Understanding China’s labor laws is essential for all companies looking to expand to the country. Setting up a business in China is a prerequisite to hire employees, regardless of whether they’re local or international hires.
China’s Labor Contract Law applies to all enterprises and organizations that establish labor relations with both local and international workers within the territory.
This guide highlights everything companies should know to ensure they remain compliant with China’s labor laws.
1. Worker’s rights in China
China has an extensive legal framework that gives workers a range of rights and protection against exploitation and discrimination.
Workers have the right to:
- Minimum wage
- A formal employment contract
- A 40-hour week with fixed overtime rates
- Social security covering pensions, healthcare, unemployment, injuries, l and severance pay in case of termination
- Housing fund
- Annual leave
2. Employment contracts
Article 12 of the 2008 Labor Contract Law states that there are three types of employment contracts.
- Fixed- term labor contracts:
They are the standard labor contracts in China. They establish an employer-employee relationship for a fixed length of time, whether it is for part-time or full-time work.
- Open/Indefinite contracts:
The date of termination is not determined on these contracts. Employers can only conclude the contract by mutual agreement. - Project-based contract:
These contracts are defined by a specific task or project, rather than by the length of time the employees will work for a company. Once the project is delivered, the contract ends.
3. Probation period
Probation is a period of time set at the start of a contract that allows employers to evaluate the performance of an employee. The probation period should be agreed upon between the employer and the employee, not imposed by the employer, and it should not exceed six months.
The employer and employee can agree to only one probation period. An exception applies to contracts that estipulate a change of position or type of work, in this case, the probation period may be renewed.
4. Working hours and overtime
China’s Labor Contract Law states that employees should not work more than eight hours a day and no more than 44 hours a week, on average. The employer has the right to extend their working hours after consulting with the trade unions, but it cannot exceed one additional hour per day. Only under exceptional circumstances can employers ask their employees to work for more than one additional hour. However, extra working hours can never exceed three hours per day and 36 hours a month.
[bctt tweet=”China’s Labor Contract Law states that employees should not work more than eight hours a day and no more than 44 hours a week, on average.” username=”globalpeo”]
5. Employee leaves
Employee leaves depend on the number of years an employee has been employed by the company.
*National holidays and weekends are not included in the annual paid leave.
As for maternity leave, female employees are entitled to 98 days. However, it is subject to local and regional regulations. For example, there are provinces where maternity leave has increased to 190 days. In the same way, paternity leave varies depending on the region, but the mandatory leave is 14 days.
6. China’s minimum wages
Local governments in China are required to update and adjust their minimum wages according to the region’s level of development and cost of living. Therefore, minimum wages are higher in the capital and developed cities, and lower for smaller cities and rural areas.
It is worth noting that employees working for international employers tend to earn more than the minimum wage, and that employer social insurance adds an additional 30 percent to employees’ salaries.
[bctt tweet=”It is worth noting that employees working for international employers tend to earn more than the minimum wage, and that employer social insurance adds an additional 30 percent to employees’ salaries.” username=”globalpeo”]
These social contributions also vary across the country and cover five mandatory schemes: pension, medical expenses, unemployment, maternity, and work-related incidents.
7. Unions in China
The only official union recognized by the government is the All-China Federation of Trade Unions (ACFTU). All other local, industry, or enterprise-level unions and associations are under ACFTU’s control.
The law entitles trade unions to protect the interests and rights of employees, as well as to negotiate and mediate on their behalf.
China labor laws – easier to navigate with an Employer of Record
The process of expanding your company to China can be as complex as its labor laws. Therefore, companies need to take every detail into careful consideration.
As an Employer of Record (EOR), Globalization Partners enables companies to have a legal presence in China without setting up a subsidiary.
With our solution, you can avoid the complexities of remaining compliant with China’s tax and labor laws. You choose your talent, they work for you, and we put them on our payroll and handle all HR tasks, while you manage your team and ensure a successful expansion.
Download the Global Hiring Handbook or visit Globalpedia to learn more about hiring in China.