMB per person. Also the employers should be liable for any damage incurred from violating of this provision.
Change No. 3 Probationary period
The new labor law set a very specific probationary period provision to prevent the employers using long-term probationary period and multi probationary period to exploit the workers. Especially among manufacturing companies, many employers will hire large group of temporary workers by using long-term probationary contract at their peak season, and then before the probationary period run out, they find reasons to fire those workers.
The new labor law clearly provides: for contract term less than 1 year but more than 3 months, the probation period should not be more than one month; For contract less than 3 year but more than 1 year, the probation period should not be more than 3 months; For contract more than 3 years and open contract, the probation period should not be more than 6 months. An employer can only stipulate one probation period with a same worker.
The salary in probationary period should not less than 80% of the salaries fixed in the labor contract and not lower than the minimum salary for the same post of the same employer.
Change No. 4 Labor contract
In the past the employers used to sign short-term contract with employees. In some extreme cases, some employers separately sign 4 labor contracts with an employee within a single year. The new labor contract provides in article 14:
“In the case of any of the following circumstances, if the worker proposes or agrees to renew or conclude a labor contract, an labor contract without a fixed period shall be concluded except that the employee proposes to conclude a labor contract with a fixed period:
(1) The worker has worked for an uninterrupted term of ten years for the employer;
(2) The worker has worked for an uninterrupted term of ten years for the employer and he attains to the age which is less than 10 years up to the statutory retirement age when the employer initially performs the labor contract system or when a restructuring state-owned enterprise re-concludes the labor contract; or
(3) The labor contract is to be renewed after the labor contract with a fixed period has been concluded twice continuously, and the worker is not under any of the circumstances as prescribed in Article 39 and Subparagraphs (1) and (2) of Article 40 in this Law.”
Many employers don't sign contracts with employees or sign a contract without a fixed term in the past, to prevent that, the new labor contract law go on to provide:
“In case any employer fails to sign a labor contract in written form with a worker after the extension of one full year as of the date of start to use him, it shall be regarded that the employer and the worker has concluded a labor contract without a fixed period(open contract).”
The penalty for not signing labor contract and signing contract without a fixed term is huge, in article 82, the new labor law provide the employers should pay their workers double amount of monthly salary if they don't sign contract or sign contract without a fixed term(open contract).
Change No. 5 welfare of workers
The new labor law provide that the employees may discharge the labor contract if their employers fail to pay the security premiums for them.
Change No. 6 provision of non-full-time labor
In article 70, 71 and 72, the new labor law covers subject of non-full-time labor. The old law didn't mention that.
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