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CHiNABRiEFiNG
GuidetoHRCompliance
andBestPracticesinChina
Producedinassociationwith
DEZANSHRA&ASSCATES
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ThisGuidetoHRComplianceandBestPracticesinChinawasproducedbyateamofHRprofessionalsatDezanShira&Associates,withZhouQianactingastechnicaleditor.CreativedesignoftheguidewasprovidedbyMiguelEnricoAncianoandAparajitaZadoo.
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Preface
OperatingabusinessinChinahasbecomeincreasinglycomplicatedduetoshiftsintheeconomy,geopoliticalfactors,diversifyingsupplychains,andevolvingregulatoryframeworksgoverningtaxation,datacompliance,andotherareas.Thesechanges,combinedwithamorefocusedimplementationofhumanresources(HR)policies,underscorethecriticalimportanceofadheringtobestpracticesinHRmanagementandensuringcompliancewithChina’slaborlawswhenmanagingacompany’stalents.
Forcompaniesthatarenewlysettingup,whethertheyareestablishingawhollyforeign-ownedenterprise,partneringwithalocalbusiness,orsimplyregisteringarepresentativeoffice—onecriticalaspectissecuringlocalemployees.Understandingeffectiverecruitmentandmanagementpractices,alongwithyourlegalresponsibilitiesasanemployer,isimperative.Thesestepsnot
onlyenhanceyourcompetitiveadvantagebutalsofacilitatestrategicdecision-makingandsolidifyyourfootholdinChinaforthelongterm.
TheGuidetoHRComplianceandBestPracticesinChina,compiledbyprofessionalsatDezanShira&AssociatesinMay2024,introducesthefundamentalsofHRmanagementandlaborcomplianceinChina.Withinitschapters,wedelveintoessentialtopicsthatbusinessesmustunderstandandpayattentiontoasemployers.OurprimaryfocusincludesinsightsintoChina’schanginglabormarket,thecountry’slaborlawframework,andessentialstepsforachievingeffectiveemploymentmanagementandcompliance.Wealsoprovideadditionallinksinseveralsectionsthatcanbeusedtoexplorespecifictopicsinmoredetail.
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DezanShira&Associates
Whetheryou’reanewentrantoranexistingplayer,thisguideequipsyouwiththeknowledgeneededtonavigateHRcomplexitiesinChina.Forpersonalizedassistance,feelfreetocontactChina@.
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GuidetoHRComplianceandBestPracticesinChina3
AboutDezanShira&Associates
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GuidetoHRComplianceandBestPracticesinChina5
TableofContents
Preface
03
AboutDezanShira&Associates
04
Part1|China’sChangingLaborMarket
7
ProminenttrendsinChina’slabormarket
9
StrategiesforrecruitingandretainingtalentinChina
11
Part2|UnderstandingChina’sLaborLaw
Framework
13
GeneralfeaturesofChina’slaborlawframework
14
China’smajorlaborlaws
15
ImportanceofcompliancewithChina’slaborlaws
16
Part3|EssentialStepsforEffective
17
EmploymentManagementandHRComplianceinChina
Theemployeehandbook:Yourpolicycornerstone
20
Hiringandcontractmanagement
24
Payrollmanagement
28
Termination
35
Managingforeignemployees
37
DataprivacyissuesinHRmanagement
38
LeveragingtechnologytoimproveHRandpayrollmanagement
41
AboutDezanShira&Associates’HRComplianceandPayrollServices
44
MeetourHRComplianceandPayrollProfessionals45
GuidetoHRComplianceandBestPracticesinChina6
China’sChangingLaborMarket
1
?ProminenttrendsinChina’slabormarket
?StrategiesforrecruitingandretainingtalentinChina
China’sChangingLaborMarket
China’slabormarket,thelargestintheworld,iscurrentlyexperiencingrapidtransformation.Asthepopulationages,theworkingagedemographicisdecreasingandalternativeemploymentmodelsaregainingprominence.Inresponse,Chinaisactivelyupskillingitsworkforcetoenhanceproductivityandefficiency.Forforeigninvestedenterprises(FIEs)operatingwithinthisdynamiclandscape,understandingtheevolvinglaborenvironmentiscrucialforeffectivetalentrecruitmentandretention—essentialfactorsforsustainedsuccessandgrowth.Moreover,aslaborlawscontinuetoimproveandemployeeawarenessgrows,maintainingcompliancewithChina’slaborregulationsremainsparamount.
