21 January 2010
What can I do to reduce the amount of overtime salary I have to pay to employees?
There are three types of working hours schemes implemented in the PRC:
- Standard working hours scheme (i.e., 8 hours a day and 40 hours a week)
- Irregular working hours scheme
- Comprehensive working hours scheme
With respect to employees who are covered by the standard working hours scheme, 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 for the application of the comprehensive working hours scheme or the irregular working hours scheme to as many positions as possible. If such application is approved, you may avoid paying overtime salary to the relevant employees in most cases.
Is it possible for all employees to be covered by the comprehensive working hours scheme and/or the irregular working hours scheme?
Generally no. The labour authorities are reluctant to grant any such approvals.
While the PRC law is not entirely clear and the local practice may vary, it would appear that:
- Employees who engage in the communication, railway, telecommunications, water transport, aviation, fishing, exploration of geology, oil or other resources, construction, salt or sugar manufacturing or tourism industries may be able to obtain the approval from the labour authority to implement the comprehensive working hours scheme.
- Senior management, sales staff, forwarders, loader stevedores, long-distance truck drivers, taxi drivers, escorts in transportation, staff on duty for non-productive business may be able to be granted the approval to implement the irregular working hours scheme.
In what circumstances would I still have to make overtime pay to employees who are approved to be subject to the comprehensive working hours scheme or the irregular working hours scheme?
The relevant employee’s working hours under the comprehensive 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 will be 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 will be required to pay 300 percent of the normal rate as overtime pay.
With respect to an approved irregular working hours scheme, generally speaking, you are not required pay overtime salary to the relevant employees. However, according to some local rules (e.g. Shanghai), you will still be obliged to pay an additional 300 percent of normal rate to the employee who is subject to the irregular working hours scheme if such employee works on a public holiday.
If the relevant labour authority grants me approval to apply the comprehensive working hours scheme and the irregular working hours scheme, can such an approval apply retrospectively to release me from past breaches?
No. Such an approval can only apply in respect of work time following the grant. It will not, therefore, be retrospective.
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