Problems relating to Trade and Investment on China

 
16. Employment
Issue
Issue details
Requests
Reference
(1) Rapid Spiraling Wages - State council (central government) at its twelfth 5-year national economic/social development plan published its policy that raises "the minimum wage for workers by more than 13% per annum", or doubles it at least once every two years so that the minimum wage doubles during the period of 2010 through 2015. Also at its 18th national people's congress, state council announced: "by 2020, it would double the 2010 minimum wage and per capita gross domestic production (GDP)."
The margin of wage increase would be:
-- In 2012: Average of 25-provinces/cities in average + 20.2%,
-- In 2013 Jan-Sept: 27 provinces/cities in average+17.0%
-- In 2014 Jan-Sept: 17 provinces/cities in average+14.1%
(Ministry of human resources and social security).
The monthly maximum: Shanghai: RMB1,820.
- Shortage of workers has pushed up the minimum wages. In Zhejiang Province, the Minimum Wage increased by about 15% in 2010, and 19% in 2011. Hike by large margin in labour costs has made it difficult year after year for enterprises to secure profitable operation.
In almost every year, the minimum wage has increased (in Beijing, Tianjing, Shanghai, Shenzhen, Guangzhou, Dalian, Hangzhou, etc.)
- GOC published "Double Income by 2020 Policy", while Guangzhou City studies further raise in minimum wages.
- In a recent few years, labour cost has increased by 10% or so each year, forming a factor that burdens heavily the profitability of MFS operation.
- In each year, the labour cost keeps going up as the regional authority across PRC keeps raising the minimum wage, which is a factor that heavily burdens enterprises, forcing them to review the location of the production foothold.
- Under GOC's direction, the minimum wage in double digits will take place during this year, again.
- In each year, the hike in minimum wage at a rate higher than the commodity price hike (RMB 160 in 2014) takes place. It pushes up the production cost.		 - It is requested that GOC arranges a Forum to exchange views not only on wages, but including other issues such as taxation and insurance, as well.
- It is requested that GOC:
-- takes measures to suppress surge in commodity prices, and
-- holds down minimum wages to assure industrial competitiveness.
- It is requested that GOC considers revisions that allow:
-- maintenance of production cost,
-- fostering of skilled workers in volume, and
-- assurance of workforce.
-It is requested that GOC curves a large-scale wage hike.
- The radical surge of minimum wages discourages investor's desire for investing into PRC.
- It is requested that GOC devises policy to hold down the labour cost hike.
- It is requested that GOC curbs the minimum wage increase at a rate higher than the hike in commodity price.		 - 2012 Shanghai Region Enterprises Wage Guideline (Up by 11.1-11.7% in Average) (Shanghai Bureau of Human Resources and Social Security)
- The 12th 5-Year National Economic/ Social Development Plan (2011-2015, published on 14 March 2011.)
- Provisions on Minimum Wages
  (Action)
- People's Government of Province, Autonomous Region and Municipalities under the Central Government each determines the substantive minimum wage in PRC.
- Since 1 April 2008, the minimum wage in Guangdong Province has gone up by 12% in average. The minimum wage/month for the 1st category at RMB860 has surpassed that of RMB850 in SSEZ, and RMB840 in Shanghai.
- In 2009, State Government froze the minimum wage to cope with the financial crisis. In 2010, it has raised it at high levels, ranging between 10 to 20% in each region. For example, for regular employees, Shanghai City raised the Statutory Minimum Wage to RMB1,120 or up by 16.7%, Guangdong City, up by 21.1% in average, Guangzhou City, up by 19.8% to RMB1,030, Jiangsu Province, up by 12.95 in average, and Tianjin up by 12% to RMB920.
- Since May 2010, epidemics of industrial dispute involving strikes have spread nationwide at high frequency. In many cases, such disputes have been settled by wage increase at high percentages. To resolve strikes, it has been customary for the local Labour Union (Gonghui) to act as intermediator, who demands wage increase by a large margin. It is said that the high level wage increase has been caused by the wage level gap between the middle management in FFEs and the itinerant workers.
- JETRO World Business News of 11 April 2011 reported on the comparative increase rates of minimum wage in two years (2009-March 2011) in each municipality: Beijing 45.0%, Shanghai 33.3%, Suzhou/Wuxi/Nanjing 34.1%, Hangzhou,/Ningbo 36.5%, Shenzhen 46.7%, and Guangzhou 51.2%.
- In June 2011 GOC released the following target in "Human Resources/Social Security Development 12th 5-Year Plan (2011-2015) ", prescribing:
(1) GOC will raise the minimum wage by 13% in annual average by 2015, and
(2) GOC will raise the minimum wage in a greater part of the regions to 40% of the urban area workers' wage in average.
