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HR/Legal Forum Report: Making labour law less like hard work

BritCham / CBBC
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On 12 September, BritCham/CBBC held a joint HR and Legal forum to discuss Chinese labour law in relation to HR work. The panel of three included experts in both fields, who gave presentations on employment-related documents, terminations and trade unions, followed by a Q&A session. Participants came from a range of backgrounds.

The topic of the forum was designed to help HR professionals, whose work so often revolves around legal issues. The aim was to bring professionals from the two areas together to discuss things that would be useful to both parties.

The forum consisted of three presentations by the panellists:

1. Legal documents in the employment relationship

  • There are four categories of employee (permanent local, permanent expat, contractor, intern). Each must have appropriate certification and may have to sign a confidentiality agreement.
  • An acknowledgement letter signed by the employee may be important in the event of dispute, as it shows that the employee read/understood company regulations.
  • Employee handbooks should be updated continually in line with international law.
  • The job description is an important document, as it outlines the employee's responsibilities clearly. Changes to duties should be recorded in writing.
  • It is not easy for employers to terminate contracts on grounds of poor performance, even if a signed job description exists: they must be able to prove that the employee was aware of their duty, that they neglected it, that the employer trained them in it, and that they still failed after being trained.
  • Hard copies of documents such as performance reviews are recommended in China, where they are preferred to emails.
  • Employees should be asked to sign a document when they resign.
  • Friendly conversations with outgoing employees are useful to quell potential bad feeling and prevent further problems such as a breach of confidentiality. It may be helpful to tell employees that violations will have consequences.

2. The employee termination process

  • Anyone who is remunerated for more than 24 hours' work per week in China requires a contract, as this is considered de facto employment.
  • Employers are advised to speak to the employee rather than just handing over the legal documents. They should be aware of the employee's rights.
  • It is important to distinguish between termination (which requires statutory grounds except in the case of misconduct, and usually entails a severance payment) and non-renewal (which does not normally require statutory grounds - although employers are advised to check in their jurisdiction).
  • In some parts of China it is mandatory for an initial fixed-term contract (e.g. probation period) to be converted into an open-term contract when it expires. It is therefore important to consider carefully the length of the initial contract.
  • Notice periods for non-renewal vary according to location.
  • Unilateral termination can be troublesome; employees may have the right to reinstatement if reasonable grounds do not exist. Employees rarely want to take this option, but they can use it as a negotiating tool in disputes.
  • HR staff are advised to learn about Chinese law and business culture, but also that communication is perhaps their most effective tool.
  • Redundancy: there are two types of layoff, individual and collective (20 or more staff, or 10 per cent of the workforce, whichever is greater). For collective layoffs, employers must file a report to the local Labour Bureau, which can be a drawn-out process. HR staff are advised to allow time for this. For individual layoffs, employers must offer an alternative position; if none is available, employers are advised to avoid this route if possible.

3. Trade unions

  • Chinese trade unions are not independent employee organisations, but under the auspices of government.
  • Funding comes not from members, but from mandatory contributions by companies in the amount of 2 per cent of the payroll. The Government will refund 60 per cent of this contribution if the company forms its own trade union. The panel suggested that it might be better to opt in to this system than out, and to keep a reserve fund in case the authorities come knocking.
  • The All-China Federation of Trade Unions (ACFTU) is generally considered benign, although it is often subject to the Government's political objectives, and it may exert pressure on companies via media or the Tax Bureau if pressed to do so.
  • Roles of trade unions include commenting on imminent changes to company policy and regulations, and commenting on layoffs.

The forum ended with a question and answer session.

BritCham/CBBC would like to thank the Chair of the forum, Tracy Driscoll (MDS Beijing), and the panellists, Susie Bates (IPG), Chris Lin (DLA Piper) and Joyce Wei (Deloitte).



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