China Employment Law Update August 2017

Executive Summary

1. The Employment Status Report of Shanghai 2016 University Graduates was issued recently which sets out graduate employment conditions, including the term of labour contracts, average monthly salaries and the proportion of employees moving roles.
2. Foreign talent in Beijing will receive more social security, including better incentive mechanisms, mutual recognition of international professional qualifications and better social insurance standards.
3. The Bilateral Social Insurance Treaty was recently executed between China and Spain. Moreover, the "Circular on Implementing the Agreement between China and Switzerland on Social Security" was passed to facilitate their bilateral treaty.

1. Employment status of 2016 university graduates in Shanghai

The Employment Status Report of Shanghai 2016 University Graduates (The "Report") recently issued by the Shanghai Municipal Human Resources and Social Security Bureau together with the Shanghai Education Committee indicates that there are 97,000 Shanghai fresh graduates entering the job market in 2016. This figure excludes those pursuing a postgraduate degree, moving abroad and obtaining employment in other provinces or cities. The average term of a labour contract is 29.2 months; 0.4 months longer than that of 2015 graduates.

The average monthly salary for 2016 fresh graduates is CNY 4,989. Of this figure, those working in the finance industry top the list with CNY 8,216 per month, followed by the education industry in second place with CNY 7,908, and the health care industry in third place with CNY 7,653.

The Report shows that 21.1% of 2016 graduates have "job-hopped" within one year of graduation. The primary reason for this , which accounts for 33.8% of moving roles, is dissatisfaction with promotion opportunities. Another main cause of moving roles, accounting for 26.9% is salary not meeting expectation.

2. Foreign talent in Beijing will receive more social security

The Work Program of Deepening Reform, Promoting Service Industry in Beijing and Opening up Comprehensive Trial Projects (the "Program") was approved by the State Council on 25 June 2017. The Program requires the improvement of incentive mechanisms for foreign talent, including: promoting recognition and reward policies for exceptional skills and skills in short-supply; stronger support in the application of government-sponsored programs, promotion based on significant achievements in scientific/technological research, and financing services, and support for foreign scientists' and specialists' participation in significant science and technology plans.

Meanwhile, mutual recognition of international professional qualifications should be explored and employment restrictions relating to highly qualified and highly sought-after foreign specialists participating in key fields of service industries should be relaxed to allow qualified foreigners to practice and provide professional services in Beijing.

Additionally, the Program blueprints better social security standards for foreign talent, which includes:

• Increasing the provision of foreign-related medical services and encouraging the development of multiform international health insurance;
• Encouraging employers to set up supplementary pension insurance for exceptional foreign talent, and exploring the transfer and succession mechanism for foreign employees' social security payment to allow them to get a refund when they terminate employment and return to their home countries;
• Planning and coordinating the placement of eligible children of foreign talent to study in designated schools; and
• Increasing housing security for foreign talent, allowing them to buy commercial housing in Beijing and executing a property right registration procedure.

3. Development with the Bilateral Social Insurance Treaty

China and Spain executed a Bilateral Social Insurance Treaty (the "Treaty") regarding social insurance on 19 May 2017. The Treaty was entered into for the purposes of dealing with:

• social insurance related issues for nationals of a home country whilst in a host country;
• the avoidance of the double tax charge, and;
• relieving certain burdens for both employers and employees.

To date, China has entered into similar Treaties with Finland, the Netherlands, Canada, France, Denmark, Switzerland, Germany and South Korea.

Moreover, to implement the Treaty between China and Switzerland which came into force on 19 June 2017, the General Office of the Ministry of Human Resources and Social Security promulgated the "Circular on Implementing the Agreement between China and Switzerland on Social Security" (the "Circular"), effective on the same date.

The Circular provides that for the following persons, China will waive their pension and unemployment insurances, and correspondingly Switzerland will waive their pension, survivors' insurance, and disability insurance:

• dispatched staff (i.e. those who are employed by a Chinese entity but perform their work in Switzerland, or vice versa)
• employees working on vessels or aircraft
• diplomatic personnel
• consular staff
• persons employed by government or public service organizations
• accompanying family members

For dispatched staff, the maximum waiver period for first application shall be six years, with an extension to be granted upon consent of the competent authorities of the two contracting states.

Circulars, which implement the rules of the corresponding Treaty, have not yet been passed between China and Spain, the Netherlands and France, although they are currently in place for the other countries mentioned above.