- The average rates of wage increase continues to remain high, although tracing the downward curb in each year, 22%-2011 (24-regions) 20.2%-2012 (25-regions), 17%-2013 (27-regions), 2014 (up to July) about 14% (16-regions) in Trans-Province, Autonomous Region, and Municipality Directly under the Central Government.
  (Improvement)
- On 17 November 2008, Ministry of Human Resources and Social Security promulgated notice to local authorities to temporarily relax the burden on the enterprises for the raise in the basic wage rate.
(2) Difficulty in Securing Human Resources and Have Them Stay - While on one hand, PRC's economic growth and double income project are underway, employers face severe difficulties in securing the needed workforce and employing new workers. Prompted by the State policy to develop Mid-Western regions, emigrant from inland PRC continent has dropped. Wages have lost their edge, while chronic shortage of workers prevails. Moreover their turnover rate is high.
- Workers' turnover is high, with increasing difficulty in securing them. Labour cost of workers has gone up year after year.
- Member firm, in coping with the production increase and the difficulty in adoption of regular workers, manages workforce shortage by increased employment of dispatched workers, however, with a high turnover. Year after year, it becomes increasingly difficult to secure the workforce.
- Because many development companies with high pay locate in Beijing abutting Tianjin, human resources for development and design tend to flow into Beijing. It takes much time in Tianjin to secure human resources for career development and design engineering.
- There has been a radical exodus of workforce to the inland areas. It makes it more and more difficult to secure workforce in the coastal areas.
- Labour cost has spiraled for both school-leaver and mid-career recruiting. Moreover, it has become customary for employees to raise their annual revenue by increased experience from job-hopping. It makes it difficult to employ quality workforce on a long-term basis.
- Wage hike of 10-15% per annum has driven expert workers to other enterprises, while the revised wage scale to stop the expert workers' out flow has extremely aggravated profitability.
- Operational cost has gone up triggered by labour cost increase.		 - Labour Contract Law of PRC, etc.
(3) Labour Contact Law Strongly Biased in favour of Protection of Labourers. -In case of term employment contract under the going labour contract law, upon reaching its 3rd renewal, or after continued service of 10-years, employers must conclude employment contract with indefinite term with its employees. It is difficult for employers to adjust the workforce flexibly, commensurate with the operational requirements. On the other hand, the going labour contract law does not allow restructuring, judging from evaluation of individual local employees' performance.
- Job Rotation or Generation Change at Workplace (JRGCW) is under strict control of labour contract law and is difficult to achieve JRGCW in order to protect workers (employment agreement includes even the job title of each worker.). As generation change is simply not possible to achieve, young workers' quitting job is another emerging problem for employers.
- MFS, having had a substitute fill the job of a Worker on Long Term Sick Leave (WLTSL), could end up by becoming a defendant in a court case, unless such substitution was done with the consent of WLTSL, even when there was a reasonable ground for MFS's such substitution. Chances are high for the Court's handing down decisions in favour of the worker. Employers must shoulder increased economical burdens, such as monetary compensation, etc.
- The Shanghai labour bureau regulation includes a provision that makes available paid-leave on non-work related sick leave.
-The persistent downward rigidity of wages makes employers' planning difficult for their employees' remuneration, by reflecting business performance. It willy-nilly drives Employers into taking a defensive stance.
- Labour Contract Law (LLC) includes numerous provisions disfavouring employers (enterprises) that frustrate flexible adjustments of workers' deployment.		 - It is requested that GOC eliminates employment contract with indefinite terms.
- It is requested that GOC takes steps to amend the labour contract law that fairly reflect the interests of both workers and employers.
- It is requested that GOC takes steps to amend the labour contract law, as production of detailed evidential documents takes up much time and substantial efforts.
- It is requested that GOC reviews the Scheme for paid-leave on non-work related sick leave.
- It is requested that GOC takes steps to amend the law, fair to both employees and employers.
- It is requested that GOC takes steps to rectify LLC fair to both employees and employers.		 - Labour Contract Law (2012 Amendment)
- Article 17. Resolution of Uncertainties in Labour Contract: Remunerations, and Work Conditions:
3. The time limit for the Labor Contract;
4. The Job Descriptions and Work Locations;
5. The Work Hours, Break Time, and Vacations
- Article 42 (Non-cancelable) If any of the following circumstances apply to a Worker, the Employer may not terminate Labour Contract on reliance of Articles 40 and 41 of this Labour Contract Law:
(1) If a worker engaged in a Hazardous Work susceptible of Occupational Disease fails to get Health Check before leaving the work, or a worker diagnosed for a suspected occupational disease is within the diagnosis period or in the medical observation period;
(2) If in the Unit (Workplace), a worker has gotten injury or lost ability to work in part or in whole;
(3) If a patient or a person is in the medical treatment period;
(4) If a female worker is in the period of pregnancy, child birth leave, or suckling;
(5) If a worker, having worked continually for 15-years in this Unit has less than 5-years before reaching the legal retirement age;
(6) If other circumstances exist, by law or by administrative legislation.
