The Labour Contract Law will usher in a new era of employment rights in the former hardline Communist state, but has been delayed until now due to questions over whether it goes too far. It will impact companies around the world that have taken advantage of low levels of business regulation to move into China.
Under current law, employers can withhold wages, terminate contracts without notice and refuse to renew contracts. The new law sets down rules detailing formalities for labour contracts, managing terms and conditions and the payment of wages.
It will also create a system of inspection and supervision of working conditions, and employers will be required to negotiate an agreement with unions if they plan to lay off more than 50 workers. The law is expected to come into full effect in March 2007.
The legislation marks the first time the legislative process has been open to consultation from trade unions and business.
Rui Li Xin, deputy director of the Legal Affairs Department at the Chinese Ministry of Labour and Social Security, said that as China’s market economy develops “the protection for employees will be our unswerving position no matter what kind of social system we are in”.
“People are the basis for production – without appropriate emphasis on people, there is no production,” he told the first-ever public discussion of the new laws at the London Business School.
Tunde Johnson, compliance officer and legal counsel at recruitment firm Adecco – which hosted the event and advised on the new laws – said the legislation would have a huge impact on businesses operating in China by improving employment contracts and staff protection.