The Gavel – Feb 2015 – Labour In Foreign-Invested Enterprises


Since China has refined labour and employment legislations in recent decades, the employer-employee relationship is constantly evolving. Understanding rights and obligations helps to reduce misunderstanding and legal risks.

Legal Documents in a “Healthy Labour Relationship”
The labour contract is one of the most important documents and shall be concluded in a written form in the establishment of an employment relationship, including at least the following terms:

  1. Parties of the contract (employer and employee names)
  2. Salary (not lower than the local minimum wage standard)
  3. Duration of the contract (fixed term, unfixed term, or with completion of specific tasks)
  4. Job description
  5. Liabilities of the parties
  6. Work permits (when hiring foreigners)

A labour contract without a fixed term can be dissolved under certain circumstances, if a) the employee has already worked for the employer for 10 years consecutively; or b)the labour contract is to be renewed after two fixed-term labour contracts have been concluded consecutively and the employee meets legal conditions.

If an employer fails to conclude a written labour contract with an employee between one month and one year after establishment of the employment relationship, they shall pay to the employee the double monthly wage for all the time he/her has worked without contract; if such period exceeds one year, the employer and the employee shall be deemed to have entered into a labour contract without a fixed term.

In addition, confidentiality agreements and non-competition agreements are recommended for the key people of the company. Further, implementing internal company regulations and an employee’s handbook is advisable for employers.

Labour Dispatch
Considering the important changes of 2014, another way for the company to have manpower is to use dispatched employees, for which a company shall sign an agreement with a dispatch agency and the latter shall provide their employees to work in the former company.

However, this labour relationship sees quite a few restrictions. For example, the proportion of dispatched staff can only be less than 10 percent of a company’s total staff, and dispatched staff are limited to temporary, ancillary and substitute positions. Representative offices of foreign enterprises, however, would be free from restriction of the above dispatch proportion and employment scope.

Curiosities and Specific Rules
Enterprises are required to give employees high temperature subsidy in summer in case of working outdoors in temperature higher than 35 degrees Celsius or working indoors in temperature higher than 33 degrees Celsius. In Nanjing, such high temperature subsidy is at least ¥200 per person per month between June and September this year.

Another interesting regulation is that enterprises are responsible for hiring disabled people in a prescribed proportion. In Nanjing, said proportion is equal to 1.5 percent, therefore in case of 200 employees, a company shall hire three disabled persons. If the prescribed proportion is not reached, companies shall pay into an annual Employment Guarantee Fund for the disabled. Its calculation formula is (Employer Number × Prescribed Proportion × Number of the Hired Disabled) × (Local Average Salary × 100%). Please be informed that the Local Average Salary in Nanjing has decreased to ¥36,092 this year.

This article is intended solely for informational purposes and does not constitute legal advice. Although the information in this article was obtained from reliable official sources, no guarantee is made with regard to its accuracy and completeness.