AccordingtotheNinthNationalWorkforceSurveyreleasedbytheAll-ChinaFederationofTradeUnions(ACFTU)inMarch2023,China’stotalnumberoflaborershasgrownto402millionpeople
atthebeginningof2022,upfrom391millionrecordedin2017whenthelastworkforcesurvey
wasconducted.
OverviewofChina’sLaborMarket
TotalWorkforce
733.5million
MigrantWorkers**
293million
MonthlyMinimumWage(May2024):
RMB1,450–RMB2,690
TotalLaborers
402million
NewLaborers*
84million
AverageEducation
13.8years
PerCapitaIncomefromWages(2023):
RMB22,053
AverageAge
38.3years
AverageYearlyIncomeof
UrbanResidents(non-privatesector):
RMB120,698
*Referstoworkerswhoprovideonlinedistribution,travel,transportation,housekeeping,andotherservicesthroughinternetplatforms,oftenonalexiblebasis.
**Referstoworkerswhomovefromruralareastourbanareasto?ndwork.
Source:NinthNationalWorkforceSurvey,All-ChinaFederationofTradeUnions,NationalBureauofStatistics.
GuidetoHRComplianceandBestPracticesinChina8
ProminenttrendsinChina’slabormarket
Ageincreasing,butsoareeducationlevels
TheaverageworkerageinChinaincreasedto38.3yearsin2022from37.1in2017.Theaverageageofindustrialworkerswas38.29,whilethemajorityofprofessionaltechnicalpersonnelwerebetween30and50yearsold,andweremostlyworkingintheeducation,manufacturing,andhealthcareandsocialworkindustries.
Theaveragelengthofeducationofworkersalsoincreasedslightlyto13.8yearsin2022,upfrom
13.6in2017.Over85percentofworkershadahighschooldiplomaorabove,and35percent
hadacollegedegree.
Diversifiedindustrydistribution
Thevastmajorityofindustrialworkers–82.7percent–workinsecondaryindustries,and77.6percentworkinmanufacturingandconstruction.Meanwhile,oneofthenewmajorchangestoChina’slaborforceisanincreaseintheproportionofpeopleworkingin‘newformsofemployment’.Thisconceptissimilartothatof‘gigworkers’intheWest,referringtopeoplewho
providevariousservicesthroughinternetplatformsonaflexibleto-orderbasis,suchasonlinecar-hailingdrivers,couriers,takeawaydeliverydrivers,andothers.Therearecurrentlyaround84millionpeopledoingthistypeofwork,around20.9percentofthetotalworkforce.
DAVIDNIU
Partner
HumanResources&Payroll
BeijingOffice
“China’slabormarket
iscurrentlyundergoing
rapidtransformation.
Understandingthe
prominenttrendsis
crucialforrecruitingand
retainingtalent,aswellas
ensuringcompliance.”
Risinglaborcosts
LaborcostshavecontinuedtoriseinChina,dueprimarilytorisingcostsoflivingandincomelevelsastheeconomygrowsandmovesupthevaluechain.
Theaverageyearlyincomeofurbanresidentsinnon-privatesector(thestatisticalgrouptowhichFIEsbelongto)reachedRMB120,698(approx.US$17,128)in2023.Theindustrywiththehighestaverageincomewasinformationtransmission,computerservices,andsoftwareindustries,withanaverageannualincomeofRMB223,088(approx.US$31,659),whilethelowestwasinthewater,environment,andutilitiesmanagementindustry,withanaverageannualincomeofRMB54,516(approx.US$7,736).TheaveragemonthlywageofamigrantworkerwasRMB4,780(approx.US$678),up3.6percentfrom2022.
TheincreasinglaborcostsinChinacorrespondwithanoverallincreaseinspendingandcostsofliving.AccordingtodatafromtheNationalBureauofStatistics(NBS),China’sdisposableincomepercapitagrewtoRMB39,218(approx.US$5,565)in2023,anominalincreaseof6.3percent
GuidetoHRComplianceandBestPracticesinChina9
year-on-year.Meanwhile,costsoflivinghaveincreased,inparticularinmanufacturinghubs,suchasShanghaiandGuangdongProvince.Inadditiontorisingwagesandlivingstandards,theincreaseincostsisalsobeingdrivenbytheincreaseinemployees’educationandtraining.AsChinastrivestomoveitseconomyupthevaluechainbymodernizingtraditionalindustriesandfocusingontheproductionofhigh-valuegoods,sodoesitsneedforhigher-skilledlabor,whichcomesatahighercost.
