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We all have read about the past infamous Apple-Foxconn business case, wherein there were huge compliance issues with respect to working hours, working conditions, employee wages, and employee mistreatment. The case had caused huge embarrassments for both the companies and had caused an uproar in the Chinese society to push for a change. The case highlighted huge gaps in compliance with work ethics, employee management, and also the social impact that they were making towards the society. However, things have changed completely now, and compliance in China is a serious matter for foreign investors and foreign companies. During the last few years, China has enforced significant new changes to its labor, and employment laws, which apply as much to Chinese nationals, as much as it does to foreigners. Also, some of the following violations have been especially identified, and can cause huge embarrassments for any employer –

a. Violation of not paying appropriate employee remuneration

b. Violation of working time or overtime laws

c. Violation of child labor laws

d. Violation of special laws on female workers

e. Violation of not paying employee social insurance

f. Other violations that can cause bad social consequences.

Any of these violations can cause a company to be publicly defamed, penalized, or even prosecuted. The employment laws in China have now become quite complex, restricted, and pro-employee. There are some general guidelines that can help a company doing business in China, to deal with these laws and regulations.

Firstly, make sure that you have an appropriately reviewed, and updated employee manual, which clearly describes all the Rules and Regulations covering all possible scenarios.

Secondly, make sure that all the agreements from offer letter to the severance agreement, and everything in between is appropriately written, and updated (with all mandatory provisions) for all the employees (local and foreigners) of your company. The employment contract must clearly specify details about the probation period, working hours (standard/flexible/comprehensive), overtime conditions, rest times, social insurance, housing fund payments, and the total number of leaves granted to the employees. You also need to make sure that the contract is specified in Chinese as the main language, rather than dual language. This helps to eliminate any probable disputes due to the difference in these languages.

Thirdly, you need to keep a check on the registrations of Non-Chinese employees as they should have their work permits, and residence permits up-to-date.

Lastly, there is a general trend in China to pay the 13th month of salary to the employees, on the occasion of Chinese New Year. However, this is not compulsory, but if you want to implement this, you should clearly define the preconditions that the employees would need to satisfy, to earn this bonus salary.

Even with all these regulations, the problem with compliance is that many of the china’s laws are ambiguous which leaves a lot to interpretation. This all also comes down to ethics and morals that any company or employer should comply to. GlobalTQM is constantly working with all our clients to make sure that every company clearly understands, and incorporates these regulations in their contracts, and procedures. This proactive involvement helps to encourage social as well as ethical compliance of the companies with their employees, and the society, besides the mandatory regulatory compliance and creates a win-win situation for everyone.

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