Social Insurance
August 23, 2009
Social insurance is a mandatory, non-profit social security system established by law in China. It is administered by the labour and social security departments.
There are five types of social insurance in China: old-age, medical, unemployment, work-related injury and child-bearing. Among these, the premiums for old-age, medical and unemployment insurance are jointly contributed by the enterprise and the individual, whereas work-related injury and child-bearing insurance premiums are the sole responsibility of the enterprise.
7.3.1 Social Insurance Responsibility
All enterprises must register with the local social insurance institution, participate in social insurance schemes and pay social insurance premiums on a monthly basis. The portion of premium payable by individual workers will be withheld and deducted from their salary and paid to the relevant authorities by the enterprises.
If any changes in the social insurance registration details occur, due amendment must be made to update the record. In the event an enterprise ceases to be responsible for paying social insurance premiums because it has been dissolved, terminated, merged or gone bankrupt, it should promptly cancel its social insurance registration.
7.3.2 Reporting and Payment of Social Insurance
An enterprise must submit its social insurance report, detailed report on social insurance premiums withheld and deducted from its employees, and other relevant information to the local social insurance institution before the 5th day of each month. The institution concerned will check and approve the report within two days. Upon receipt of the approved report, the enterprise should make full payment of social insurance through its bank or by cheque or cash within three days.
7.3.3 Social Insurance Premiums
(a) Basic old-age insurance: In general, the contribution of the enterprise will not exceed 20% (including the portion entered under the individual’s account) of its total payroll. The actual percentages are determined by provincial governments and may vary from place to place. The contribution of the employee to old-age insurance premium may eventually reach 8% of his salary, which is his average monthly salary during the previous year. This amount is also used as the base for calculation of social insurance premiums payable by both the enterprise and the employee.
(b) Basic medical insurance: This is jointly contributed by the enterprise and the employee. In general, the premium paid by the enterprise equals to about 6% of its total payroll, while the employee contributes 2% of his salary.
(c) Unemployment insurance: The enterprise contributes a certain percentage of its total payroll (the percentage varies from place to place, e.g. 2% in Guangzhou), while individual workers contribute about 1% of their salary (e.g. 1% in Guangzhou).
(d) Work-related injury insurance: Premiums vary with the type of risk, type of injury and frequency of occurrence of the occupational disease concerned. Actual premium rates are set by labour departments.
(e) Child-bearing insurance: Premiums are based on a certain percentage of an enterprise’s total payroll (e.g. 0.7% in Guangzhou).
Tags: medical insurance, labour, EmploymentRelated Posts:
Employment Procedures
August 23, 2009
Signing of Labour Contract
The new Labour Contract Law sets out stricter stipulations on the signing of labour contracts between employing units and employees. The new law specifies that an employing unit must sign a written labour contract with its employee within one month after the commencement of service by the employee. If an employing unit fails to sign a written labour contract with an employee who has worked for the employing unit for more than one month but less than one year, it should pay the employee double his wage each month. Any employing unit failing to sign a non-fixed term labour contract with an employee in violation of the Labour Contract Law should pay the employee double his wage each month starting from the date on which the non-fixed term labour contract should have been signed.
In hiring an employee, an employing unit should truthfully inform the employee of the job duties, conditions of work, place of work, occupational hazards, safe production conditions, remunerations and other matters that the employee wishes to know. Meanwhile, the employing unit has the right to know the basic information about the employee which directly relates to the labour contract, and the employee should truthfully provide the same.
On probation, the new Labour Contract Law sets out the following provisions:
For a labour contract with a term of more than three months but less than one year, the probation period may not exceed one month; for a labour contract with a term of more than one year but less than three years, the probation period may not exceed two months; and for a fixed-term labour contract of more than three years or a non-fixed-term labour contract, the probation period may not exceed six months. The same employing unit and the same employee may agree on only one probation period. For a labour contract with a term on project basis or a labour contract with a term of less than three months, no probation period is required. The probation period must fall within the term of the labour contract. If the term of a labour contract covers the probation period only, such probation period is deemed invalid and the term will be the term of the labour contract.