  (Action)
- On 1 January 2008, the President of PRC has enforced LCL intended to strengthen the rights and interests of the workers. On the same day, Employment Promotion Law, and Measures for Paid Annual Leave were enforced.
- Article 87 of LCL, enforced since January 2008, stipulates a penalty double the amount upon termination of economic compensation payable by the employer, who dismisses or terminates employment in violation of LCL.
- LCL entitles workers with more than 10 service years to request conclusion of a labour contract for an unfixed term, while it also mandates any employer who has concluded a fixed term labour contract in two consecutive years with the same worker to conclude a labour contract for an unfixed term.
- In the event where any employer sets forth or amends rules of employment closely related to the rights and interests of workers, it must be concluded through consultation with workers on an equal footing.
- Law of PRC on Labour Dispute Mediation and Arbitration has been enforced since 1 May 2008.
- On 18 September 2008, Implementing Measures of the LCL was promulgated and enforced.
  (Improvement)
- Article 19 of LCL expressly sets forth 14 reasons that enable employers to legally terminate the labour contract.
(4) More Radical Workers' Demands - All Across PRC:
-- Demonstration taking the form of sabotage and strike has come to jeopardise a stable business operation as the labour risk gets aggravated with the demand for exorbitant higher wages and better fringe benefits. Since April 2010, sabotage and strike have frequently taken place at foreign funded enterprises (FFEs) in other industrial sectors and within the group enterprises.
-- Legal base is ambiguous on the right to walk out, and the related restrictions.
-- GOC recommends strengthening the activities of All China Federation of Trade Unions (communist organization), which is administrative guidance not based on laws. As regards enterprises with least cohesive power with Trade Unions, employers tend to experience their weakening negotiation position.
  (Action)
- After enforcement of Law on Labor Dispute Mediation and Arbitration in 2008, the cases for individual industrial disputes doubled in 2008, climbing to 690,000 cases compared to 350,000 cases in 2007.
- During May through June 2010, labour strikes occurred frequently demanding wage hike in plural cities, revolving around the coastal areas.
- In regard to the PRC, in 2012, labour disputes received numbered 641,202 cases, of which 7,252 cases were group disputes (China Statistical Yearbook 2013).
(5) Inadequate Legislation on Labour Disputes - The PRC legislation on strike and sabotage is imperfect, devoid of provision for "possession of the right to strike". More precisely, walkouts frequently arise without assurance of the right to strike, and without rules on exercising the right to strike. In the absence of the provision of the law that expressly prohibits strike, it is assumed that the strike goes about under the presumption that strike is in effect allowed by the law. Enterprises involved in strikes must deal with the task of resolving the disputes without an express set of rules, while confusions continue to expand.
Strikes have occurred also, due to the aggravated relations between PRC and Japan.
- Legislative provisions on labour disputes are ambiguous and require overhaul. It takes much time and work for getting the labour disputes settled.
- Presumably strike is permissible. "Regulations of Guang Dong Province on Collective Contracts for Enterprises" (Enforced in January 2015) defines strike by law. On the other hand, it compels enterprises further hike in labour cost and richer fringe benefits.
- No definition of "strike" is set forth in the Labour Contract Law so that the legality of "strike" itself is unknown.		 - It is requested that GOC overhauls the legislation concerning strike and sabotage.
- It is requested that GOC takes steps to overhaul legislative provisions on Strike/Sabotage.
- It is requested that GOC takes steps to overhaul legislative provisions on labour disputes.		 - Regulations of Guang Dong Province on Collective Contracts for Enterprises (Enforced in January 2015)
  (Action)
- On 9 June 2014, Xiamen City Labour Disputes Arbitration Commission decided that employer's discharge of the employee that started the strike was in violation of the Labour Contract Law, for the first time in the domestic China. The strike was instituted by the employees who were dissatisfied with the wholly U.S. owned subsidiary's decision to move the factory. The arbitration was triggered by the employer's notification of employees' discharge on the ground of material violation in the company's rules of employment.