Improvingprotectionoflaborrights
Inadditiontocontinuedeffortsonpreventingwork-relatedinjury,ensuringtimelysalarypayment,aswellasbuildingupamandatorysocialsecuritysystem,thelaborauthoritiesin
Chinahavealsobeenrampingupprotectionstocertain‘disadvantagedgroups’.
Forinstance,in2021,China’sStateAdministrationofMarketRegulation(SAMR)issuedpolicyguidelinesthatorderedinternetplatformsprovidingfooddeliveryservicestoensureworkersarepaidtheminimumwage,arenotsubjecttoexcessiveworkinghours,andadheretocertain
safetystandards,amongotherrequirements.
Chinahasalsomademajorin-roadsintotheprotectionoftherightsofwomenintheworkforce.InOctober2022,ChinapassedtheLawontheProtectionofWomen’sRightsandInterests
(Women’sProtectionLaw),whichincorporatesgenderdiscriminationintheworkplaceintothescopeoflaborsecuritysupervisionandfurtherclarifiesthedefinitionsofsexualharassmentintheworkplace,thusstrengtheningtheenforcementofotherlawsandregulations.
Work-lifebalanceandtechnicalupskilling
AnimportantdevelopmentinChina’sworkcultureoverthepastfewyearsisagreaterawarenessofwork-lifebalanceandanincreasingbacklashagainstoverwork.Thisisparticularlytrueinwhite-collarprofessions,perhapsduetothehigherlevelofvisibilityofthesepositionswithinsociety.Anumberofhigh-profileincidentsattechcompaniesinparticularhaverenewedcriticismandbacklashagainstthe“996”workculture.
AccordingtotheACFTUsurvey,itisfoundthatemployeesarealsoplacinghigherimportanceontheirlong-termdevelopment,with95.3percentofworkersinterestedinlearningnewvocationalskillsorknowledge.Thisproportionisparticularlyprominentamongemployeesaged18to40andemployeeswithabachelor’sdegreeorabove.
Growingdemandformoreflexibleworkarrangements
Ashifttomoreflexibleworkarrangementsiswellunderway.Thishasalottodowiththepsychologicalchangesofworkersinthepost-pandemicera.
GuidetoHRComplianceandBestPracticesinChina10
First,thediversificationofcurrentsocialemploymentformshasimpactedthetraditionaleight-hourworkingday.Underthesamesalarybenchmark,personalfreetimehasbecomeincreasinglyimportantforworkers.
Secondly,psychologicaladjustmentduringtheepidemichasintensifiedworkers’reflectionuponplanningtheirlives.Inthefaceofaglobalpublichealthemergency,peoplehavebecomemorecognizantoftheshortnessandfragilityoflife,andthishasforcedthemtotakestockofthethingsthatmatterthemosttothemandhowtoliveamorefulfillinglife.
Remoteworkforcebecomingmorecommon
AnothertrendobservedinChina’slabormarketisthat‘telecommuting’hasbeenadoptedbymoreandmoreemployers.Telecommuting,alsoknownasteleworking,referstothepracticeofworkingfromalocationoutsidethecompany’soffice.Throughtelecommuting,acompany’sworkforceisdistributedacrossacountryorregionanddonotworkintraditionaloffices.Thedistributedemployeesmaytelecommuteforlongperiodsoftimeormaychoosetotelecommute
onlytemporarily.
Thankstotelecommuting,thetalentpoolhasgreatlyexpandedirrespectiveofthelocationoftheenterprise.Recruiterswill,however,needtoadoptnewhiringpracticesandexpandtheirsearchfarbeyondthetraditionalgeographicboundariestheymightoncehaveadheredto.It
alsoprovidesjobopportunitiesforpeoplewithdisabilitiesandmobilityproblems.Themodelcouldappealtopeoplewhoneedtoworkflexibly,suchasparentswithyoungchildren.
