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Labour laws and disputes in China

Find here Daxue Talks episode 69. In this interview, Nicolas Coster discusses labour laws and disputes in China as well as the different labour laws across provinces (learn more about Chinese labour tax).

Full transcript below:

When can an employee take their employer to court?

Most of the time we like to negotiate so if you go to the court it’s because you get laid off or because you didn’t get pay every month and this is criminal to not pay an employee in China. So, 90% of the Chinese employees I would say will go to the labour commission. It’s not the court, first we go to the labour commission and after – we can go to see a true judge in the court. The first step is the labour commission. That’s the main reason.

What is the role of the employee handbook?

The employee handbook is a very important document. First this is compulsory according to Chinese labour law to have an employee handbook. So, the employee handbook will define all the rules of the company, all the rules inside of the company to apply to the company and to the employees. Okay. So, for example the working time, holidays for example sick leaves – everything related to the rules inside the company you will find in the employee handbook and today employee handbook is also very important for civil security, personal data, and such kind of things. So basically, if you want your employee handbook to be implemented and you already are an employee in the company, its compulsory in most of the cities to notify the project of the employee handbook to the employees and to ask the opinion of the employee handbook. If you don’t do that, if you cannot prove that you did that, asking the opinion of the employee, then the employee handbook will not be implemented. That’s why most of the time when we set up a company in China, we set up the company one day after we draft the employee handbook and after we will hire employees.  Because like that, we don’t need to ask for the opinion of the employees.

What are the main reasons for labour disputes in China?

The main reason for labour dispute is when the company wants to lay off employees. I mean this is very current, this is more and more current according to the actual economic situation, this is the main reason. It’s hard to have a guess, but from what I see every year – it would be laid off, it would be change of position, it would be change of salaries, reimbursement of expenses – nothing more.

How are labour laws different to people with different hukou?

No, today the impact of the hukou follows the law, there is no impact for me, we don’t use the hukou for labour law.

What are the taxes for labour in China?

The taxes on labour in China is quite expensive if you compare to Europe. For high income taxes in China, income tax in China is very expensive. This is by eventually it goes from zero to 45%. It’s possible to deduct some spending like child expense and that kind of things, but it’s very, very easy to arrive to 45% if you’ve got high income. It’s very expensive.

Are labour laws different from one province to another?

You have national law, labour contract law and labour law which is two national laws and after each province and some cities have their own collaboration to implement these laws and to interpret these laws. So, you have different small practices – not big difference but sometimes you have small different practice for example for the minimum compensation from competition in Shanghai we say we need to pay at least 20%, and in other cities it could be 50%.

Who should pay personal taxes? The employee or the employer?

According to the law personal income tax should be paid by the employees at the end, but the Chinese law says that the employers is collaborable to pay the income tax on the employee and if it pays them and the employee doesn’t pay for it, then he can ask the employee to pay him back. The personal income tax. So that’s why in most of the case we strongly advice the company to withdraw personal income tax from the salaries of the employees and to pay directly to the tax office, because if they don’t pay the tax office, will not go by themselves to go to see the employees, it will go to see the company at first.

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an email at dx@daxueconsulting.com.