Employee rights in China on the up

The rate of change in China is rapid, as one of the world’s most vital economies evolves to manage its continued growth.

Along with this growth has been a stark change in employees’ rights.

“China has transformed from a planned economy to a socialist market economy, which is also bringing great changes to employee rights,” explains Vincent Chiu, senior partner at Long An Law Firm.

But he says there’s still a “long road to go” before the gap is bridged between China and Western nations.

Chiu says workers’ rights in China include the right to be employed equally and choose occupations, obtain labour remunerations, take rest and vacations, acquire labour safety and health protection, receive occupational skill training, enjoy social insurance and welfare, and submit labour disputes for settlement.

“However, the employee rights are completely restrained by some systems. For example, the census register system and the social security system restrict the migrant workers’ rights,” Chiu says.

“With regard to infringement of employee rights, it is common in China that the individual depending on himself goes through a series of legal relief channels, such as applying for mediation, labor arbitration and litigation, rather than resort to certain organisations, such as the labour union.”

Chiu says when it comes to dispute resolution with employers, mediation always comes first.

“This dedication to mediation is in line with Chinese traditional cultural stereotype of ‘harmony’ spirit and is not widespread in western nations.”

While Western nations emphasise equality, such as people doing the same work getting the same pay, China’s attempts to do the same through its Labor Contract Law has largely not been realised in practice.

MMLC Group partner Yu Du says: “China’s trade unions are mass organisations attended by voluntary employees, however, there is strict ‘level system’ – the trade unions in lower level must be obedient to those in higher level, and all the local unions are led by the All-China Federation of Trade Unions.

“Plus, the establishment of a trade union needs approval from a higher level. Namely, it can’t be set up freely, which is different with the policy of Western nations.”

Du says with the rapid development of China’s economy and society, and several revisions of labour legislation, employee rights in China have been greatly improved.

“In the past, employees have an absolute disadvantage, in labour relation and it’s difficult for them to fight for their rights.

“Currently, employees and employers must sign the labour contract in written form, elaborating the employee’s remuneration, labour period, working hours, rest and vacation, labor safety and hygiene, insurance, benefits, compensation, and training.”

Du says the labour contracts are implemented under the supervision of the government.

 

“In case of breach of the employer, employees may make a claim to the labour authorities and/or file an complaint with labour arbitration commission, and an appeal to the courts, to protect their legitimate rights.

“The employer will bear the according liability and may also be imposed with a fine by the administrative authorities. In this environment, more and more businesses pay more attention to, and respect, employee rights,” adds Du.

Willis China chief executive Lincoln Pan says the country has a largely employee-friendly legal framework similar to those in most European nations.

“Most companies are required to have some form of labour union to represent the rights of employees, with those in manufacturing industries and former state-owned enterprises being strongest and most active,” says Pan.

“The Workers Compensation Law has been in effect since the start of 2004 and provides protections to employees on a no-fault basis.”

All companies across China are also required to deposit funds per employee into the provincial government WC Social Fund.

“Any occupational injuries suffered by an employee are compensated based on a defined framework based on the type and extent of injury. The Fund will also pay out predetermined amounts for death and permanent disablement.”

Pan says compared to most countries in Asia, China would be considered more labour friendly than employer friendly.

Risk manager considerations

Pan says there are three primary considerations for risk managers around employee rights in China.

“Firstly, the Permanent Employment Regime for Employees on the 3rd Contract,” Pan says.

“This simply means that for long-serving employees, companies have more significant financial obligations than other employees.

“When undertaking restructuring programs locally, companies may be required to compensate employees at a higher level of severance than other jurisdictions.

“Secondly, unionised industries – being still a Communist country, unions remain strong in traditional manufacturing and state-owned industries and depending on the province in China, can create additional liabilities and obligations for employers.

“Risk managers should maintain strong provincial government relations with the Labor Relations Board in the event they plan to undertake material changes to their operations.

Pan says the third consideration for risks managers is around the increase of domestic lawsuits.

“Over the past several years, we have seen an increase in tort litigation and employer litigation for aggrieved employees.

“This is a rapidly changing environment with more tort lawyers establishing in China and a domestic population more willing to take on employers when accidents and incidents occur,” adds Pan.