China: 2012 Review: Employment Law – Exit-entry Law, female workers and social insurance

China: 2012 Review: Employment Law – Exit-entry Law, female workers and social insurance

By David Tring –

For the first time, the Standing Committee produced a unified immigration law, which encourages foreign talent to work in China. Social insurance schemes also became more attractive as international agreements were signed, putting an end to double contributions


China’s first uniform Exit-entry Law

Promulgated on June 30 2012, the PRC Exit-entry Administration Law (中华人民共和国出境入境管理法) is the first major reform to China’s immigration laws since 1986. When the Law becomes effective on July 1 2013, it will repeal the Law for Foreigners and the Law for Citizens, creating a unified immigration law.

The Law tackles illegal employment and lays out harsh consequences for non-compliance. It also provides new opportunities for recruiting foreign talent under a separate visa category.

The Exit-entry Law was the result of nine years of research, discussion and coordination. The increase in economic growth and globalisation highlighted the need for a consistent and comprehensive immigration Law.

Since 1986, China has also undergone great demographic change. The number of foreigners has increased by 10% annually since 2000. At the end of 2011, there were 220,000 foreigners employed in China, nearly triple the figure of 72,000 in 2000.

Employers will be fined Rmb10,000 ($1,570) for every foreigner they illegally employ up to a maximum fine of Rmb100,000 per employee. In addition, any monetary gains from illegal employment will be confiscated (Article 80).

The Law also empowers authorities to detain foreigners for investigation if suspected of illegally working in China (Articles 59 and 60). It also, for the first time, clearly outlines what constitutes illegal employment.

“The new Law is clearer and more detailed than previous regulations. Previously, it only said if you have a foreigner working illegally, the employer may be asked to stop employment and may be penalised. It is clear China wants to better administrate foreigners staying and working in China,” said Linda Liang, a labour and employment lawyer with King & Wood Mallesons in Beijing.

A new talented visa category also appears in the Law. First proposed during the second draft in April, it creates new opportunities for foreigners. The visa is strictly for foreigners with particular talents and the details will be determined by future legislation.

Speaking to China Law & Practice in April 2012, Lesli Ligorner, a partner at Simmons & Simmons in Shanghai who specialises in China employment, said it can be difficult to get approval, for example, for talented foreigners who have already surpassed China’s retirement age of 55 for women and 60 for men, and the new process may make this easier.

The visa is also about bringing “specific talent in specific industries to China, it is not for entry level employees as the government wants more experienced and talented foreigners” added Ligorner.

Much preparation work is still to be done before the Law becomes effective. Local labour departments will be busy reviewing the Law, while companies will have to ensure they comply with the requirements. It is expected further details will be released in 2013 about the talented visa category.

For detailed analysis of the Law see: Cracking down on illegal employment

Also in Employment news:

Provisions protect female workers

In April 2012, the State Council promulgated the Special Provisions for the Work Protection of Female Employees (女职工劳动保护特别规定). The Provisions come 14 years after legislation protecting female employees first became effective.

For the first time, the Provisions make sexual harassment a legal issue under Chinese law (Article 7). This is a stepping-stone for employers to improve equality in the work place.

However, sexual harassment is still a new concept: “Judges will face difficulties with sexual harassment and its obscure legal definition,” said Tara Tang, a lawyer with the boutique labour and employment outfit Shanghai HR&L Law Firm.

Employers find themselves more accountable under the Provisions as the scope of their responsibility to protect female workers is enlarged. It will be interesting to see if any cases of sexual harassment go before the courts in 2013 and how judges determine the employer’s responsibility.

Boost for social insurance

The PRC Social Insurance Law (中华人民共和国社会保险法) became effective in July 2010 and requires foreigner employees to participate in the government schemes for pension, medical care, work-related injury, unemployment and maternity.

Many foreigners complain the Law is an additional burden, as they will not remain in China to enjoy the benefits. In some cases, it also means they are contributing to schemes in their home country and in China.

Employers are also at a disadvantage, as they have to make contributions for each foreign employee. Contributions are substantial with foreigners having to pay 8% of their salary to pension schemes and employers paying 20%.

International agreements between foreign countries and China could end double contributions, as foreigners would then only be required to contribute in their home country.

The government signed deals with South Korea and Germany in September 2012, but more agreements are expected. The agreement with Germany relieves employees from contributing to pension and unemployment schemes. For Korea, the agreement only covers pension schemes.

Enrolment depends on whether the relevant province has implemented regulations. Beijing, Chongqing, Xiamen and Suzhou have so far all issued implementing regulations, but the city with the most foreigners, Shanghai, has yet to issue mandatory contribution regulations.

It is foreseeable that as the government signs more agreements, other provinces and municiplaites will consider issuing regulations over mandatory contributions.

However, as Zhou Bo, a labour lawyer at Fangda Partners in Shanghai points out: “Cities are still reluctant to introduce the scheme because of the practical difficulties of creating a new system for expatriates and fears that attractiveness to expatriates may be jeopardised.”

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