This is the first of a two part series on why it has become so important to comply with China’s labor and employment laws and how best to make sure your company is in compliance. In this first part, I briefly explain what has changed in China to make employer compliance — especially for foreign companies doing business in China so important. And in part 2, I explain what our China employment lawyers do by way of Human Relations audits to ensure our clients are in compliance.
Over the last few years China and Chinese employees have become serious about enforcing China’s labor and employment laws. I defy you to find any foreign employer in China that has not had their employer decisions legally tested in the last few years. And thanks to a new law called Measures of Public Disclosure of Significant Violations of Labor Protection Laws that took effect on January 1, 2017, China employers that violate China’s labor protection laws face the additional threat of being “named and shamed.” The following violations of China’s labor laws may be made public by the relevant labor authorities:
- Failing to pay “substantial” employee remuneration
- Violating the laws on working time or rest or vacation and the circumstances are “serious”
- Violating any child labor laws
- Failing to pay employee social insurance and the circumstances are “serious”
- Violating the special rules on protecting female workers and underage workers and the circumstances are “serious”
- Causing significantly bad social consequences due to violations of labor laws
- Other serious illegal conduct
Like pretty much everything related to China’s employment laws, enforcement of these naming and shaming measures is going to depend on the locale. Guangdong Province, for example, has been disclosing labor authorities’ rulings on employer violations even before the new law was implemented. According to Guangdong published rulings for the first three quarters in 2016, the first three violations mentioned above: (1) failure to pay employee remuneration, (2) overtime law violations and (3) using child labor have been the most common illegal practices. Labor authorities are cracking down particularly hard on employer failure to pay employee remuneration.
What is considered a “substantial” failure to pay? If you owe 10 employees wages, you will no doubt be penalized and your violation will be made public. If you owe one employee a substantial amount (could be as low as 20,000 RMB), you may be listed as well. In other words, the threshold is not terribly high, especially for foreign companies whose employee wages tend to be higher. And since the labor authorities have gobs of discretion in deciding whom to name and shame, we are expecting foreign companies to get less slack. Egregious violations subject employer companies and the person-in-charge to criminal liabilities. Failing to pay substantial employee remuneration is a crime and will be prosecuted. This is not something you want to get wrong.
So if you employ anyone in China, now is the time for you to get compliant. In tomorrow’s post, I will set out our method for accomplishing that.
Editor’s Note: Whenever we write something related to ensuring compliance with China’s employment laws, companies with no legal entity in China contact us “to get into compliance.” If you have “employees” in China but no company in China, your problems go way beyond what is written above. For how to handle that sort of situation, you should check out Doing Business in China with Deportation or Worse Hanging Over Your Head and follow and read the links in that post. Now!