China Employment Law Update

By Ying Wang, Pattie Walsh, Susan de Silva, Kristy Peacock Smith


Executive Summary
  1. Shanghai clarifies salary payment rules by amending Measures of Shanghai Municipality for Payment of Wages by Enterprises.
  2. Gradual changes to China's retirement age announced for the first time since the 1950s.
  3. The amended version of the Measures for the Administration of  Contingency Plans for Work Safety Incidents comes into effect.

Major modifications to the Measures of Shanghai Municipality for Payment of Wages by Enterprises (2016 amendment)

The current Measures, which have been in place for 13 years, will be replaced on 1 August 2016, when the newly amended version comes into effect (the 'Amended Measures'). The current Measures are formulated in accordance with the relevant rules in the Labour Law of the People's Republic of China, and the conditions of Shanghai Municipality for maintaining employee's rights through the regulation of wage payment by enterprises. The Amended Measures should further enhance the protection of these rights. The most significant modifications are explained in more detail below.

Article 9: the basis for calculating overtime pay and vacation pay will be clarified:

  • if the monthly salary is stated clearly in the labour contract, overtime and vacation pay will be based on the monthly salary stated in the contract;
  • if the agreement on wages is not clearly stated in the labour contract, the applicable pay will be based on the collective wage agreement;
  • if neither the collective nor the labour contract provide clear terms, wages during vacation shall be equivalent to 70% of the monthly wages payable for normal attendance by a worker in the relevant employee's position.

These changes move away from Article 9(2) and 9(3) of the current Measures, in which the calculation base for wages depends on collective wage bargaining between the employer and employee representatives. The newly amended systematic calculation method supersedes the bargaining process when no clear terms are set out in the labour contract and collective agreement.

Article 14, which details the calculation of daily wages for working overtime, has been amended. Instead of dividing the monthly wage (defined in accordance with the principles of Article 9) by 20.92 working days, as the current Measures stipulate, the monthly wage will now be divided by 21.75 working days. The hourly wage calculation method will be maintained (by dividing the daily wage by 8 hours).

Amendments to Article 23, which relates to workers' disputes, will extend the period of time in which wages are paid to workers during disputes to include a mediation period. In circumstances where labour disputes arise from a unilateral termination of the employment relationship by the employer, under the Amended Measures wages shall be paid to workers during the period of mediation, arbitration and litigation carried out under the labour dispute resolution system. The calculation of such wages remains the same; the average monthly wage for the employee's working position during the 12 months preceding the month of the termination is multiplied by the number of unpaid months.

The 13th Five-Year-Plan highlights China's gradual approach to increasing the retirement age 

On the 5 July 2016, the Beijing government announced its human resources and social security 'Five-Year-Plan' (the Plan'). The Plan, which is the 13th to be released, focuses on a programme to increase the age at which workers in China can retire. The programme, which aims to reduce the social and fiscal pressures brought about by China's ageing population, will be implemented over a number of years, with the retirement age being increased gradually by a few months until the target retirement age is met. The current retirement age in China is 60 for men and 55 for women working as civil servants and employees of state enterprises. The age for all other female workers is set at 50 years.

According to Yin Weimin, the minister for Human Resources and Social Security, changes to retirement rules will only be made after public consultation has taken place later this year. The official target retirement age will be officially announced in 2017. However, scholars have already raised concerns that an increase in the age at which workers can retire will lead to a severe funding shortage with cash shortfalls being estimated to rise to $11 trillion over the next twenty years. The Plan suggests that the country's pension and insurance system will be reformed accordingly to ensure that retired residents in both urban and rural areas will benefit from the raised pensions.

The overall strategy of the Plan is to empower trade unions and promote a reasonable distribution of income between workers and enterprise leaders. In addition to delaying the retirement age, Beijing will focus on increasing wages for front-line workers in state-owned enterprises. They will also look to enhance the welfare of vulnerable work groups (workers suffering from serious illnesses, work injuries, those that are unemployed), through the establishment of a uniform programme of medical insurance for rural and urban workers.

Tightened sanctions for overdue corrections of Companies' Contingency Plans

The revised version of the Measures for the Administration of Contingency Plans for Work Safety Incidents (the 'Measures'), as amended by the State Administration of Work Safety on 15 April 2016, took effect on 1July 2016. The Measures are designed to improve the management of emergency plans for work site accidents by increasing fines and introducing personal liability for responsible persons, alongside the requirement to introduce detailed emergency procedures. Contrary to the initial version of the Measures, which contained general administrative guidelines, the revised Measures have underlying rules relating to matters such as people orientation.  They also place the emphasis on practicalities and detailed safeguarding procedures. Before organising a contingency plan, companies must carry out a risk assessment of potential accidents that could take place and a survey of available contingency resources. Effective communication must be demonstrated between the coordinating committee and an emergency response team. There is also a greater emphasis on the objective procedures prior to the coordination of companies' contingency plans.

The Measures require supervision and management units at all levels to submit summaries regarding the quality of management of emergency plans. To enhance the effectiveness of the Measures and as a way to ensure they are enforced, more stringent legal sanctions have been put in place:

  • insufficiently comprehensive contingency plans will be subject to corrections, and a maximum fine of 50,000 RMB can be imposed;
  • overdue corrections are subject to a fine of 50,000-100,000 RMB;
  • plans which are made without risk assessments and surveys having been carried out in accordance with the Measures will be subject to a fine of 10,000-30,000 RMB;
  • companies' liability is extended to responsible persons and may carry costs of up to 20,000 RMB individually.