Avoiding Employment Law Problems in China

With China’s economy slowing down, foreign-owned companies in China are facing increasing scrutiny in different aspects of their business, especially if they hire Chinese workers. As a whole, the Chinese government has become stricter about the business dealings of foreign companies, making it all the more important for foreign companies to be completely compliant with Chinese labor laws and standards (both national and local standards), while also providing ethical work conditions.

Utilizing an employee handbook in the workplace is the easiest way to ensure policies and procedures are clearly understood, while also giving employees a resource for reference. Online platforms such as Global People Strategist offer global employers exactly what they need to meet both global standards while abiding by and keeping current with local statutes and norms, making compliance with China’s employment laws easy and accessible to the entire organization.

Employee handbooks should be updated annually in order to capture any changes to a country’s laws. For example, in China, minimum wage rates are updated often and each province has a different rate, as do the major metropolitan areas such as Beijing and Shanghai. Shanghai – along with Beijing – tend to update their minimum wage every year to keep up with the high cost of living, both having done so each year since 2015. Chinese Labor Contract Law mandates that if an employing unit pays lower than the local minimum wage, the competent labor department should order the employing unit to pay the outstanding amount. If these payments are delayed, a compensation equivalent to 50%-100% of these payments must be paid in addition to the due payments.

Another example of a relatively recent labor law change in China was in November 2017, when China amended their Labor Contract Law to reflect new severance calculations, specifically for those employed for less than 6 months.

Being proactive in creating an effective employee handbook is very important in order to be a successful foreign company in China, and realistically, to be a successful foreign company in any region. Without a good understanding of local employment laws and standards, a company may be putting themselves at unnecessary risk of litigation by both the employee as well as the governing authorities. Employee handbooks should be crafted with the best interest of the employee, as well as the company, in mind. A well designed and written handbook leads to happier employees, provides transparency in the workplace and results in fewer misunderstandings and instances of legal action.



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