On termination of contract, the new Labour Contract Law provides that an employing unit may unilaterally terminate a labour contract if an employee:
(1) is proved to be not meeting the requirements for employment during the probation period;
(2) seriously violates the employing unit’s rules and regulations;
(3) commits serious dereliction of duty or practices graft, causing substantial damage to the employing unit;
(4) has simultaneously established a labour relationship with another employing unit which seriously affects the completion of his tasks with the original employing unit, or refuses to rectify the matter after the same is brought to his attention by the employing unit;
(5) causes the labour contract to be invalid due to the circumstances1 specified in item (1) in the first paragraph of Article 26 of the Labour Contract Law;
(6) has his criminal liability pursued in accordance with the law.
On staff layoff, it is provided that:
According to the Labour Law, staff layoff for economic reasons was only allowed if the employing unit was on the brink of bankruptcy or its production or operation had run into great difficulties. Under the new Labour Contract Law, the scope of staff layoff for economic reasons has been expanded:
If, under any of the following circumstances, an employing unit has to reduce its workforce by 20 persons or more or by less than 20 persons but the number accounts for more than 10 percent of its total workforce, the employing unit may only lay off its staff after it has explained the situation to the labour union or to all its employees 30 days in advance, has considered the opinions of the labour union or the employees, and has subsequently submitted the staff layoff plan to the labour department:
(1) restructuring pursuant to the Enterprise Bankruptcy Law;
(2) serious difficulties in production and operation;
(3) changes in production, major technological innovations or adjustments in the operation mode of the enterprise have made it necessary to reduce workforce even after changes have been made in the labour contract;
(4) the economic circumstances at the time of the signing of the labour contract have undergone major changes which have rendered it impossible to execute the contract.
In retaining staff in the course of carrying out layoffs, priority should be given to the following staff:
(1) those who have signed a fixed-term labour contract with a relatively long term with the employing unit;
(2) those who have signed a non-fixed-term labour contract with the employing unit;
(3) those who are the sole wage earner in their families and have to support elders or minors at home.
If an employing unit that has laid off its staff in accordance with the rules recruits staff again within six months, the laid off staff should be notified and should be given priority in employment under the same conditions.
The new Labour Contract Law and the relevant regulations clearly state the mandatory terms and conditions to be included in a labour contract, such as the term of the contract, changes in the contract, dissolving or terminating the contract, as well as compensations in the event of dissolving the contract. The Labour Handbook provided by the local labour department should be used as reference by enterprises in formulating their labour contracts.
7.2.2 Contract Authentication
Contract authentication is a legal process whereby the labour administrative department conducts full-scale examination, verification and validation of all labour contracts signed between an enterprise and its employees. Hence, the process confirms the legality of a labour contract. At present, it is compulsory for all labour contracts signed between enterprises and their staff to be authenticated.
The enterprise should submit the labour contract to the local labour administrative department for authentication within 30 days after the commencement of service by an employee upon signing a labour contract. In the case of collective labour contracts, they should be filed with the local labour administrative department for the record. Collective contracts automatically enter into force 15 days after the date of receipt by the labour department if no objection is raised during that period.
The following documents are required for contract authentication (the list may vary in different localities, so enquiry at relevant local departments is advised):
(a) Labour contract and its copy;
(b) Business licence or its copy;
(c) Proof of identity of legal representative or authorised person;
(d) Identity card or proof of domicile registration of the employee;
(e) Proof of education attainment, medical report, Labour Handbook, and other relevant information of the employee.
7.2.3 Personal Files Management
An enterprise or its resident representative office may entrust a service agency specialised in human resources employment to manage the personal files of its mainland staff. Such agencies should be located at the place of domicile registration or current work place of the staff concerned. The services they offer include verification of the staff’s identity, salary track record and political reports (for overseas travel). Other services such as assessment of technical qualifications, contract authentication and social insurance are also provided.
