New grading system for labor protection in China

On 1 January 2017, a new Grading Evaluation of Compliance and Integrity of Enterprises’ Labor Protection has officially entered into effect. The new regulation was issued on July, 25 2016 by the Ministry of Human Resources and Social Security (MOHRSS). The Grading Evaluation sets out new requirements for enterprises, and implements an annual evaluation system for compliance. The reform also introduces an enterprise classification system. It will apply to both domestic and foreign employers.

On an annual basis, it grades the compliance of enterprises` labor protection level in three classes: A, B and C. The results of the class evaluation will then be added to the compliance file of the company for a minimum of three years.

A Level A Rating is the best credit level one can achieve. Level B Rating is considered as normal, whereas Level C Ratings define dishonest enterprises with a negative and serious impact on society.

Dos and Dont’s – What factors determine your company’s ranking

To judge enterprises, the MOHRSS will consider the following aspects:

 – Internal labor rules and regulations.

 – Existence of valid contracts for each and every employee.

 – Compliance with current labor laws.

 – Violation of child labor laws.

 – Compliance with laws according to female- or underage workers.

 – Working hours and rest time based on the current laws.

 – Minimum wage payments and compliance with laws regarding employee remuneration.

 – Social insurance.

 – Other relevant labor protection regulations.

Reasons for receiving a C rating can be as follows:

– The enterprise has been at least three times investigated for labor violations.

– Occurrence of labor related mass incidents or serious negative social impact.

– Use of child labor or forced labor and similar serious violations.

– No compliance with orders and fines issued by labor protection authorities.

– Resistance and blockage of controls by labor protection authorities.

– Investigation for criminal charges due to labor violation.

A company that is constantly rated as Level C will be become the focus of the Labor Protection authorities. Additionally, the government will publish a list of companies, which repeatedly ignore and violate these rules.

In return, companies with an A grading will receive considerable less controls, whereas B-level enterprises will be subjected to the periodically standard inspections.

Observations by ECOVIS Beijing

The new regulations further strengthen already employee-friendly Chinese labor regulations. (For further details on the Labor Law in China, please consult our previous posts on labor contracts and employment termination).

Since the Chinese government takes labor violations more and more serious, foreign companies should expect more controls and should make sure that their contracts and staff manuals are up to date and signed by all employees.

If in doubt, foreign businesses should consult legal advisers for help to ensure that employment relations are in compliance with relevant rules and regulations.

Continue reading about similar topics such as How to be on the safe side when terminating employment contracts or Is spanking your employee legal in China?

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 Richard2017 150x225   Richard Hoffmann

Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: richard.hoffmann@ecovis-beijing.com

 

Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 (10) 6561 6609 or contact us directly via service@ecovis-beijing.com