(6) Procedure to obtain Work Visa is complex and delayed - For acquisition of work visa in PRC, it takes much time (for more than 3-months). In addition to the documents concerning companies and application forms, applicants must complete numerous other documents and procedures, such as health insurance certificate, resident certificate, and notification to Public Security Bureau. It is even more difficult, if the applicant does not speak Chinese, as it requires the help of a Chinese consulting agency with much cost.
- Required documents for visa acquisition of new expatriates have grown needing substantial period for preparation. For example, criminal record certificate (attested) (a certificate showing the applicant has no criminal record) takes minimum one-month for acquisition. Furthermore, a substantial period is necessary for completing the visa application procedures in PRC. This requirement materially interferes with the smooth personnel rotation of a Member Firm.
- It takes much time for acquisition of alien visas and Residence Formalities, while it has become more complex and the requisite documents have materially increased in volume. During the deposited time of the passport, the applicant is unable to exit PRC.		 - It is requested that GOC deregulates the system and procedures for acquisition of work visa in PRC.
-It is requested that GOC accepts health examination obtained in Japan before departure of expatriates to PRC.
- It is requested that GOC:
-- expedites the visa acquisition procedures in PRC, and
-- simplifies the required documents.
- It is requested that GOC cuts down and streamlines the application procedures, as applicant's business is materially affected from the delays.		 - Certificate of No Criminal Record (Attested) ? Hangzhou City Labour Bureau Regulation
- Health Certificate, Z-Visa (Work Visa), Resident Permit, Border Exit/Entry Administration Regulation of Hanzhou & SAFE/GAC
- Work Permit, Entry Invitation Letter, Hangzhou City Labour Bureau/Japan Embassy Regulation, Embassy of PRC in Japan Regulation
- Family Register (Attested)-- Exit and Entry Administration Law, Ministry of Public Security
  (Action)
- The renewal procedural period for work visa (Z) appears to vary by regions. For example, as of September 2013, 15 business days in Beijing, 7-days in Shanghai, and 5-days in Tianjin (JETRO Business News, 27 September 2013).
- Beginning January 2016, Beijing city has introduced new application system for examining alien working visa application, whereby enterprises file documented application at the window, after first electronically filing application for examination.
(7) Stringent Requirement for Acquisition of Expatriates' Work Permit - The requirement for a high level of education (university graduate or higher) excludes dispatch to PRC of highly qualified persons, however, with a lesser academic degree.
- Dispatch of engineers under work visa Z has been frustrated by introduction of new requirements that stipulate academic qualifications (university graduate or higher), and age limit (less than 60-years old).		 - It is requested that GOC:
-- deregulates the academic minimum requirement to high school or higher, or repeals the work permit requirement by the academic record.
-- concritises the rules.
- It is requested that GOC deregulates the work visa requirements..
  (Action)
- Foreign workers terms of employment relative to the academic history (Beijing):
(1) Holder of bachelor's degree or above, with work history of more than 2-years in the field of work in concern.
(2) High class engineers without bachelor's degree, but holding external technical qualification certificate, urgently required to perform important technical research, and to supplement the shortage of engineers in Beijing.
- In March 2015, GOC announced its policy to repeal work visa age limit for aliens satisfying certain conditions. In response to this announcement, since June 2015, Shanghai city has repealed the 60-years work visa age limit for specified overseas human resources, working in human resources administration headquarters, etc.
(8) Longer Period for Working Rules on Visas and Residence Permits for Foreigners (and Passport Deposit) - By amendment in July 2013 of Regulation of PRC on the Administration of the Entry and Exit of Foreign Nationals, it takes a longer period for examination of application for alien visas and residence formalities, from 5 to 15-business days. It is also said that it varies by municipalities: in Beijing, about 21-business days. The new amended regulation materially affects business activity for business trips and conferences during the time the passport is deposited with the competent authority.
- Amended Law enforced in September 2013 on the Amended Control of the Exit and Entry of Citizens has expanded by large margin the examination period for stay visa acquisition (from 5 to 15-business days). It seems the previous 5-business days scheme has been reinstated in certain districts. However, the arrangements are not harmonised among districts, including the requirement or non-requirement of "Certificate of No Criminal Record," so that confusions have arisen in practical business operation. Beijing is adamant on the 15-business day requirement, although it has introduced express application scheme, which, however, is restrictive, requiring extra fees, and is not realistic.
- Prolonged procedures for "new application or renewal of residence permits" by the 2013 amendments of "new law on the entry and exit of foreign nationals and regulation of PRC on the administration of the entry and exit of foreign nationals" restrict FFEs' staff's overseas business trips.		 - It is requested that GOC cuts down the visa examination period.
- Continuation of the 15-business days requirement by Beijing at its centre, materially impacts business activity of FFEs, curving business trips, etc. It is requested that GOC reviews the amended law as soon as possible.