7.2.4 Foreigners Working in China
According to stipulations, foreigners (including Hong Kong residents) are allowed to work in China. Any organisations or individuals employing foreigners (including Hong Kong residents) in the mainland are required to complete the necessary formalities with the labour bureau which is responsible for granting approval and handling registration. Otherwise, the employees and employers concerned would become “illegal workers” and “illegal employers” and may be fined or even prohibited from working in the mainland.
(a) Departments Responsible for Administration of Employment of Foreigners in China
The labour administration departments at provincial, autonomous region and municipal levels and their authorised labour administration departments at prefecture and city levels are responsible for the administration of employment of foreigners in China.
(b) Criteria for Foreigners Taking up Employment in China
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At least 18 years of age and in good health;
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Possessing the professional skills and working experience required for the work of intended employment;
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No criminal records;
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Having a confirmed employer;
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Having a valid passport or other international travel documents;
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Being able to obtain employment and residence permits for foreigners upon entry into China.
(c) Application Procedures for Foreigners Taking up Employment in China
China has a more liberal and pessimssive foreign labour policy than Hong Kong or other western countries. Hong Kong residents or foreigners wishing to work in the mainland are only required to register with the “foreign labour employment service centre” under the local city-level labour bureau by presenting the following documents:
|
Category |
Hong Kong, Macau and Taiwan Residents |
Foreign Nationals |
|
Formalities |
Employment Permit for Personnel from Taiwan, Hong Kong and Macau |
Employment Permit for Foreigners |
| Documents Required |
|
|
| Note |
|
|
The term of the employment permit for foreigners (including Hong Kong residents) issued by various mainland cities depends on the duration of the current labour contract and is usually one or two years. It is advisable to apply for extension of the employment permit within one month before its expiration as overdue applications are not only more costly and time-consuming but also involve more complicated procedures. Formalities for extending the employment permit are as follows:
|
Category |
Hong Kong, Macau and Taiwan Residents |
Foreign Nationals |
|
Formalities |
Extension of Employment Permit for Personnel from Taiwan, Hong Kong and Macau |
Extension of Employment Permit for Foreigners |
| Documents Required | The extension formalities are generally the same for foreigners and personnel from Hong Kong, Macau and Taiwan:
|
|
| Note |
|
|
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Ways of Staff Recruitment
August 23, 2009
Under China’s new Labour Contract Law, enterprises can decide for themselves the timing and means of recruiting staff as well as the relevant requirements and number. At present, enterprises may hire staff through various channels.
7.1.1 Public Employment Service Organs and Employment Agencies
(a) Public Employment Service Organs and Employment Agencies
At present, the majority of public employment service organs in China are organisations under labour and social security departments as well as personnel departments. They can provide the following services according to the requirements of employing units: (1) guidance in staff recruitment; (2) staff recruitment; (3) cross-regional staff recruitment; (4) professional services such as corporate human resources management and consultancy; (5) handling of labour security affairs; and (6) other employment service projects as required by employing units.
There are also profit-making employment agencies run by enterprises, organisations and individuals. These agencies are usually called “employment centre”, “human resources market” etc. In recent years, head-hunting companies specialising in recruiting high-calibre senior executives have also emerged.
(b) Points to Note
Before using the service of an employment agency, an enterprise may request the agency to provide proof of its legal status, approval certificate issued by the labour department, information on the scope of service, charge standards, name and telephone number of its supervisory authorities etc.
When appointing an employment agency, an enterprise should present a letter of introduction on the enterprise itself, its business licence (copy) or other proof of registration as a legal entity, a profile on recruitment requirements, and identification document of the person-in-charge of the recruitment exercise. The profile on recruitment requirements should contain information such as an introduction of the enterprise, number of staff to be recruited, job duties, terms of employment, remunerations, fringe benefits, social insurance coverage and other information prescribed by laws and regulations.
