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A Quick Glance at Proposed Amendments to China’s Labor Contract Law Proposed amendments to China’s Labor Contract Law will severely restrict secondment of employees, an arrangement where companies doing business in China contract employees via a labor agency. The popular scheme sometimes allows companies to avoid entering into long-term employment contracts in China as these, if not handled properly, can expose employers to onerous Chinese labor law compliance and penalties. A draft of the Amendments to the PRC Labor Contract Law was recently published for public discussion ("Draft Amendments"), and according to these Draft Amendments, seconded employees in China can only be employed if the work is temporary, auxiliary or substituting in nature. The current Chinese Labor Contract Law already has similar provisions but requirements pertaining to the nature of the work positions have not been compulsory. According to China’s labor law officials, the current system has left many seconded employees with compensations not commensurate to their work and also with deprivation of adequate health and safety rights. The Draft Amendments have provided clear details on what constitutes temporary, auxiliary or substitute work positions. Temporary work position lasts no longer than six months. Auxiliary work position is where services are provided to those who are carrying out work inherent to the enterprise. Substituting work position is where services are provided to those who are carrying out work inherent to the enterprise. The Draft Amendments are scheduled to be reviewed by the PRC People’s Congress and are expected to be passed by end of 2012. Foreign invested companies with seconded employees may need to revisit their employment law compliance strategies and employee structures in the wake of these developments. Once the draft amendments are approved, no Chinese employers can use seconded employees for their principal business activities for an extended term. In any international expansion, it is always crucial to have a good idea of the employment system there. Having the right people working with you in China can ensure smooth progress. With the changes in the regulations, it is prudent to take the help of an expert business consultant who can provide professional assistance in areas of your business like eu vat rules, sas compliance, etc. Read more on - global transfer pricing, doing business overseas, international financial reporting


A Quick Glance at Proposed Amendments to China’s Labor Contract Law