- It is requested that GOC expedites the procedures.		 - Law on the Control of the Exit and Entry of Citizens
- Regulation on the Administration of the Entry and Exit of Foreign Nationals
- Regulation of PRC on the Administration of the Entry and Exit of Foreign Nationals, Article 30
- New Law on the Entry and Exit of Foreign Nationals
- Regulation on the Administration of the Entry and Exit of Foreign Nationals
  (Action)
- In July 2013, "Exit-Entry Administration Law" entered into force, requiring 15-business days for renewal of the Alien's Stay Visa.
(9) Complex, Nebulous Procedures for Acquisition of Alien's Short-Term Business Trip Work Visa/ Residence Permit - According to "issuing the relevant handling procedures for a foreign national's entry into China to complete a short-term work assignment (for trial implementation) (RenSheBuFa [2014] No.78)", acquisition of work visa and residence permit has become a mandatory for an employee on a business trip to PRC, complicating the Procedures. Where an applicant is a Japanese citizen, entry without visa was normally possible under the exemption treaty for a stay within 15-days, regardless of the reason for the stay. However, where a short stay person enters PRC with a purpose to engage in work, work visa acquisition before entry has become necessary.
- Concerning "the Handling procedures for a foreign national's entry into China to complete a short term work assignment, enforced on 1 January 2015", this provides: "Acquisition of visa is mandated for those satisfying certain requirements." On the other hand, visa acquisition is exempted for entry into China for the purposes of sightseeing, business, visiting relatives and acquaintances, or in transit, provided, however, that, if such stay is within 15-days from the date of entry. Substantively, which case requires visa acquisition and which case doesn't are nebulous.		 - It is requested that GOC slims down the entry procedures for foreign nationals entering PRC from a country, contracting party to the exemption treaty.
- It is requested that GOC provides more precisely the visa acquisition standard.		 - Notice of MHRSS, MFA, MPS and MOC on Issuing the Relevant Handling Procedures for a Foreign National's Entry into China to Complete a Short-Term Work Assignment (for Trial Implementation) (RenSheBuFa [2014] No.78)
(10) Vexatious complexity and disunity of the visa system - The procedures and the requisite documents and time required for visa application vary by municipality (or even within a municipality at times). They could vary by the past history and the change of officer in charge. - It is requested that GOC eliminates all differences by municipality, officer in charge, etc. and cuts down the room for discretionary judgement. - Regulations on the Management of Employment of Foreigners In China (May 1996)
- Regulation of PRC on the Administration of the Entry and Exit of Foreign Nationals
(11) Increased Cost from Double Payment of Compulsory Take Out of Social Insurance System - "Social insurance law" enforced from 1 July 2011 mandates aliens working in PRC to subscribe to social insurance policy. Japanese expatriates are normally insured in Japan for social insurance policy and another subscription in PRC makes a double subscription, with an extra cost to employers.
- By social insurance law amended in July 2011, GOC has mandated expatriates' subscription to social insurance policy, increasing the operational cost to MFS. Its implementation varies by local jurisdictions, in a manner difficult to understand.
- On 15 October 2011, GOC has implemented social insurance upon foreigners, including expatriates from Japan, triggering the double payment of social insurance premium to the increment of cost to employers.
- Mandatory requirement of aliens' subscription to social insurance policy has resulted in double taxation payment and increased cost on account of social insurance policy.
Legislative control varies by provinces and municipalities.
- GOC compels subscription to social insurance policy and annuity not only upon Chinese nationals but foreign workers as well. Its implementation varies from city to city. There is no uniformity either to its collection standard.
- A member firm having dispatched its employees to its subsidiary (MFS) in Beijing faces the double payment of social insurance premiums in Beijing, despite its payment in Japan under the Japanese social insurance system.
- The benefit is thin to foreign contributors to social insurance policy. Under endowment insurance, it requires contribution of insurance fees for 15-years before the subscriber may receive payment of the insured amount. In effect, its receipt is practically impossible. As to medical insurance, in most hospitals and medication institutes that accept foreigners, they are excluded from the insurance coverage, etc.
- MFS, currently enrolled in medical insurance and endowment insurance policy, has received request for contribution to endowment insurance (corresponding to employee's pension insurance of Japan in the amount, totaling the contribution amounts in PRC and Japan).
- Double payment of social insurance contribution has arisen as regards foreign employees (expatriates from Japan) as their enrollment in PRC in social insurance policy has become compulsory. (Its employment differs by municipal jurisdictions. For example, Shanghai has not yet implemented the social insurance contribution.)		 - It is requested that GOJ and GOC ratify as soon as possible the social security agreement to resolve the double payment problems.
