China Employment Law Update

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


Executive Summary
  1. The government release their proposals for the 13th Five-Year Plan, including the provision to grant all couples the right to have two children. 
  2. A court in China issues a fine of RMB 10,000 against an Appellant for making a false statement 
  3. Foreign employees may contribute to a housing fund and enjoy related benefits in Shanghai. 
  4. Researchers in the Ministry of Human Resources and Social Security say there is no a trend towards a second wave of layoffs.

The 13th Five-Year Plan is Released

On 3 November 2015, the Proposal for Formulating the 13th Five-Year Plan (2016-2020) (the "Proposal") was issued at the 5th Plenary Session of the 18th CPC Central Committee. A Five-Year Plan (the "FYP") is the central government blueprint for China’s long-term social and economic policies, drafted and implemented by central, provincial, local, and district governments, alongside industry regulators. FYPs are important in illustrating government priorities and setting down the direction of travel for social policy. The key employment-related aspects of the Proposal are as follows:

1. Salary and Income

  • China aims to double the 2010 gross domestic product (GDP) and the 2010 per capita income of both urban and rural residents by 2020;
  • A system of collective bargaining on salary will be introduced;
  • The way in which minimum wage increases are assessed and determined will be enhanced. The treatment of skilled workers will be improved; and
  • The individual income tax system will be comprehensively reformed.

2. Social Insurance

  • An individual account system will be introduced into pension insurance to ensure "the more you pay, the more you gain". The basic pension of staff and workers will be coordinated nationwide. State assets will be transferred partly to social insurance funds;
  • Policies on extending the retirement age will be progressively set out ;
  • Critical illness insurance will cover all residents in urban and rural areas; and
  • Maternity insurance will be implemented alongside basic medical insurance.

3. Employment and Entrepreneurship

  • New apprenticeships will be implemented across enterprises, in a new way of developing skilled workers ;
  • An entrepreneurship service platform, accessible to everyone, will be established; and
  • The assessment of professional titles and technical levels will be incorporated into the household registration system in large cities.

4. Family Planning

  • In a bid to combat the impact of an aging population, the fertility policy will be fully implemented, allowing all couples to have two children.

Appellant Fined RMB 10,000 by Suqian Intermediate Court for False Statement During the Court Hearing

On 22 October 2015, the Suqian Intermediate Court fined an Appellant, Mr Zheng, RMB 10,000 for providing a false statement during the hearing. Zheng, who was appealing a decision made by the district court, is the former legal representative of a company co-established by Zheng, Xu, and Gu. Due to disputes over the corporate operation, Gu, the supervisor of the company, sent a written notice via express mail service (EMS) to Zheng and Xu, informing them that an interim shareholders' meeting would be held on 8 October 8 2014. Gu and Xu attended the meeting on time but Zheng was absent. At the meeting, a resolution was passed to remove Zheng from his duties as an executive director, to revoke his identity as a legal representative, and demand him to hand over business-related materials, including the company's business license, official seal, and financial documents. The company informed Zheng of the resolution, but he refused to provide the materials. Throughout the hearing Zheng had insisted that he had not received the written notice sent by Gu and that as result, the resolution was unlawful.

EMS provided the court with the Mail Delivery Inventory ("Inventory") which showed that the written notice sent to Zheng had been signed for to acknowledge receipt. The court was also provided with an opinion from the Judicial Appraisal Centre of Nanjing Normal University, which stated that the signature on the Inventory matched Zheng's handwriting. The court concluded that the evidence was sufficient to show that Zheng had received the written notice and as a result they upheld the decision of the district court in finding that the resolution had been lawful.

In light of the evidence before it, the court considered that Zheng's insistence that he had not received the written notice was false and found that he had sought to obstruct the effective trial of the case. Consequently, he was fined RMB 10,000, in accordance with Article 15 Paragraph 1 of the Civil Procedure Law of the People's Republic of China and Article 110 of The Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China.

Shanghai to Retain Foreign Talents in China

The Shanghai Housing Fund Administration Committee have released a Notice on the Housing Fund System (the "Notice") in accordance with the State Council Administrative Measures on Housing Funds and Administrative Measures on the Shanghai Housing Fund. The Notice, which concerns foreign personnel working in Shanghai, personnel with permanent (or long-term) residency abroad, and residents of Taiwan, Hong Kong and Macaw ("Personnel"), aims to create a technology innovation centre with global influence and to implement a more open policy for introducing foreign talent into China.

With this relaxed approach, Shanghai will adopt a pioneering approach whereby Personnel can deposit and extract housing funds to rent or pay for property fees or purchase of owner-occupied houses after negotiation with employers. So far this practice has not been accepted by most of other cities in China. The Notice, which was effective on 24 September 2015, will remain in force for five years.

Researchers in Ministry of Human Resources and Social Security: No Trend of a Second Layoff

2015 has seen ups and downs throughout the Chinese e-commerce industry. Certain policies have resulted in market shares being obtained by industry leaders. This has led to other e-commerce enterprises facing a dim future. According to Labour Daily, in the latter half of the year, many established e-commerce enterprises have narrowed the scope of their business, with many layoffs having already secretly taken place due to cost-cutting and lack of investment.

For example, the once-popular enterprise, Vancl, has cut its employee numbers from 5000 to 300 since its 2013 restructure and its Stock Keeping Unit (SKU) has been reduced from 190,000 to 300. The kind of large-scale cuts pose a serious threat to the e-commerce industry.

On 13 November 2015, director of the Scientific Research Institute, Zheng Dongliang, and director of the International Labour Security Research Institute, Mo Rong, both from the Ministry of Human Resources and Social Security, issued responses to the widespread view that there is a move towards a second set of employee cuts and layoffs. They concluded that there is no such trend in China, and cited the following reasons for their view:

  • Firstly, Mr Rong pointed out that surveyed unemployment needed to reach a rate of 7% before it could be said that there was a "trend" of further layoffs. According to statistics released by the Ministry of Human Resources and Social Security, the urban registered unemployment rate in the third quarter of 2015 is 4.05% and the surveyed rate is also well below 7%.
  • Secondly, he pointed out that the current scale of the unemployed population cannot be defined as a "trend" when compared with levels of unemployment in 1989, throughout the '90s, and in 2008, when more than 120 million peasant workers returned to their hometowns.
  • Thirdly, Mr Rong said that the rapid speed of China's economic growth, the encouragement of entrepreneurship, the creation of jobs for public welfare, and the negotiation mechanism and internal exit mechanism in the reforms of state-owned enterprises jointly guarantee stable employment.