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Human Resources Section 7: Labour legislation: Overview
[August 21, 2006]

Human Resources Section 7: Labour legislation: Overview

(China Hand Via Thomson Dialog NewsEdge) China completed a review of its decade-old labour legislation in 2005 and saw a need to refine the laws to meet new socio-economic needs. As a result, a new Labour Contract Law was drafted and submitted to the National Peoples Congress (NPC) standing committee at the end of last year for a first-round deliberation. A draft law normally becomes law after three rounds of deliberation by the NPC standing committee. The NPC released the draft document for public consultation in March 2006. The proposed law covers a variety of new situations arising from the rapid growth of private and service industries. The NPC has reported receiving more than 190,000 public responses during the month-long consultation. Comments from employees reportedly far outnumbered those from employers.

The 1995 Labour Law is faulted for not giving adequate protection to workers and for giving provinces too much discretion in interpreting the law. (See page 95.) Employment discrimination on the basis of appearance, gender, educational level, age and birthplace remains a problem. Workers often sacrifice their rights in order to keep their jobs. Some private enterprises do not provide labour contracts or social-security benefits, and fail to pay salaries in full, or at all. Social insurance and occupational safety are also not adequately covered by the current law. Indeed, occupational health and safety (OHS) falls under the purview of the State Administration of Work Safety (SAWS). It is responsible for drafting OHS laws, regulations, technical standards, as well as overseeing compliance and safety management systems. SAWS deputy director Zhao Tiechui has admitted that the OHS system established in the coal mining industry is hardly functional.

Whats in the new draft law?

The draft Labour Contract Law is considered a step forward from the employees point of view. However, from the corporate HRs viewpoint, it is considered a major step backward as it gives more power to the unions, which are generally state-run in China. Companies will be required to consult with labour unions before they can implement mass hiring and layoffs or any changes to any policies related to employment of Chinese workers at any level. As soon as the draft was issued, foreign companies and employee associations began lobbying the NPC to make revisions.

A concern is the requirement for a written contract. Article 9 of the draft requires all employers to have a written contract with their employees. This rule was proposed with the idea of protecting the rights of migrant workers. A recent study conducted by the NPC found that only 85% of employees in SOEs and FIEs were covered by a written contract (which provides a useful reference in case of a dispute), leaving 15% of the working population unprotected. The worst offenders were small- and medium-sized private enterprises (domestic and foreign), which had paper contracts with only 30% of their workforce. Only 30% of rural workers were covered by employment contracts. The worst industry employers were in construction, and food and beverage enterprises where only 40% of the employees had written contracts. In stark contrast to the cradle-to-grave employment of the past, more than 60% of all present-day contracts have terms of three years or less.

The draft law contains many other pro-employee provisions, including one that allows an ambiguous labour contract to be construed in favour of the employee in the event of a dispute. Another provision stipulates that if a labour relationship exists without a labour contract, then the employee will be considered to be on an open-ended contract, not a fixed-term one.

Copyright 2006 Economist Intelligence Unit

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