China Employment Law Update - July 2015

By Ying Wang, Pádraig Walsh, Susan de Silva, Lesley Maclou


  1. New Rules on Collective Agreements are issued in Shanghai
  2. Applications for foreigner's permanent residence permits are relaxed
  3. Chinese government is keen on mediation for labour disputes

New Rules of the Shanghai Municipality on Collective Agreements

On 18 June 2015 the Standing Committee of the National People's Congress of Shanghai promulgated an amendment to the Rules of the Shanghai Municipality on Collective Agreements, which came into effect on 1 January 2008. In contrast with the 2008 edition, the 2015 amendment features the following additions:

  • it sets out the scope of collective bargaining on salary. This generally covers salary distribution rules and methods, salary standards and salary payment methods, the annual adjustment range of salary standards, distribution methods of bonuses, stipends and subsidies, overtime salaries and salaries during probationary periods and sick leave and personal leave;
  • it sets out a number of factors which may be referenced for collective bargaining on salary, such as the employers' production efficiency and business performance, the total salaries and average salary of the employer, the human resource costs of the employer and its particular industry, and the local consumption index;
  • it prescribes the respective obligations which the employer and employee must follow in the course of collective bargaining, For example, employers should not prevent employees from entering the workplace or refuse to provide labour equipment and employees should not cease work in breach of their employment contracts or force co-workers to leave work by any means, This suggests that employees are not allowed to strike during the course of collective bargaining. Employees are also expected to keep any of the employer's trade secrets confidential during negotiations;
  • trade unions 0f the architecture and catering industries, and of any other industries which have the capacity to carry out collective bargaining, may send representatives to carry out collective bargaining with the specific industry associations and their representatives; and trade unions representing economic development areas, industrial (technology) park areas and central business districts, where small or micro businesses are located, may send representatives to carry out collective bargaining with the representatives elected by those enterprises which do not have the capacity to participate in collective bargaining independently.
Expanded scope of entities in respect of application for the foreigner's permanent residence permit

According to '', the State Ministry of Public Security issued a decision (the 'Decision') on expanding the categories of entity whose foreign employees may apply for a permanent residence permit. The decision, which came into effect on 9 June 2015, categorises the new entities and includes national laboratories, national key laboratories, national engineering laboratories, national engineering research centres, national certified enterprise technology centres, national engineering technology research centres and foreign investment research and development centres. The entities must be certified by the competent government authority before their foreign employees can apply for a permanent residence permit.

The permanent residence permit can only be applied for by foreign employees of these entities if they meet the following requirements:

  • holding the qualification of associate professor, associate researcher or some other associate level (or higher) title or having enjoyed equal treatment to employees with those qualifications;
  • having a good record of paying tax;
  • having at least four consecutive years of employment with the entity; and
  • having resided in China for not less than three cumulative years in a four year period can also apply for a permanent residence permit.

In late June 2015, Shanghai issued the relevant implementation rules of the Decision. The implementation rules provide that foreigners whose annual salary reaches RMB 600,000 and whose annual individual income tax amounts to RMB 120,000 may also apply for a permanent residence permit, provided that they have worked in Shanghai for four consecutive years with a cumulative period of residency in China of not less than 6 months each year.

The permanent residence permit is a valid ID certificate for a foreigner with permanent resident status in China. A foreigner with permanent resident status in China may enter and leave China with his or her passport and foreigner's permanent residence permit without the need for a visa. A permanent residence permit entitles foreigners to the same rights and obligations enjoyed and placed on Chinese citizens in respect of investment, real estate purchases, driving license applications, children's education and accommodation. A foreigner's permanent residence permit is valid for either five or ten years. The five year permit is provided to foreigners under 18 and the ten year permit is provided to those ages 18 and above.

Strengthened role of mediation for labour dispute resolution

During the seven years since the Law of the PRC on Mediation and Arbitration of Labour Disputes took effect in 2008, there have been approximately 1.5 million labour dispute cases handled by labour tribunals. Since the rules for submission of a claim were relaxed in May 2015, so that cases are now simply registered rather than reviewed before being accepted, the number of cases accepted by all courts in China has increased by 20% and the number of labour disputes issued has doubled in some areas.

Given this significant increase in labour cases, the Chinese government are attaching a higher level of importance to mediation and are expecting labour dispute mediation organisations to be rolled out across towns and communities. These organisations will have full-time mediators dedicated to solving labour disputes before proceedings are issued. The government requires 80% of towns and communities to set up the organisations before end of this year.



Ying Wang

Ying Wang


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