Introduction

On 1 January 2017, two new sets of regulations under the PRC Labour Law came into force:

  1. Measures for Announcing Major Violations of Labour Security (the Announcing Measures); and
  2. Measures for Credit Rating Evaluation of Enterprise Labour Security Compliance (the Grading Measures)

Both sets of regulations have been passed to improve protections for employees across all industry sectors. We discuss the impact of these regulations below.

Main content

1. Measures for Announcing Major Violations of Labour Security

The Announcing Measures, which will be administered by the Ministry of Human Resources and Social Security (the MHRSS), create a system for naming and shaming those employers who are in serious breach of the PRC labour law. The Announcing Measures set out seven categories of major labour security violations . These comprise:

  1. unjustified deduction from, or delay in paying “substantial amounts” of employees’ remuneration, or refusal to pay remuneration (if this results in criminal charges);
  2. failure to enrol an employee in the social insurance or make social insurance contributions, if the circumstances are "severe";
  3. "severe violation" of rules on working hours, rest and leave;
  4. failure to protect female and juvenile workers;
  5. violation of the provision on prohibiting employment of child labourers;
  6. any violation against labour protection resulting in "severe adverse social impact"; and
  7. any other "severe violations" against labour protection.

The Announcing Measures provide that when announcing major violations of labour security to the public, the following items shall be included:

  1. full name of the employer in breach;
  2. the employer's Unified Social Credit Code (or Registration Code) and registered address
  3. full name the employer's legal representative or key person in charge;
  4. particulars of the violation; and
  5. relevant sanctions to be imposed.

However, information relating to national secrets, trade secrets and personal privacy shall not be published.

In relation to form and frequency of announcements, the Announcing Measures provide that the announcement shall be published on the MHRSS website, as well as through media channels such as major newspapers, magazines and television in the local administrative area. MHRSS offices at Prefectural level and County level shall announce major violations of labour security within their administrative areas quarterly. MHRSS offices at Provincial level shall announce major violations of labour security within their administrative areas every six months.

2. Measures for Credit Rating Evaluation of Enterprise Labour Security Compliance

The "Grading Measures", which are also to be administered by MHRSS, set out a rating evaluation system which is intended to rank employers on their commitment to labour security. The evaluation will be based on assessment of 9 criteria being:

  1. Formulation of internal rules and regulations;
  2. Employment contract signing;
  3. Compliance with regulations relating to labour dispatching;
  4. Compliance of provisions on prohibiting employment of child labourers
  5. Compliance of special protection provisions on employment of women and juveniles;
  6. Compliance with regulations relating to working hours, breaks and vacations;
  7. Paying employees and compliance with regulations on minimum wage;
  8. Participating in the Social Insurance Scheme and paying insurance premiums;
  9. Compliance of other labor laws/regulations/rules.

Employers will be given a grade of A, B or C depending on the level of compliance with these criteria. The grading will, in turn, affect the level of scrutiny employers can expect from MHRSS.

Employers with an A grade can expect infrequent inspections and minimal oversight by MHRSS. Employers with a B grade can expect to be inspected by MHRSS until any violations that have been identified have been corrected. Employers with a C grade can expect to be regularly inspected and subject to close supervision until all violations are remedied. Additionally for employers with a C grade, MHRSS will schedule talks and meetings with the principal person in charge (such as the legal representative, CEO or general manager) and direct that person to undertake any corrective action that may be required for the employer to comply with the labour law and regulations.

Employers will be notified of their grade by the Department for Credit Rating Evaluation of Enterprise Labour Security Compliance and the rating will be recorded in the Labour Security Compliance Credit System. MHRSS will also establish a mechanism for the exchange and sharing of information with the Administration of Industry and Commerce, the finance authorities, housing and infrastructure authorities, taxation authorities and trade unions.

These new regulations are clearly aimed at ensuring that employers comply with the PRC Labour Law and regulations by introducing a regime for the "naming & shaming" of employers who fall afoul of the law and by grading employers on their level of compliance with the law.

A feature of both the Announcing Measures and the Grading Measures is that they are quite broadly worded and not very prescriptive. For example, in relation to the Announcing Measures, it is not clear what would amount to a "severe violation". Does this refer to one significant violation (perhaps a health and safety violation leading to a fire) or a series of small violations, such as employees having inadequate employment contracts? It is therefore difficult to predict how much of an impact the regulations will have. Employers will probably just have to wait and see how the MHRSS will apply the regulations in practice and adjust their internal policies accordingly.

In light of the incoming changes, employers would be well advised to ensure that:

  1. They have a proper set of internal rules and regulations which have been circulated to all employees;

  2. All employment contracts are correctly signed and staff handbooks are up to date.Employers should also ensure that the latest edition of the staff handbook has been circulated to, and initialled by, all employees;

  3. Where employees have been sourced from a labour dispatch agency, the dispatch agency's paperwork is in order and up to date;

  4. they are in compliance with the Labour Law provisions in relation to:

    1. women and juveniles;

    2. working hours, breaks and vacations;

    3. the minimum wage (this is particularly relevant to the retail and restaurant sectors which often employ younger staff at or near the minimum wage)

  5. The employee payroll is correct and up to date with all entitlements due and owing to employees fully paid up;

  6. Contributions to the Social Insurance Scheme are up to date.

As with many things, an ounce of prevention is worth a ton of cure. If employers ensure that all of their housekeeping is in order and that they are fully compliant with the Labour Law and regulations, they should have nothing to fear from either the the Announcing Measures or the Grading Measures.