China Opens Its Gates to Hong Kong, Macao and Taiwan Residents

The citizenship number for each application shall be in accordance with the national standard for citizenship numbers, where the address codes for citizenship numbers are 810000 for Hong Kong, 820000 for Macao and 830000 for Taiwan.

The residence permit would allow HMT residents to enjoy the convenience of public transportation, hotel accommodation, banking and financial affairs, tickets purchase for parks, sports and cultural venues, driver's license applications; obtaining vocational qualifications, registration of birth services and other facilities.

The State Council has called for local authorities at all levels to establish and improve the management information system for residence permits of HMT residents, and to “do a good job in accepting, reviewing, producing, distributing and managing residence permit applications.”

The residence permits shall be valid for five years. HMT residents planning to apply for the permit can fill out the “Hong Kong, Macao and Taiwan Residents' Residence Registration Application Form,” which is to be submitted to local public security bureaus together with entry and exit documents, and proof of residence, proof of employment, or proof of attendance for students.

The Changing Realm of Employment Law in the Mainland

The move by mainland China to open up residency to people from its administrative regions, and abolishing work-permit requirements illustrates the expansive employment options now available to HMT residents. The Human Resources and Social Security Ministry announced on Aug. 3 that HMT residents will no longer be required a work permit for employment in the mainland.

The current work permit system that has been in place since 2004 requires tedious application and documentation procedures by both the employer and applicant. Mainland employers would have to prove that it is a unique position that could not be filled by a local applicant after a minimum of three-week open recruitment process, thus justifying a HMT resident hire.

The new rules will simplify the employment processes involved both for the HMT resident seeking employment in mainland China, as well as the hiring procedures by companies in the Mainland.

“Previously enterprises on the mainland had to apply for work permits to employ individuals from the three locations. This involved significant documentary requirements and a fairly arbitrary approach across the autonomous regions of China. The permit also had to be applied for at least every two years,” said Antonia Grant, a Hong Kong partner at Lewis Silkin.

“For HMT residents, the benefits are more personal and potentially life-changing,” said Richard Grams, a consultant at Hong Kong law firm, Oldham, Li & Nie. “First, working in the mainland, in an industry of their choice, is now finally viable since employers there will be less likely to reject these candidates on the basis of overly complicated administrative procedures.”

“Second, these changes the level of the playing field for HMT residents since they are now free to seek employment elsewhere and any time without having to wait for a new employer to obtain approval,” he said.

The practicality and key impacts that will affect the employment processes will be clear when the Ministry of Human Resources and Social Security issue the substitute policies and measures to supervise this transition.

Jeffrey Wilson, Beijing-based counsel at JunHe LLP, shares with us some of the potential key impacts from the elimination of work permits for HMT residents. They include:

1) HMT residents would be deemed to be employees and protected under labor law when they begin work. This is in contrast to previous law that stated THM residents had legal employment relationships only after securing work permits.

2) HMT residents may be fully protected under the Employment Contract Law. These protections could include, among others, (i) the right to claim double pay if written contracts are not provided within the first month of employment, and the right to claim an open-term contract if no contract is provided within 12 months; (ii) the right to demand an open-term contract after completion of two fixed-term contracts or 10 years of service; (iii) application of termination protections.

3) Among the possible termination protections, may include:

- There may be increasing costs faced by employers (and the HMT residents) for social insurance and housing fund contributions. In most cities, employers are not currently required to enroll HMT residents in such programs and make contributions.

- HMT residents may lose some preferential individual income tax treatments if they are made subject to the same treatment as mainland Chinese employees. Still, proposed amendments to the Individual Income Tax Law may largely eliminate the tax differences between mainland Chinese employees, HMT residents, and foreign nationals.

- It may now be possible for HMT residents to be dispatched under labor dispatch arrangements to third parties. Under current law, HMT residents can work only for the company that sponsors their work permits.

- It is uncertain whether HMT residents could be seconded by offshore employers or whether they would need to have local employment contracts. If local contracts are required, many HMT residents may demand from their employers that overseas employment relationships be maintained in order to facilitate continued participation in social insurance and benefit programs. The existence of dual employment relationships could lead to more employee claims and litigation.

By Jacelyn Johnson