China: Legal Update on Chinese Labour Law

With our newsletter we like to inform you about recent legal updates and practice in China in the future.

1. Special Regulation for the Protection of Female Employees

On 28 April 2012 the State Council has announced the Special Regulation for the Protection of Female Employees ("Special Regulation"). Female employees are entitled to 98 days of maternity leave; an increase of 8 days. The maternity leave begins 15 days prior to the birth date. In case that the employee gives birth to more than one child, the maternity leave will be increased by 15 days for each additional child. The employer may neither decrease the employee’s salary nor terminate the employment during the pregnancy, maternity leave and nursing period. If the employee reaches the seventh month of pregnancy, overtime and night time work are no longer permitted. In case of a miscarriage prior to the fourth month of pregnancy, the employee has the right to 15 days maternity leave. If the miscarriage happens after the fourth month, the employee shall be entitled to 42 days of maternity leave. Those provisions set out the minimum standards. In case those local regulations provide better protection, such local regulations shall prevail.

If contributions for the employee have been paid to the maternity insurance, the maternity insurance fund will pay her an amount according to the average monthly salary paid by the employer to all of its employees in the preceding year during the maternity leave. An employee with salary below the company’s average salary may be better off according to the Special Regulation. However, an employee with salary above average may not receive less as many local regulations oblige the employer to pay the difference between the amount paid by the maternity insurance fund and the employee’s actual salary. In case that the employer has not paid the contributions to the maternity insurance, the maternity leave benefits shall be paid by the employer according to the employee’s actual salary.  If the employer violates any provision of the Special Regulation, penalties such as fine, stopping operation or closing down business may be imposed on the employer.

2. Mandatory Social Insurance for Foreign Employees

On 6 September 2011 the Ministry of Human Resources and Social Security issued the Interim Measures for Contribution to Social Insurance by Foreign Employees in China ("Interim Measures") which are in effect since 15 October 2011. The Interim Measures stipulate mandatory social insurance for all legally employed foreigners in China. The enforcement of this national regulation is carried out differently on the local levels.

Last year Beijing was the first city to issue implementing rules regarding the Interim Measures obliging companies to contribute to the social insurance for their foreign employees. Employees employed before 31 October 2011 must be insured from October 2011 on. Employees employed from November 2011 on must be insured from the commencement date of their employment. Beginning of this year cities like Suzhou and Chongqing published local implementing rules and enforced the mandatory social insurance for foreign employees. Cities such as Changshu, Zhangjiagang and Xiamen followed in March. Details on how local authorities actually enforce the implementing rules should be enquired with those authorities. Whether the companies and the foreign employees are obliged to contribute to all five social insurances (pension, health, unemployment, work-related injury and maternity insurance) may differ in the practice from city to city. Dalian, for example, has not yet promulgated implementing rules regarding the Interim Measures. However, local authorities already request companies to contribute to the pension insurance for their foreign employees. Cities like Shanghai and Shenzhen have not enforced the mandatory social insurance for foreign employees in practice yet, thus, raising questions on how those cities will implement the Interim Measures on the local level.

In case of any further questions, please do not hesitate to contact us.

Contact Person

Raymond Kok, Mag. rer. publ., Attorney at Law (Germany) / Partner
Pyn-An Sun, LL.M. (LSE), Attorney at Law (Germany)