- It is requested that GOJ and GOC:
-- ratify the social insurance agreement to resolve the double payment Problems, and
-- accelerates negotiation toward early ratification of social insurance agreement.
- It is requested that GOC and GOJ ratify the bilateral social insurance agreement.
- It is requested that GOC makes its participation optional.
- It is requested that GOC and GOJ ratify the bilateral Social Insurance Treaty as soon as possible.
- It is requested that GOC excludes aliens paying social insurance policy in the mother country from the scope of the Mandatory Participation in PRC.
- It is requested that GOC:
-- assures transparency in introduction of new taxation system, or change in taxation system or Tax Rates by providing opportunities for exchange dialogues and an ample and adequate explanation to FFEs, and
-- avoids double payment as to Japan.
- It is requested that GOC and GOJ ratify the bilateral or multilateral agreement on social insurance.
- It is requested that GOC and GOJ ratify as soon as possible Japan-PRC bilateral social insurance agreement.
- It is requested that GOC takes step to amend the social insurance law.
- It is requested that GOJ and GOC wipe out the double tax burden by the Social Security Treaty between Japan and PRC.
- It is requested that GOC takes steps to overhaul the social insurance scheme so that foreigners may receive the full benefit from their enrollment in the social insurance policy.
- It is requested that GOC and GOJ materialises as soon as possible the ratification of Japan-China bilateral social insurance agreement).		 - Social Insurance Law
- Social Insurance Law: President Order [2010] No.35
- Social Insurance Law of 2010, Article 97
- Announcement No. 2 2011] of the State Administration of Taxation
- Interim Measures for the Participation in Social Insurance of Foreigners Employed in China [Order of the Ministry of Human Resources and Social Security (MHRSS)(No. 16) ] (09-06-2011)
- Legislation relative to PRC Social Insurance
  (Action)
- "Social Insurance Law" enforced on 1 July 2011 compels coverage under Social Insurance (Employees Basic Old-age Insurance, Employees Basic Health Insurance, Industrial Injury Insurance, Unemployment Compensation Insurance, Maternity, and Child Rearing Insurance) of all aliens working in PRC (holding Alien Employment Certificate, Alien Expert Certificate, Employment Certificate for Permanent Foreign Reporters, Alien Resident Certificate, Alien Permanent Resident Certificate).
- On 15 October 2011, "Interim Measures for the Participation in Social Insurance of Foreigners Employed in China (Order of the Ministry of Human Resources and Social Security (No. 16))" came into force, implementing the Social Insurance Law, Order of the President (No. 35). However, regional differences are emerging in practical application, as the Interim Measures do not specify the cardinal number, the burden rate, due payment date, etc.
- Since October 2011, upon request of GOJ, a bilateral consultation has been under way, as the agreement was reached between GOC and GOJ for early conclusion of the Bilateral Social Security Treaty (BSST). The consultation continues as of now. Incidentally, BSST has been concluded and in force in 12 countries, including Germany and South Korea, while in 3-countries, BSST has been already concluded but not yet in force. Germans are exempted from subscription to endowment issuance and unemployment issuance, while South Koreans' exemption applies as to subscription to endowment issuance. As BSST entered into force before promulgation of Social Insurance Law (SIL), it remains unclear after the promulgation of SIL, how BSST is implemented in practice as to Germany and South Korea.
  (Improvement)
- On 22 March 2016, Shanghai municipal human resources and social security bureau reduced the contribution rates of social insurance (pension 21%=>20%, medical insurance 11%=>10%, unemployment 1.5%=>1.0%), retroactive to 1 January 2016.
(12) Increased Labour Cost to Enterprises by Introduction of Social Insurance - New social insurance law promulgated in 2010, the subsequent measures of Ministry of human resources and social security that compelled enrollment in China in the social insurance scheme, and the increase in personnel cost on aliens working in PRC, personal tax levy, etc. on the portion of the home country social insurance contribution borne by the employer under SAT announcement No.2 (2011), etc. have increased the operational cost. They serve as negative factors, being impediments to further development of FFEs' operation in PRC.
- Employers' assumption of social insurance cost (pension, medication, workmen's compensation, maternity, and unemployment compensation) bears heavily upon employers' profit & loss, a factor that causes the spiraling hike of the labour cost. Social insurance covered at the cost of employer's attaches to the local city, town and village, making it difficult for employers to move staff across the city, town and village borders. As ratification is pending on the bilateral social security agreement between Japan and China, Japanese expatriates must also pay social insurance premium, another factor that inflates the operational costs.
