The Ministry of Education, the Ministry of Finance, the Ministry of Human Resources and Social Security, the State Administration of Work Safety and the China Insurance Regulatory Commission jointly issued the Regulations for the Management of Interns from Vocational Schools (the “Regulations”) on 11 April 2016, which came into effect on the same day. Compared with the Administrative Measures on Interns from Secondary Vocational Schools of 2007 (the “Measures”), the Regulations introduce a classification management mechanism with a focus on the supervision and management of the whole process, and refine certain clauses with more attention paid to some major and difficult issues.

1. Scope of Application

Article 2 of the Regulations provides that the Regulations apply to students who receive full-time education in either a secondary vocational school or an advanced vocational school. Accordingly, the Regulations are not applicable to full-time college students. Manufacturing enterprises that may hire students from secondary vocational schools or advanced vocational schools as interns shall abide by the requirements and terms of the Regulations. Other types of employer that hire such students as interns may handle internships as before and both parties may agree on their rights and obligations freely so long as applicable laws and local regulations permit.

2. Special Provisions on Post Practice

Articles 9, 10 and 16 of the Regulations set requirements on the scope and working time regarding post practice in the 3 following dimensions: (1) the number of interns taking posts to practice shall not exceed 10% of the total on-post employees; for a specific post, the number of interns shall not exceed 20% of the on-post employees taking the same post; (2) the term of an internship is generally 6 months; (3) unless it is required by relevant professions and practice posts and documented by authorities, the intern-accepting entity shall not arrange interns to work on statutory holidays, overtime or on night shifts.

However, the above provisions are made solely for the convenience of intern-accepting entity’s management of interns. With no specific restrictions on the term of an internship, arrangement of overtime work or legal liabilities of the intern-accepting entity incurred for violations of relevant percentages or the term of an intership, it remains to be seen whether the Regulations will be properly enforced.

3. Remuneration for Interns

The Regulations provide that the intern-accepting entity shall reasonably determine the remuneration for an intern taking into account his workload, working intensity and working hours and the salary of a permanent employee taking the same post, and the remuneration shall not be less than 80% of the salary for an employee on probation in principle. The intern-accepting entity shall fully pay such remuneration in cash as agreed in the internship agreement. It is worth noting that if a dispute arises out of payment of internship reward between the intern-accepting entity and the intern, the dispute will be settled by a people’s court as a normal civil case under current PRC laws and regulations. As the Regulations lay down general principles and guidance, we suggest that intern-accepting entities expressly specify a reasonable internship remuneration standard in the internship agreement in accordance with the Regulations.

In addition, intern-accepting entities’ all reasonable costs for hiring interns belong to “before-tax expenses”. This policy undoubtedly encourages enterprises to hire students as interns. It is worth noting that any income from an internship is subject to the levy of individual income tax under Article 6 of the PRC Individual Income Tax Law.

4. Compulsory Insurance

Article 35 of the Regulations provides that vocational schools and intern-accepting entities shall purchase “internship liability insurance” for each intern, which is commercial insurance in nature and different from social security for a permanent employee. Vocational schools and intern-accepting entities may agree on the cost for such insurance in the internship agreement, but they cannot charge it to the student or deduct such cost from the internship reward for the student. We suggest that vocational schools and intern-accepting entities reach agreement on how to share insurance cost and shoulder liabilities in excess of the insurance scope so as to avoid any potential legal dispute arising out of any intern’s personal injury.

To recap, the Regulations provide quite specific provisions on different internship activities of secondary vocational school students and advanced vocational school students, and vocational schools’ and intern-accepting entities’ corresponding responsibilities. However, the Regulations do not explicitly state the legal liability for breach of the clauses therein, and enforcement of the Regulations and its effects remain to be seen in the future.