Due to fierce competition in the sector, it is a fair assessment that employees working for TMC companies generally work longer compared to employees in other sectors. Since many years, the “996 working time system” has become an implied routine for the industry. In general, employees have to work from 9 am to 9 pm every day for 6 days a week. In most cases, no overtime compensation or subsidy will be paid for the prolonged working hours. Recently a renowned .com was reported to have set out the 996 concept in its written HR policy. It quickly became a hot topic on Chinese media triggering controversial discussions. The 996 concept leads to significant legal concerns.

Working hours in China

Companies can use different types of working hour systems in China, which can be used alternatively or cumulatively. For most companies, the so-called “standard working hour system” and “the flexible working hour system” are in particular relevant.

 

Daily / weekly work time Maximum permitted overtime
Standard working hour system 8 hours / day 40 hours / week 3 hours / day 36 hours / month

Under the usual 996 system, accumulated monthly overtime hours could be as high as 72 hours or more (assuming a 1 hour lunch break each day and 4 work weeks each month). Under the standard working hour system, such overtime would constitute a serious violation of law. Related legal risks are outlined below.

 

Daily / weekly work time Maximum permitted overtime
Flexible working hour system Flexible Not regulated

Under the flexible working hours system, the working hours will generally not be measured or subject to any maximum cap. But this system can only be applied to certain functions such as,

  • senior managers
  • sales staff

and usually has to be approved by the competent labor authority in advance. Normally, it is not possible for a company to implement a 996 system in the form of “flexible working hours” applicable to all its employees. Even if a flexible working hour system were to be implemented, this would not necessarily mean that the company could arrange overtime work solely according to its own will. By law, employees’ health and rest need to be guaranteed, and their opinions on working hours and time off must be considered.

Implications and risks Depending on the individual case, a violation of working time related regulations (including through a 996 system) can lead, among others, to the following legal consequences:

  • administrative sanctions such as being ordered to rectify the past practice
  • administrative fines up to CNY500 (approx. USD75) per employee
  • if overtime compensation is not duly paid, the order to pay overtime compensation and in a worst case, 50% to 100% as punitive compensation on top of the payable overtime compensation
  • filing of labor arbitration or litigation by the employee to enforce his / her rights, leading to litigation and management costs
  • legal unilateral employee terminations followed by statutory severance claims, if incompliant internal rules incorporating the 996 working time system cause damage to employees’ rights
  • in extreme cases, work-related injuries or even death can occur due to overwork, which may lead to substantial financial obligations of the employer.

Practitioner’s advice The described inflexible statutory restrictions under Chinese law seem not business friendly, in particular for fast moving businesses like the TMC sector. In order to better survive and stand out in this highly competitive while yet booming market, TMC companies will need experts to help finding the best and very tailor-made options for their specific case to mitigate legal risks. This may include regular employer/employee audits and the introduction of cetain “due procedures”.