StrategiesforrecruitingandretainingtalentinChina
Buildingemployerbrandingandcultivatingcompanyculture
Employerbrandvalueisincreasinglygainingwidespreadattentionandrecognitionandhasbecomeoneofthebestindicatorsofaworkplacecultureforjobseekers.Establishingastrongemployerbrandwillhelpyourcompanystandoutinthejobseekermarketandultimatelyhelpyouattractandretainbettertalent.
Companycultureisanindispensablepartofanycompany.Itcancreateapositiveworkplaceenvironment,improvethestaff’sculturalexposureandethicalstandards,andallowinternalemployeestonaturallyformacohesiveandtightlyknitteam.Companyculturecanhelpenterprisesplayapositiveroleintheworklivesoftheirstaffaswellasassistinrationallyallocatingenterpriseresourcestoimprovecompetitiveness.
GuidetoHRComplianceandBestPracticesinChina11
Toeffectivelybuildagoodcompanycultureandapositiveemployerbrandimage,wesuggestadoptingthe“4P”strategies,namely:People,Product,Position,andPromotion.Theseconceptscanbeunderstoodasfollows:
?People:Identifyingthetypeofpeopleanddesiredskillsandexpertiseyourcompanywantstoattract–toinformthedevelopmentofyourbrandimage.
?Product:Regardingthecompanyasaproductandidentifyingyourcompany’suniquesellingproposition,suchaswhatexperiencesandbenefitsyourcompanycanofferemployeesandprospectiveemployees.
?Position:Identifyingyourcompany’sbrandpositioningintheemploymentlandscapeandrefiningyourbrandmessageusingconciseandeffectivelanguage.
?Promotion:Promotingyouremployerbrand–remember,yourcurrentemployeesareyourmosteffectiveadvocatesandthebestresourceforpromotingyourcompanyasanemployer.
Adoptingstrategiestoretaintalent
Retainingtalent,especiallyexcellenttalent,isatoppriorityforanyenterprise.Keepingemployeesloyal,productive,andemployableisanimportantskillforeveryleaderandHRdepartmentto
havetoday.
Thefirsttactictoimproveemployeeretentionistoincreaseflexibilityandsetboundaries.
Flexibilityisoneofthethingsmostemployeeswillfocuson.Youngerworkersprefertobemeasuredbyperformanceratherthantime.Aflexibleschedulethatincludestheoptiontoworkfromhome,flexiblestartandfinishtimes,paidvacations,careerbreaks,choiceoflocation,andshorterweeklyworkinghoursareattractiveperksthatcompaniescanoffertoseekandretaintoptalent.
Thesecondtacticistomakeworkfunandgivegoodfeedback.Whethertheyareattheofficeorathome,leaderscanhaveabigimpactontheiremployees’work.Peoplewhoarehappyatworkwillstaylonger.Thecompanyshouldalsoprovidegood,actionablefeedbackandmotivationinatimelymanner.Feedbackiscrucialforemployeestolearnandgrowandhelpstofosterloyaltyandretainemployees.Peoplealsoneedtoreceiverespectandapprovalfortheirwork,whichcancomefromconstructivefeedback.
Employeeincentivescanhelpsatisfythevariousneedsofstaffandstimulatetheirenthusiasmforwork,sothattheymaintainapositivemood,enablingthemtofullyexploretheirpotential.Thiswillnotonlyimprovetheefficiencyofthecompanyitself,butalsoempoweritsemployeestoachieveprofessionalprogressandachievements.
GuidetoHRComplianceandBestPracticesinChina12
2
UnderstandingChina’sLaborLawFramework
?GeneralfeaturesofChina’slaborlawframework?China’smajorlaborlaws
?ImportanceofcompliancewithChina’slaborlaws
UnderstandingChina’sLaborLawFramework
China’slaborlawframeworkiscomplex,notonlyduetoitscontentandscopebutalsobecauseitcontinuallyevolvestoalignwiththecountry’ssocio-economicdevelopment.Additionally,localvariationsarecommon–whilethecentralgovernmentestablishesseverallawsthatmustbefollowed,numerousbylawsandregulationsareinstitutedatthelocallevel.
Undersuchcircumstances,understandingthegeneralfeaturesofChina’slaborlawsystemisimperativeforevaluatingtheresourcesneededtoensureHRandpayrollcomplianceintheChinamarket,inadditiontoknowingthemajorlaborlaws.
