No revision of employment law expected
April 16, 2009 | BY
clpstaff &clp articles &Legal burdens could lead to more short-term employment
The government will not revise China's Employment Contract Law (ECL), despite rising cases of bankruptcy due to increased costs for companies. This is likely to lead to companies giving workers more short-term jobs.
Xin Chunying, deputy director of the Legislative Affairs Commission of the Standing Committee of the National People's Congress (NPC), was recently quoted by the Xinhua news agency as saying that the employment contract law had nothing to do with the financial crisis and that China's labour relations are stable and “can weather through the test of time.”
At the recently closed NPC meeting in Beijing, Xin cited a survey which found that the new law had driven up labour costs for enterprises by only 2% in the first nine months of 2008.
But some small businesses claim to have seen increases in costs of between 10 and 20%. Companies have also suggested that stringent implementation of the ECL will lead to more bankruptcies amid the deepening economic downturn.
“Compared with previous laws and regulations, the major direct labour costs are related to expiration of employment contracts,” said Jiang Junlun, a partner of King & Wood, who is also chairman of the labour and social security law committee of the All China Lawyers Association.
Under the ECL, which came into force on January 1 2008, employers must pay severance unless the employee refuses to renew a contract with the same or raised conditions proposed by the employer; this was not required in previous provisions.
According to Jiang's estimates, labour costs are rising by 8% – four times the rate that the government's data indicates. But this figure does not include retirement, resignation for personal reasons and termination due to violation of company regulations or laws.
“Companies are traditionally not in favour of long-term employment and this makes them even more likely to use short-term contracts or simply recruit part-time staff,” said Jiang. “This could also be an option as part-time employment is more flexible and saves costs such as social security payment.”
Companies in the Pearl River Delta, for example, could save around Rmb300 a year for each staff member by doing this.
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