- With ratification of Japan/PRC social security agreement pending, such burden on social security insurance coverage materially aggravates profit & loss of FFEs' business operation. All these factors prompt early review.		 - It is requested that GOC and GOJ accelerate ratification of Japan- China Social Security Agreement.
- It is requested that GOC:
-- constructs integral measures on Personal Income Tax (PIT), such as write off of Corporate Income Tax against PIT (to maintain consistency),
-- adjusts the effects of impact from differences in geographical regions and regional time zones,
-- mitigates impact caused by regional or time differences,
-- secures ample preparatory period before enforcement begins, and
-- overhauls the detailed implementing regulations.
- It is requested that GOC & GOJ give the top priority to ratification of the bilateral social security agreement.
(13) Difficulty in Receiving Payment under Employees Basic Endowment Insurance - An alien employee under endowment policy is entitled to receive the endowment payment only after 15-years of paying insurance premium.
- Japanese expatriates working in PRC must pay premium for endowment insurance doubly in Japan and PRC.
Endowment insurance takes more than 15-years to qualify for receiving payment. In effect, it ends up by turning into "insurance with no refund".		 - It is requested that GOJ and GOC ratify as soon as possible the Social Security Agreement to resolve the double payment problems.
- It is requested that GOC & GOJ:
-- ratify agreement on exempting expatriates from payment of social insurance premium, as is done between PRC and F.R. Germany, and
-- conduct negotiation for that purpose.		 - Social Insurance Law
(14) Regional Disparity/Disunity in Implementation of Social Security System - By virtue of amended social insurance law, it applies to enrollment of foreign workers in social insurance. However, its operation and thoroughness of operation await harmonisation. (It means cost increase to enterprises that correctly have taken responsive action.)
- Independence of social insurance scheme in each autonomous body gets in the way of employing capable human resources. (Where an employer desires to employ a Shanghai citizen in Suzhou, transfer of social insurance policy is not possible. Employment of such person is only possible by the assistance of manpower supply company with an extra cost, with, possibly, a negative impact upon the sense of belonging of the person so adopted.		 - It is requested that both GOJ and GOC:
-- resolve double payment by ratification of social security treaty, and
-- harmonies application of relevant laws.
- It is requested that GOC administers social insurance scheme uniformly statewide, or in a broader area (for example, Huadong District).		 - Social Insurance Law
  (Action)
- On 15 October 2011, "Interim Measures for the Participation in Social Insurance of Foreigners Employed in China (Order of the Ministry of Human Resources and Social Security (No. 16))" came into force, implementing the Social Insurance Law, Order of the President (No. 35). However, regional differences are emerging in practical application, as the Interim Measures do not specify the cardinal number, the burden rate, due payment date, etc.
(15) Nebulous Interim Measures for the Participation in Social Insurance of Foreigners - Shanghai city has not yet promulgated implementing rules on mandatory enrollment of foreign workers in social insurance, while it is already enforced in Beijing. Before long, other provinces and cities will follow suit. It means another cost increase factor, including double payment of social insurance premium, and insurance with no refund (on pension insurance).
- No payment has been made yet on Social Insurance of Foreigners Employed in China (SIFEC). As of now, Shenyang Japanese Association (SJA) has filed a formal proposal, requesting Shenyang authority's public disclosure of the full details of the basis, timing, and substantive details of SIFEC, after which formal enrollment in SIFEC by SJA members will begin across the board.		 - It is requested that GOC and GOJ will ratify and enforce bilateral social insurance treaty, as soon as possible. - Social Insurance Law
- Article 97 of Social Insurance Law
- Order MHRSS No. 16 The Interim Measures for the Participation in Social Insurance of Foreigners Employed in China, enforced on October 15, 2011.
(16) Tightened Provisions on Labour Dispatch - "Interim provisions on labour dispatch", enforced on 1 March 2014, has tightened the control on deployment of dispatched workers (DWs), (such as holding down the DWs' ratio (against directly employed employees) within 10% until March 2016, frustrating employers' seasonal adjustment of production volume.
- The 10% cap on DWs ratio, namely, [DWs/Total number of employees (Direct Employees + DWs)] tightens employer's ability to make seasonal adjustment of production volume.
- Tightened restrictions on the ratio of the dispatched workers over total workers, increased awareness of "Equal Pay for Equal Work", etc., have pushed up the labour cost.		 - It is requested that GOC takes steps to moderate legislative overhauls that allows smooth enterprises operation.
- It is requested that GOC raises the DWs' ratio to 30%, which is appropriate.
- It is requested that GOC ensure that DRI fully provides the precise details of implementation, such as establishment of the most appropriate rate by reflecting the regional supply of labour force, GDP level, etc.		 - Labor Contract Law
- Several Provisions on Labour Dispatching (SPLD)
- Article 4 of SPLD.