GeneralfeaturesofChina’slaborlawframework
Ingeneral,China’slaborlawframeworkfeaturesthefollowingpoints:
?Emphasisonprotectingworkers:China’slaborlawstendtoprioritizesafeguardingworkers’rights,recognizingtheiroftenvulnerablepositioninlaborrelations.Forinstance,theselawsestablishminimumwagestandardsandensurethatworkershavereasonableworkinghours,vacationtime,andaccesstosocialinsurancebenefits,therebysecuringtheirfundamentallaborrights.
?Emphasisonemployerresponsibility:China’slaborlawsnotonlyrequireworkerstoadheretorelevantlabordisciplineandregulationsbutalsoemphasizetheresponsibilitiesofemployersinensuringlaborprotection.Employersmustestablishrobustoccupationalsafetyandhealthsystems,providesafetyeducationtoworkers,andfurnishnecessaryprotectiveequipmenttosafeguardworkers’physicalhealthandsafety.
?Primacyofmandatorystandards:China’slaborlawsprimarilyrelyonmandatorynorms,withspecificlegalprovisionsdictatingthelaborprotectionstandardsandrequirementsthatemployersmustcomplywith.
?Integrationofsubstanceandprocedure:China’slaborlawsaddressbothsubstantivecontentandproceduralaspects.Whilesafeguardingworkers’rights,theyalsorequireemployerstofollowproperproceduresduringemployment,includingcontractformation,modifications,andterminations.Thisensuresthelegalityandstabilityoflaborrelationships.
?Adaptationtochangingtimes:AsChina’ssocio-economicdevelopmentandlabormarketevolve,laborprotectionlawscontinuallyupdateandimprove,makinglaborcomplianceinChinamorechallenging.
?Localvariation:Localregulationscansignificantlydifferacrossprovincesandmunicipalities.Employersmustbeawareofregionalnuanceswhenimplementinglaborpolicies.Forinstance,differentcitiesmayhavedifferentminimumwage,socialsecuritycontributionstandards,numberofmaternityleavedays,andmedicaltreatmentperiodpolicies.
ALLANXU
Partner
BusinessAdvisoryServices
ShanghaiOffice
na’slaborlaw
“Chi
frameworkisintricate,not
onlyduetoitscomplex
wordingbutalsobecauseit
continuallyevolvestoalign
withthecountry’ssocio-
economicdevelopment.”
GuidetoHRComplianceandBestPracticesinChina14
China’smajorlaborlaws
Despitelocalvariations,mostlaborlawsalignwiththenationalprinciplesandguidelinesestablishedbymajorlaborlegislation.Theselocaldifferencesfallwithinthepermissiblescopeofdiscretiongrantedbynationallaw.
TheLaborLawofPeople’sRepublicofChina(theLaborLaw)andtheLaborContractLawofPeople’sRepublicofChina(theLaborContractLaw)aretwoprimarysourceofemploymentregulationswithinChina’slaborlawframework.Theyplayacrucialroleinsafeguardingworkers’rights,regulatinglaborrelations,andpromotingharmoniousstabilityinlaborrelations.
TheLaborLaw,firstimplementedin1995andlastrevisedin2018,establishesthefundamentalstructureoflaborrelationsandspecifiescoreelementssuchasthelaborcontractsystem,laborprotection,workingconditions,wages,andlabordiscipline.Itprovidesessentialguidanceandabasisfortheformulationandimplementationofotherlaborlawsandregulations.
Meanwhile,theLaborContractLaw,firstimplementedin2008andlastrevisedin2012,servesasasubsidiarylawtotheLaborLaw.Itprovidesdetailedregulationsonvariousaspectsoflaborrelationsbetweenemployeesandemployers,includingestablishment,modification,aswellasthesigning,execution,andterminationoflaborcontracts.TheLaborContractLawoffersmore
preciseandspecificlegalguidanceforthepracticaloperationoflaborrelations.
OtherlaborlawsinstitutedcentrallythatinvestorsshouldtakenoteofwhendoingbusinessinChinainclude:
?LawontheProtectionofRightsandInterestsofWomen:Thislawsafeguardswomen’srightsintheworkplace,addressingissuessuchasequalpay,maternityleave,andprotectionagainstdiscrimination.
