The Labour Law of the People's Republic of China ("PRC") came into effect on 1 January 1995. The PRC Labour Law sets out the basic legal framework for the administration of employment/labour relationships and is applicable to all labour/employment contracts entered into between a PRC entity (including any foreign invested company) as employer and an individual as employee rendering services in the PRC.
Most local governments do formulate their own local regulations and rules and notices in light of the national PRC Labour Law, to facilitate their administration and management of local employment/labour relationships. It is therefore important to refer to the applicable local labour regulations as well if such regulations have been promulgated by the local government. By way of examples, the following are the major local labour regulations applicable in Beijing, Shanghai, Guangzhou and Shenzhen respectively:
• Beijing local labour regulations: Provisions of Beijing Municipality for Labour Contract (北京市劳动合同规定), promulgated in December 2001
• Shanghai local labour regulations: Regulations of Shanghai Municipality on Labour Contracts (上海市劳动合同条例), promulgated in November 2001
• Guangzhou local labour regulations: Regulations of the Guangdong Province for the Administration of Labour Contracts (广东省劳动合同管理规定), promulgated in April 1995, amended in May 2003
• Shenzhen local labour regulations: Rules of the Shenzhen Special Economic Zone on Labour Contracts (深圳经济特区劳动合同条例), promulgated in June 2004
Under the existing PRC Labour Law, PRC employers are required to make social security contributions of different types, including medical insurance, pension scheme, unemployment insurance, work-related injury insurance and maternity insurance, as well as housing provident fund contributions, for their employees on a monthly basis. Penalty payments may be imposed for the employer’s failure to do so. However, housing provident fund is generally not applicable to expatriates (i.e. non-PRC nationals) working in China, and employers are thus not required to contribute housing provident fund in respect of their employees who are not PRC nationals.
Social security contributions are payable by both the employer and employee at different applicable rates based on the basic monthly salary of the employee. The rates at which social contributions are determined are generally much higher for the employer than for the employees. The employer is expected to deduct the employee’s share of contributions from the employee’s salary for onward payment of the employee’s share of contributions together with the employer’s contributions to the relevant authorities. The rates of contributions vary from city to city and the local governments may revise the rates from time to time. To view the rates currently applicable in Beijing, Shanghai, Guangzhou and Shenzhen, please visit: http://www.deacons.com.hk/eng/knowledge/knowledge_285.htm#5
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