China’s labor law provides for a 44-hour work week, but its regulations provide for a 40 hour work week and most municipalities enforce the 40-hour work week, but recognize that this workweek may not be practical for certain employees. A “flexible” working hours system is thus permitted for “senior management” as an exception to this basic hour rule.
But before an employer can implement a flexible working hours system for its employees, it must usually first secure permission to do so from the relevant authorities. But it seems that every Chinese city has its own rules on what it requires and on what it will allow.
For example, Beijing permits an employer to use a flexible working hours system for its senior management personnel without having to obtain permission first. This system is consistent with a U.S. style “salaried employee” approach in that as far as these employees are concerned, the employer is not required to follow the 40-hour workweek rule.
One of the first issues that must be resolved to have a flexible working hours system is what is meant by the term “senior management.” The Beijing Human Resources and Social Security Bureau interprets that to mean all employees designated as such in the employer’s Articles of Association. At the very minimum, a company’s legal representative and general manager are certain to qualify as senior management. With respect to other management employees, it is important that the employer review its Articles carefully to be sure that they are indeed “senior management” and thus do not require permission from the Beijing authorities.
But like I said, other cities may have different rules. For instance, Shanghai requires permission from the authorities before you can apply a flexible working hours system to any type of employees. Moreover, even though a salaried employee approach is permissible in Shanghai, Shanghai requires an employer to provide them at least one day a week that is not a work day.
Making things even more complicated is that each district within a particular city may have different requirements. This is why when one of our clients seeks the advice of one of our China employment lawyers, we always contact the particular district where the client is registered so we can figure out the specific local rules our client must follow.
First, even for employees under the flexible working hours system, employers are legally required to provide adequate rest time to these employees. Though “adequate rest time” has been left undefined in some jurisdictions (Beijing being one of them), some are clear on what they require by this. Shanghai, for example, requires employers provide at least one day every week as rest time for their employees designated under the flexible working hours system.
Second, you often cannot avoid paying overtime simply by implementing a flexible working hours system. Even in the case of a salaried employee system, some municipalities (Shanghai and Shenzhen immediately spring to mind) require employers pay 300% of an employee’s normal wages for time spent working on a Chinese legal holiday. For this reason, we tell our clients that the safest approach is for them not to have any employee work on Chinese national holidays, if at all possible.
It also needs to be emphasized that employers cannot use a flexible working hours system with low level management and non-management employees, unless those employees fall under one of the following five categories:
- offsite sales personnel
- personnel permanently based out of town
- long distance transportation personnel
- non-production on-duty personnel
- others in special work positions that may arrange their own work and rest schedules.
For example, it may be possible for you to secure approval from the local agency for your off-site sales managers or for your long-distance transportation employees who are constantly on the road, but note that you must secure the requisite permission from the authorities before you can apply a flexible working hours system to any employees who fall under the above five categories.
In May 2012, China’s Ministry of Human Resources and Social Security issued Draft Regulations on Management of Special Working Hours (“Draft Regulations”) for public comments. These regulations would have clarified various issues relating to the flexible working hours system. These Draft Regulations would have revised the above-mentioned categories by adding a new category: “employees in positions relating to technology, research and development, and creative work who may arrange their own work schedule with no attendance record requirement.” The Draft Regulations kept categories (1) and (3) above, as well as senior management, as positions eligible for the flexible working hours system.
But these Draft Regulations have yet to take effect and until they do, the existing regulations are what apply, and as far as non-senior management employees are concerned, you can only use the flexible working hours system with those who fit into one of the five categories listed above.
China’s “flexible” working hours system is an exception to its standard working hours system. China’s labor law and relevant regulations also provide for a second exception: the “comprehensive” working hours system. This latter system applies to three categories of employees who work longer hours because of their particular industries:
(1) employees required to work extended hours in the transportation, aviation, railway, shipping, fishing, postal and telecommunications service industries;
(2) employees subject to seasonal and natural constraints in the resource exploration, construction, salt production, sugar production, and travel industries; and
(3) other employees in positions that may be suitable for the implementation of the comprehensive working hours system.
Before implementing the comprehensive working hours system, an employer must obtain written permission from the local labor bureau on two fronts: general permission to implement the system, and specific permission for each specific employee designated to work under the system. Once implemented, the designated employees’ working hours will be accumulated over a given period (i.e., a week, month, quarter or year), called a “comprehensive calculation period.” During each such period, the employee’s hours for a month may exceed by up to 36 hours what would have been allowed under the standard working hours system. (In practice, the overtime calculation is even more employer-friendly, as labor bureaus typically define the maximum allowable hours as the employee’s average hours for a month.) Employers that disregard overtime rules risk significant penalties: 150% of an employee’s normal wages for any time exceeding the legal maximum, and 300% of normal wages for such time occurring on a Chinese legal holiday.
The above rules leave several details open to interpretation, and to help clarify matters, China’s Ministry of Human Resources and Social Security issued Draft Regulations on Management of Special Working Hours for public comments. The Draft Regulations introduced the following revisions:
- Categories (1) and (2) above would be expanded to include the electric power, petroleum, petrochemical, and finance industries.
- Category (3) above would instead read: “in accordance with the industry policies issued by the State Council with respect to encouraged or promoted industries, the positions that the PRC Ministry of Human Resources and Social Security deems eligible for implementation of the Comprehensive Working Hours System.”
- The amount of allowable overtime would depend on the length of the comprehensive calculation period. For a period of one week, the maximum overtime permitted per period would be 15 hours (with an additional cap of 36 hours per month). For a period of one month, the maximum overtime permitted per period would be 36 hours. For a period of one quarter, the maximum overtime permitted per period would be 108 hours. For a period of one year, the maximum overtime permitted per period would be 360 hours. In addition, regardless of the period length, an employee could not work more than 11 hours per day, and would be required to have 24 continuous hours of rest every other week.
However, the Draft Regulations are still out for comment, with no end in sight. Unless and until they take effect, the comprehensive working hours system may only be used for employees who fit into one of the three categories listed above.