FIEs which have not applied for incorporation and have only set up representative offices or offices in China are not in a position to directly recruit staff. They can only recruit staff through foreign enterprise service companies authorised by the state. Technically speaking, employees working for representative offices are not staff of the representative office but are staff deployed by the foreign enterprise service company to work at the representative office. Representative offices must sign labour contracts with foreign enterprise service companies with regard to the deployment of staff to work at the representative office. Since Chinese staff working at the representative offices of FIEs in China are paid their wages and benefits through foreign enterprise service companies, foreign enterprise service companies charge certain fees. Representative offices can sign a supplemental agreement with their Chinese staff on specific labour issues.
7.1.2 Mass Media
With the prior approval of the local labour and social security department, an enterprise may place recruitment ads in the mass media such as newspapers, magazines, and radio/TV stations. Without such approval, recruitment ads are not permitted to appear in the news media.
7.1.3 Human Resources Fairs
Currently, human resources fairs are a popular way to recruit employees in China. These events are specifically organised for enterprises to recruit staff, such as senior executives recruitment fairs, FIE staff recruitment fairs, and dedicated interview sessions with university graduates. These events are usually organised by employment agencies with participating enterprises setting up recruitment booths and job seekers admitted for a fee.
Enterprises planning to hire staff through these fairs should consider various factors such as whether the events are well organised and the reputation of the organiser.
7.1.4 Office Premises and Corporate Website
An enterprise may use free channels such as its own office premises and website to release recruitment news.
7.1.5 Points to Note Regarding Staff Recruitment
When an employing unit hires a worker, it should in accordance with the law truthfully inform the worker of the job duties, conditions of work, place of work, occupational hazards, safe production conditions, remunerations and any other matters that the worker wishes to know. In hiring a Taiwan, Hong Kong or Macau resident, an enterprise should report to the local labour and social security department and apply for an Employment Permit for Personnel from Taiwan, Hong Kong and Macau for the employee. In hiring a foreign national, an application for a People’s Republic of China Employment Permit for Foreigners should be made to the local labour and social security department before the foreign national arrives in China and the appointment can only commence after the application is approved and the employment permit is granted.
When hiring workers for special job types involving public safety, personal health, and life and property safety, the employing unit should hire people who hold vocational qualification certificates of the relevant job types; otherwise, arrangements should be made for the workers to receive special training and obtain the necessary vocational qualification certificates before they could start work.
An employing unit may not refuse to hire female workers or raise their eligibility criteria for the sake of their gender provided that the job types or positions concerned are not deemed by the state as inappropriate for women. An employing unit may not refuse to hire people who are carriers of infectious disease causative agents. However, people who carry causative agents must not engage in activities that are deemed by laws, administrative rules and the State Council’s health departments to have high risk of spreading the infectious disease, until it has been clinically proven that the people concerned have been cured of the disease or the risk of transmitting the disease to others has been cleared.
Any employing unit committing the following acts in recruiting staff is in violation of the law:
(1) Providing false information with regard to staff recruitment or posting false job advertisements;
(2) Withholding the identity card or other documentations of the recruits;
(3) Demanding money or valuables from applicants as guarantee;
(4) Hiring people under the age of 16 or people prohibited from taking up employment by state laws and administrative rules and regulations;
(5) Hiring people without legal identity documents;
(6) Making improper economic gains or carrying out illegal activities under the pretense of recruitment.
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Settlement of Employment Termination
July 8, 2009
It is common practice for an employee and employer to attempt to negotiate the monetary amount that the employer is required to pay the employee upon termination of employment. Any agreement in such circumstances will generally involve an employer paying an amount equivalent to its potential legal liability or lower. However, a question arises as to whether, under China’s Labour Contract Law, such an agreement is enforceable if an employee ultimately reneges on its agreement and takes the dispute to labour arbitration. The notion of free will and fair bargaining underpin Chinese contract law and the Chinese legal system in general. Accordingly, there may be such occasions where such an agreement could be struck down by the P. R. of China court.