Aidi
Sapea
WhatistheimportanceoforiginalemploymentcontractsinChina?
Q&AansweredbyAdamLivermore,Partner
?SocialInsuranceLaw:Thislawplaysacrucialroleinprovidingsocialsecuritycoveragetoemployees,includingpensions,medicalinsurance,unemploymentinsurance,maternityinsurance,andwork-relatedinjuryinsurance.
?RegulationsontheHousingFund:Theseregulationsprovideguidanceonhowemployersshouldregisterandcontributetohousingfundschemesfortheiremployees.
?LaborDisputeMediationandArbitrationLaw:Thislawprovidesguidanceonresolvingdisputesrelatedtolaborcontracts,workinghours,wages,safety,andotherlabor-relatedmatters.
?TradeUnionLaw:ThislawoutlineshowtradeunionsshouldbeorganizedinChina,theirroleinlaborprotection,andtheresponsibilitiesofemployers.
EXPLOREDETAILS
?LawofthePeople’sRepublicofChinaonWorkSafety:Thislawenhancessupervisionandcontroloverworksafety,aimingtopreventaccidentsandprotectlivesandproperty.
?AdministrativeProvisionsonEmploymentofForeignersinChina:ThislawlaysouttherequirementsandproceduresforhiringforeignemployeesinChina.
GuidetoHRComplianceandBestPracticesinChina15
ImportanceofcompliancewithChina’slaborlaws
CompliancewithChina’slaborlawsplaysavitalroleinmaintainingaharmoniousandproductiveworkplace.Itisessentialforpreventinglabordisputes,avoidingpenaltiesfromregulatoryauthorities,andattractingandretainingtoptalents.
Preventinglabordisputes
GivenChina’sstrongemphasisonemployeeprotectioninlaborrelations,employersoftenfind
themselvesatacomparativedisadvantagewhenlabordisputesarise.Therefore,implementingeffectivestrategiestopreventsuchdisputesiscrucialforminimizingtheriskoffinancialloss.Adheringtolaborlawsandregulationsplaysapivotalroleinpreventingmisunderstandingsandconflictsbetweenemployersandemployees.Byensuringthatworkers’rightsaresafeguardedandthatemploymenttermsaretransparentandequitable,companiescansignificantlyreduce
thelikelihoodofdisputes.
Avoidingpenaltiesfromauthorities
Aspreviouslymentioned,China’slaborlawsplacesubstantialresponsibilityonemployers.
Failingtocomplywithrelevantmandatorynormscanleadtopotentialaudits,investigations,andsignificantfinancialpenalties.Maintainingstrictcompliancewithlaborregulationsallowsbusinessestooperatesmoothlywithinthelegalframeworkandavoidtheserisks.
Attractingandretainingtalent
WhileChinahasanabundantlaborsupply,findingsuitablecandidatesisn’talwaysstraightforward.Attractingandretainingtoptalentisakeypriorityforbusinesses.Companiesknownfortheircommitmenttolaborcomplianceandfairtreatmentofemployeestendtobemoreappealingtojobseekers.Conversely,companieswithlabordisputerecordsorviolationsoflaborlawsmaydiscouragepotentialcandidates.
GuidetoHRComplianceandBestPracticesinChina16
3
EssentialStepsforEffective
EmploymentManagementand
HRComplianceinChina
?EmploymentmanagementandHR
complianceinChinaataglance
?Theemployeehandbook:Yourpolicycornerstone?Hiringandcontractmanagement
?Payrollmanagement?Termination
?Managingforeignemployees
?DataprivacyissuesinHRmanagement?Leveragingtechnologytoimprove
HRandpayrollmanagement
EssentialStepsforEffective
EmploymentManagementandHRComplianceinChina
EffectiveemploymentmanagementandHRcompliancearemultifacetedchallengesthatdemandexpertiseacrossvariousdomains.VariouskeyissuesdeservespecificattentionbyemployersinChina.Wesummarizesomeofthesebelow,anddelveintothemingreaterdetailwithinsubsequentsections:
?Hiringoptions:Anenterprisecanhirestaffthroughthreebasicoptions-directhiring,labordispatch,andoutsourcing.Professionalemployerorganization(PEO)serviceisgrowinginpopularityasanalternativehiringoption
?Representativeo?ces:Representativeoffices,beingoneofthesimpl
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