  (Action)
- On 24 January 2014, Human Resources and Social Security Bureau promulgated "Interim Provisions on Labor Dispatch", which provides in substance as follows:
(1) As regards the upper limit of the number of dispatched labour per enterprise, Interim Provisions provide: "An employer shall strictly control the number of despatched workers employed which shall not exceed 10% of the total number of its workers." (Article 4). The employer must formulate the adjustment plan based on the actual performance and reduce the number gradually until 29 February 2016. Any employer failing to achieve this limit shall be subject to penalty. Furthermore, no increase is permissible in this ratio during the grace period.
(2) As regards Sanxing, Interim Provisions provide: "temporary" means work not lasting for more than 6-months, "supplemental" means work not providing service for the main work, and "substitutable" means work substituting respectively the worker on leave or for learning, etc.) In this regard, as to "substitutable", the employer must set up the public notice within the enterprise the draft plan for the applicable work after discussion with the employees representative general meeting or by discussion of the total employees, and then, for its discussion with its labour union or employees' representative.
(3) Dispatched labor's right to "equal work equal pay", set forth in the Labour Contract Law must apply equally to fringe benefits as well. (Article 9).
(17) Increased Cost to Employers for Security Bond on Employment of Persons with Disabilities - Security bond refund (the number of the enrolled persons x 1.5%) under interim measures for transfer on security bond for employment of persons with disabilities has terminated. Many on the payroll comprise of foreign workers, while the stipulated disabled persons do not reside in the neighbouring area. It simply amounts to additional taxes. - It is requested that GOC reviews:
-- the mathematical formula for calculating the number of the stipulated disabled persons and also
-- the going rate of 1.5%.		 - Interim Measures on Security Bond for Employment of Persons with Disabilities
(18) Difficulty in Accounting for Expenses incurred by Japanese Visitors to MFS - In the case where a Japanese staff of a Member Firm visits for business purposes the Member Firm's subsidiary (MFS ) in PRC, expenses incurred in Japan for the business trip to MFS cannot be entered as expenses in the book of MFS, for lack of the "fapiao (invoice)" issued only in PRC. - It is requested that GOC takes steps to enable MFS to enter such expenses on the book of MFS as MFS expenses, even without "fapiao".
(19) Transfer or Overseas Trip is Difficult for the Local Employees due to Permanent/ Temporary Residence Scheme - The Firm transferring its local employees to other location finds that the local employee is unwilling to move his/her official family registry (OFR) to the new location. Problems arise upon his/her transfer to other location or dispatch on overseas business trip. The local staff children can receive education only at the place of OFR. Such staff must return to the place of OFR for acquisition of passport, visa, etc. when making overseas business trip.
- A local staff, working in a location other than his/her home country, does not move the permanent residence to the address of the workplace.
For this reason, such staff needs to return to the place of permanent residence for acquisition of passport and visa, frustrating his or her overseas business trip.		 - It is requested that GOC revises the OFR system.
- It is requested that GOC takes steps to revise the OFR system.
(20) Rigorous Control of Overtime Work - The current restrictions on overtime work do not come to grip with the rapidly expanding economy, making it difficult for enterprises to observe the legislative requirements.
- Due to the provisions of the current LL that restricts overtime-working hours, MFS is unable to cope with the change in production volume. It is difficult to observe the law to the latter
(e.g. overtime per general worker per month is 36 hours maximum).		 - It is requested that GOC implements the law flexibly tailored to the prevailing needs and circumstances.
- It is requested that GOC takes steps to review the restrictions for making necessary adjustments.		 - Labour Contract Law
- Labour Law, Article 41
(21) Irrational Statutory Retirement Age - The retirement age of female worker is prescribed as 50-years old, which works contrary to employers' effort toward active deployment and upbringing of female employees as executive staff/officers. - It is requested that GOC takes steps to expand the age-limit retirement of female executive staff. - Decision of SCNPC on Authorizing the State Council to Make Partial Amendments and Supplements to the Measures Concerning the Retirement and Resignation of Staff Member and Workers, Article 1 (1).
(22) Inadequacy of Economic Compensation Scheme - In the absence of retirement allowance scheme, employers pay not even a penny for a leaving employee on his own accord. However, employers must pay economic compensations to employees in the event of change or cancellation of the labour contract at the company's request. Cases have arisen whereby a party demanded a huge amount of economic compensations for even a small case such as change of company name. It impedes move of personnel to another firm in the same group. - It is requested that GOC takes steps to get labour contract law amended. - Labour Contract Law

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