Key Points:

  • Focus on stabilizing labor relationships during the global financial crisis
  • Job retention measures given high priority
  • Collective bargaining promoted
  • Focus on careful conducting of layoffs
  • Salary payment delays to be avoided
  • Communication related to material labor issues encouraged

The following summarizes some of the key points in the Guiding Opinions on Responding to the Current Economic Circumstances and Stabilizing the Labor Relationship, jointly issued by the Ministry of Human Resources and Social Security (“MHRSS”), the All China Federation of Trade Unions (“State Unions”) and the China Enterprise Confederation and the China Enterprise Directors Association (“CEC-CEDA”) on January 23, 2009 (the “Guiding Opinions”).  

MHRSS, State Unions and CEC-CEDA are parties to the “Trilateral Negotiation System” established in accordance with the Trade Unions Law of PRC. MHRSS, State Unions and CEC-CEDA represent the interests of the government, employees and employers, respectively. The Guiding Opinions, addressed to labor bureaus, unions and CEC-CEDA offices at the provincial level, set the standards for these offices (and their subordinate offices) to follow in dealing with labor issues.  

The Guiding Opinions emphasize the following:  

1. Attach high importance to the impact of the global financial crisis on labor and employment issues in China.

The Guiding Opinions emphasize that China-based entities, especially those focused on manufacturing goods for export, have encountered numerous difficulties since last year; that there are fewer jobs and more massive layoffs and temporary shutdowns. Some companies have stopped paying salaries, and the owners of some have even disappeared. Parties to the Trilateral Negotiation System must focus on stabilizing the labor relationship and strengthening lines of communication and collaboration among the government, employees and employers in order to protect enterprises’ interests and workers’ jobs and reinforce social stability. Government must enact measures and polices that are practical.  

2. Actively support and encourage the parties in the labor relationship to work together to stabilize it.

Parties to the Trilateral Negotiation System must give first priority to helping suffering enterprises get through this difficult time and preventing the employment situation from deteriorating; promoting enterprise development while protecting employees’ interests; and supporting, encouraging and guiding both employers and employees to cooperate with each other and work through tough times together.

The Guiding Opinions require the labor bureau at each level to implement governmental policies that increase employment opportunities and measures that reduce burdens on enterprises to better enable them to retain jobs, especially suffering enterprises. The CEC-CEDA at each level must guide and encourage enterprises to take their social responsibilities seriously and adopt measures, such as on-the-job training, job sharing, and compensation adjustments and reductions, and to do their best to either avoid laying off employees altogether or lay off the smallest number possible. Unions at each level must guide and encourage employees to value the development and growth of their employers and understand and support their employers’ decisions by enrolling in training courses, taking advantage of flexible work schedules and voluntarily agreeing to compensation reductions. Unions must mobilize employees to contribute ideas on company development, efficiency improvement and cost savings, and to be willing to shoulder burdens, overcome hardships and work side by side with their employers to weather the crisis.

3. Develop a collective consultation system.

Parties to the System must promote collective contracts and support collective contract negotiations between employers and employees. Employees of companies able to maintain their normal operations should be permitted to share in the success of their employers through receipt of reasonable compensation and increased compensation through collective bargaining. Suffering enterprises should seek to adopt flexible working hours, compensation plans and training systems through collective bargaining that addresses the difficulties the enterprises are facing so they can avoid layoffs.  

4. Strengthen guidance and management of layoffs caused by economic difficulties.

Parties must strengthen guidance and supervision related to layoffs so that they are conducted in accordance with appropriate laws and regulations, the employees receive the compensation to which they are entitled, and there are fewer disputes. Companies that cannot make severance payments to laid-off employees in a lump sum may consult with their employees or unions to make the payment in installments or through other means.  

5. Prevent salary payment delays and properly handle problems if they occur.

Parties must push for the establishment of salary payment protection mechanisms, further improve the Salary Guaranty Fund rules and introduce such rules from the construction industry into other industries. If any salary payment delay is discovered, it must be corrected promptly. If a company is having difficulties covering its payroll, it must report to the local labor bureau and, with the consent of the unions or the employee representatives, may delay paying its employees.  

6. Establish a communication and collaboration system for material labor issues.

When dealing with labor issues, each party to the Trilateral Negotiation System must duly perform its duties and also communicate with the other parties. Communication and cooperation among parties must be strengthened when dealing with labor issues involving significant number of employees, and the parties should act in concert.  

China’s labor bureaus and unions traditionally have tended to protect employees’ interests over those of employers. The Guiding Opinions set a somewhat different tone. Given the current world economy, they emphasize the need for mutual understanding, flexibility and support between employees and their employers. Overall, the Guiding Opinions make it clear that government labor authorities clearly prefer corporate decisions, such as voluntary employee salary reductions, that will help retain jobs and prevent layoffs