It is advised that employers that it is in their interest to avoid labour arbitration as, in most cases, it favors the interests of employees. Further, in labour arbitration and litigation in China there is little possibility of recovering your legal costs and, accordingly, even if you are ultimately successful, there is a strong likelihood that you will incur legal expenses greater than the potential liability. For these reasons, many employers make every effort to settle matters with employees. The assumption is that in coming to an agreement with an employee, arbitration will be avoided.
Article 5 of the Law of the People’s Republic of China on Labor Dispute Mediation and Arbitration states that labour arbitration is available “where a labor dispute arises, if a party does not desire a consultation, the parties fail to settle the dispute through consultation, or a party does not execute a reached settlement agreement”. It seems, on the face of the matter, that where there is an agreement between the parties, there is no jurisdiction for the dispute to go to labour arbitration.
If an employee reaches an agreement with an employer regarding the termination of the labor contract and the economic compensation is far from the statutory standards, generally the agreement shall be deemed as invalid because it exempts the employer from statutory liability
and extinguishes the rights of the employee. The concepts of free-will and fair bargaining are critical principles underpinning Chinese Contract Law, particularly in the employment context. Article 4 of the Contract Law provides that ‘[t]he parties have the right to lawfully enter into a contract of their own free will in accordance with the law, and no unit or individual may illegally interfere therewith.’ Further, Article 3 of the Labour Contract Law provides that ‘[t]he principle of lawfulness, fairness, equality, free will, negotiation for agreement and good faith shall be observed in the formation of a labor contract.’ Whilst a settlement agreement in relation to economic compensation payable to an employee is not technically a “labour contract”, the matters outlined in Article 3 reflect common principles. Accordingly, where the agreed amount is well below the legal entitlement it will be difficult for the employer to show that the principles of fair-bargaining existed. In such circumstances, after an employee obtains economic compensation according to the agreement, if the employee applies for arbitration or files a suit to ask the employer pay the balance of the legal entitlement, the application shall be supported.
It is clear that the critical issue is whether there is fair-bargaining between the parties. As such, if the agreement stipulates the calculation methods and standards of economic compensation and the employee acknowledges that the agreed economic compensation is far from statutory standards, it shall be deemed that the employee has disposed of his or her rights, and any application to alter the terms of the agreement would be rejected. Further, if after an employee obtains economic compensation in accordance with an agreement with an employer, he or she applies for arbitration or files a suit beyond the statutory limitation period (it should be noted that the statutory limitation period is 1 year from the date of termination) for the balance of the employer’s legal liability, the employees rights shall be extinguished.
NancySun, Attorney & MatthewMcKee, Foreign Legal Counsel
Tags: labour, labour arbitration, LawRelated Posts:
China’s labour disputes ‘up 95pc’
March 4, 2009
Labour-related lawsuits nearly doubled in the China last year mainly due to mass factory shutdowns, a senior official with the Supreme Court said.
A manufacturing powerhouse, China’s factories were hard hit when overseas demand for their exports evaporated in the wake of the global financial crisis.
Shen Deyong, vice president of the Supreme People’s Court, said at a news conference Monday that the number of labour-related lawsuits filed last year jumped 95 per cent, marking the biggest on-year increase of any type of suit.
He said most of the cases were filed in the country’s coastal southeast, home to a string of factory hubs. In some areas, labour suits increased about 200 per cent compared to 2007, he said, without giving specific figures.
The spike in labour lawsuits was “closely connected to businesses slumping and factories being shut down,” he said.
“When they face difficulties, these businesses often reduce their costs by cutting the labour force and salaries,” he said.
He said a new labour contract law that came into effect at the start of last year and rising public awareness of worker’s rights also contributed to the rise in cases.
Unemployment is a major concern for China’s communist leadership because of fears it could trigger social unrest and demands for political reform.
Source: AP
Tags: China, disputes, labourRelated Posts:
