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PRC Labour Law - Bitesize

3 July 2013
Mayer Brown JSM Newsletter

Wages, Overtime and Compensation (Cont'd)

This week, we continue our discussion on overtime.

What can I do to reduce the amount of overtime salary I have to pay to employees?

With respect to employees who are covered by the Standard Working Hours Scheme (please refer to our Bitesize article of 19 June 2013), one option is to put in place an appropriate overtime policy to make sure that working hours are correctly recorded and any overtime work is properly approved.

You may also apply to the local labour authority to have as many positions as possible covered by the Comprehensive Calculation Working Hours Scheme or the Flexible Working Hours Scheme. If such application is approved, you may avoid paying overtime salary to the relevant employees in most cases. (Please refer to our Bitesize article of 19 June 2013.)

Is it possible for all employees to be covered by the Comprehensive Calculation Working Hours Scheme and/or the Flexible Working Hours Scheme?

Generally no. The labour authorities are reluctant to grant any such approvals.

While the PRC law is not entirely clear on this matter and the local practice may vary, it would appear that:

  • Employees in select positions engaged in the communications, railway, telecommunications, water transport, aviation, fishing, geological exploration for oil or other resources, construction, salt or sugar manufacturing, or tourism industries may be able to obtain approval from the labour authority to implement the Comprehensive Working Hours Scheme.
  • Senior management, sales staff, field staff, forwarders, loader stevedores, long-distance truck drivers, taxi drivers, railway transportation escorts, port staff, warehouse staff, staff on duty for non-productive business (e.g., in order to fight fires or to provide any other types of emergency service) may be granted approval to implement the Flexible Working Hours Scheme.

An employer must convince the labour authority of its need to implement the said scheme by submitting the required supporting documents. The employer may also confer with the trade union, employee representative congress, or the employees affected.

Please note that in accordance with Beijing local rules, those holding a senior management position automatically qualify for the Flexible Working Hours Scheme without needing to go through the approval procedure. However, the rule offers no guidance as to what constitutes "senior management". In practice, the description may apply to those at the level of CEO, deputy CEO, CFO (or deputy CFO) and other high-level senior positions, especially where such is stipulated in the company's Articles of Association or internal employee handbook. In normal cases, a department manager is not considered to be "senior management staff".

In what circumstances would I still have to pay overtime to employees who are covered by the Comprehensive Calculation Working Hours Scheme or the Flexible Working Hours Scheme?

The relevant employee's working hours under the Comprehensive Calculation Working Hours Scheme may be comprehensively calculated in terms of per week, per month, per quarter, or per year (the "Calculated Period"), as approved by the labour authority. However, the employee's average working hours per day and per month within the relevant Calculated Period shall be similar to those under the Standard Working Hours Scheme. If the employee's total working hours during the Calculated Period exceed the maximum working hours under the Standard Working Hours Scheme, you are required to pay 150 percent of the employee's normal rate as overtime pay for the excess working hours. If the employee works on any public holiday, you are required to pay 300 percent of the normal rate as overtime pay.

With respect to an approved Flexible Working Hours Scheme, generally speaking, you are not required pay overtime salary to the relevant employees. However, according to some local rules (e.g., in Shanghai), you are still obliged to pay an additional 300 percent of the normal rate to an employee who is subject to the Flexible Working Hours Scheme if such employee works on a public holiday.

If the relevant labour authority approves my application to introduce the Comprehensive Working Hours Scheme and the Irregular Working Hours Scheme, could such approval be applied retroactively to release me from past breaches?

No. Such approval only applies in respect of work carried out following the time at which approval was granted. It cannot, therefore, be applied retroactively. The term of the said approval is generally 1-3 years, which means the employer needs to apply again upon expiry of the approval. During the term of the approval, consent from any newly-hired employee is not required.

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