How to Avoid the Risk of Paying Double Wages

A huge tide of litigation appeared in the years after the entry into force of the Labor Contract Law in 2008, which mainlyrelated to the non-signing of written labor contracts, of which many employers had to pay a heavy price. Chinese law stipulates that it is essential to sign a written labor contract within one month after the establishment of labor relations between qualified employers and employees, but in cases where no written labor contract has been signed with the employee, according to law, after a labor relationship has been established, double wages should be paid by the employer. In practice, more attention should be paid to certain details within this area, such as the following:

Q

May written agreements signed between the parties such as a service agreement or a letter of engagement replace the labor contract?

At present, it is still controversial whether documents which are not titled as “labor contract” can be used as a labor contract in judicial practice. However, even those who favor these kinds of contracts admit that in order to be regarded as a “written labor contract” a document shall clearly include certain necessary aspects such as the employment position, start and end date, place of work, remuneration, social insurance and other basic rights and obligations of both of the parties. Therefore, if the employer fails to sign a written labor contract with the employee and there is only an offer letter signed between the parties, the employer shall bear the punitive responsibility of paying double wages in accordance with the provisions of the Labor Contract Law.

Q

Can the risk of paying double wages be avoided by supplementing the actual date of employment within a labor contract?

Whether or not to sign a labor contract is the free will of the employer and the employee. After a certain period of the existence of a labor relationship, the employer and the employee may supplement a labor contract to include the actual date of employment, which may solve the issue of evidence of the existence of a labor relationship.

In this case, should the employee advocate for double wages, it is generally not supported in judicial practice. What needs to be clear is that if the employer and the employee have signed the labor contract but have not agreed to include the period from the actual employment date, the employee may still claim double wages for the period from the actual employment date to the date of the entry into the labor contract. Therefore, within the labor contract, the company should include the actual working duration of the employee in order to avoid further disputes.

Nowadays, more and more methods can be used to collect evidence and prove the existence of labor relations, such as audio-visual recordings on mobile phones, CCTV on roadsides, surveillance in buildings, access to control records, etc. For employers, once labor relationships are established without signing a written labor contract, it is difficult to evade their responsibilities as prescribed by law. Therefore, the employer should set up a strict management system, especially in regards to their human resources department, to “chase” newly recruited employees for their signature on the labor contract within the statutory time limit. In cases where an employee’s labor contract is about to expire, it would be best to implement a procedure in order to renew the labor contract one month prior to expiry. For anyone who requires more information in this area, you can find a copy of our practical guide: Chinese Labour Law in one of our D&P Offices, on the online store of ClassEditori, as well as on Apple iBooks, Amazon, and Google Play, or feel free to contact us at info@dandreapartners.com. D&P remains at your service for any query you may have.