Good knowledge of Chinese labor law is essential for engaging local and foreign employees and compliance in relation to management when doing business in China. In the following article, we are sharing some specialties about overtime regulations, using Shanghai as an example.
In particular, we will answer the question of what is considered working overtime according to Chinese labor law. And also what distinguishes the individual working hour systems in China as well as in which cases they find application. Moreover, we address the requirements that must exist to be able to implement the working hour systems accordingly. In this context, we will let you know how to ensure the overtime system is legally effective and reasonable and how you should communicate it with your employees. The importance of the "Employee Handbook" will be touched upon, too.
Please note that we are explaining the regulations here using Shanghai as
an example because, in China, these kinds of regulations can vary from place to
place. If you need information on overtime regulations or other labor issues
elsewhere in China, please do not hesitate to contact us (firstname.lastname@example.org).
The basics of overtime regulations
The “Labor Law” requires employees to work no more than 8 hours per day and no more than 44 hours per week on average. More than 8 hours is considered overtime. In China, there is no distinction between overtime regulations for managers or ordinary employees. Employees can work up to 3 hours of overtime per day, and no more than 36 hours per month. If overtime work is arranged on a working day, the employee will be paid at 1,5 times the salary and the company should not arrange compensatory time off. If overtime work is arranged on weekends, the company can arrange compensatory time off, and if compensatory time off cannot be arranged, the company has to pay the employee 2 times the salary. If overtime work is arranged on legal holidays, the company shall pay 3 times of the employee's salary, and in this case, the company should not arrange compensatory time off. The official Chinese national holiday calendar is issued yearly by the State Council and you find it here.
China's three existing working hour systems are: the standard, the flexible, and the comprehensive working hour system.
A. Standard working hour system
It is the most common working hour system, with 8 working hours a day. It is applicable to all employees as long as it is stipulated in the labor contract between the two parties.
Overtime recognition: Generally, the daily overtime working hours shall not exceed 1 hour; if the working hours need to be extended for special reasons, the extended working hours shall not exceed 3 hours per day and 36 hours per month under the condition of protecting the health of employees. In addition, the company shall pay the overtime wages.
B. Flexible working hour system
The flexible working hour system refers to a working hour system without the restriction of fixed working hours, which is adopted for employees who need to work continuously or have difficulty in getting to and from work on time due to production characteristics, special needs of work nature or the scope of duties, and cannot apply standard working hour system or need to operate in a mobile manner. There are three types of employees who can implement the flexible working hour system as follows:
- Senior managers, field workers, salespersons, part-time duty employees and other employees in the enterprise whose work cannot be measured by standard working hours;
- Long-distance transport personnel, taxi drivers and some loading and unloading personnel of railroads, ports and warehouses in enterprises and employees who are required to work on a mobile basis due to the special nature of their work;
- Other employees who are suitable for flexible working hour system due to production characteristics, special needs of work or scope of duties.
Overtime recognition: For overtime work on working days and weekends, the employer is not required to pay any overtime wages; for overtime work on legal holidays, the company is required to pay no less than three times of overtime wages.
C. Comprehensive working hour system
The comprehensive working hour system refers to the employees who are required to work continuously due to the special nature of their work. There are three categories of employees who can implement the comprehensive working hour system as follows:
- Employees in transportation, railroad, post and telecommunications, water transportation, aviation and fishery industries who need to work continuously due to the special nature of their work.
- Some employees in industries such as geological and resource exploration, construction, salt production, sugar production, tourism, etc., which are subject to seasonal and natural conditions;
- Other employees who are suitable for the comprehensive working hours system.
In the case of the comprehensive working hour system, the employer shall not arrange for the employee to work more than 11 consecutive hours per day, and shall arrange for the employee to have at least one day off per week.
Overtime recognition: The period of calculating working hours for the employers who implement this system is no longer in days, but in weeks, months, quarters and years. However, the average daily working hours and average weekly working hours should be basically the same as the statutory standard working hours, i.e., the actual working hours of a specific day (or week) can exceed 8 hours (or 40 hours) in the comprehensive calculation cycle, but the total actual working hours in the comprehensive calculation cycle should not exceed the total statutory standard working hours. If the legal working hours are exceeded, overtime shall be paid at the rate of 1.5 times.
To implement the flexible or comprehensive working hour system, two major requirements must be met: first, the administrative approval of the flexible or comprehensive working hour system by the authority: labor administration department, is required; second, both parties shall agree in the labor contract to implement flexible or comprehensive working hour system.
In other words, if both parties only have agreed to implement flexible or comprehensive working hour system in the labor contract, but have not obtained administrative approval from the labor administration department, the flexible or comprehensive working hour system cannot be implemented for the employees.
Or, if the employee’s position gets the approval of the labor
administrative department regarding the flexible or comprehensive working hour
system, but both parties agree to implement standard working hours system in
the labor contract, then it should still be considered as implementing standard
working hour system.
Overtime Rules and Regulations
If an enterprise calculates overtime wages based on the rules and regulations, the following 3 conditions are required:
1. The overtime system should be legal and effective
When establishing and improving the overtime system, enterprises should ensure that its content conforms to the relevant provisions of national laws and regulations, and respect the rights granted to employees by law. If the overtime system violates the laws and regulations, it may lead to invalid or partially invalid overtime system, and the invalid content shall not be used as the basis for the enterprise to manage the workers' overtime work.
The overtime system of an enterprise is not effective after it is formulated, because the content of the overtime system involves the personal interests of employees such as labor remuneration and working hours, therefore, the formulation of the overtime system also needs to go through the statutory democratic consultation procedure. Specifically, it is required that when formulating the overtime system, the enterprise should determine the content of the system after consultation and discussion with the representative assembly of employees or all employees in order to ensure the legality of the procedure.
2. The overtime system should be reasonable
If the content of the overtime system is unreasonable, there is still a legal risk that its effectiveness will be denied. In practice, there is no clear standard for determining whether the system is reasonable or not, and the reasonableness of the system is mainly determined by the arbitration committee or the court exercising discretionary power, taking into account the specific industry, the nature of the industry and the working environment.
3. The overtime system should be notified to the employees and confirmed by the employees
The overtime system should be publicized and confirmed by the employees
before it can be used as the basis for overtime work. The overtime system can
be made public by issuing written rules and regulations to employees and asking
them to sign and file them, or by sending emails and asking them to reply for
confirmation, etc. We recommend creating an „Employee Handbook” and describing
the rules very clearly in this handbook.
To sum it up, concerning overtime regulations, on the one hand, the statutory provisions apply. However, on the other hand, relevant provisions on overtime work are laid down in the "Employee Handbook", the "Labor Contract" and the "Rules and Regulations" of your company and should be observed accordingly.
If an enterprise wants to apply the overtime system, it should ensure that the content of the system conforms to the law, the formulation process conforms to the democratic consultation procedure, the employees have been informed by public notice, and there is no obvious unreasonable situation.
If you have any labor questions, please get in touch with email@example.com or book cost-free consultation appointments with us at: https://www.terminland.eu/bdp-team/. Our bdp China Desk Team is happy to provide you with advice and assistance.
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errors or omissions in the content. The information contained in this article
is intended as a general guide to the issues at stake and is not intended to be
relevant, systematic, complete, accurate, or timely, nor should it be construed
as legal advice. As every situation is different, we advise you to consult a
specialized bdp lawyer, tax consultant, auditor or consultant on relevant issues.