What Foreign Retailers Should Know about China’s Regulations

Jul 16 2020
What Foreign Retailers Should Know about China’s Regulations

Foreign retailers must adhere to strict government requirements and employment regulations (in particular) to operate in China. Compliance with these requirements and regulations can be quite complicated especially if you have multiple stores, which will inevitably involve staff rotation, as well as a variety of job functions for different staff members.

China’s retail employment modules

Retailers must first familiarise themselves with these four employment modules to operate in China:

  1. Full-time Labour Contract
  2. Non-full-time Labour Contract
  3. Labour Dispatch Contract
  4. Service Agreement

For employees hired under the full-time labour contract module, social benefit or insurance contribution is compulsory, while those hired under the non-full-time labour contract module are legally not permitted to work more than four hours a day and must be paid up to 15 working days a month.    

An employer may hire his staff under the labour dispatch contract module if they are filling temporary, alternative and subsidiary roles, though such staff should not account for more than 10 per cent of the company’s total workforce.  

Employers may also use service agreements if they intend to hire retired individuals or those who already have full-time contractual obligations with other companies.

Hourly arrangement

In addition to the four main employment modules, retailers must also be familiar with China’s three main working hour schemes:

  1. The first scheme is the Standard Working Hour Scheme, which entails up to eight hours of work daily (40 hours a week), and it is mainly applicable to white-collar, office position holders.

     

  2. The Flexible Working Hour Scheme, as its name suggests, is applicable to employees who do not have a fixed schedule or number of working hours in the position of management and sales, and does not regulate any overtime during working days or weekends.

  3. Lastly, the Integrated Working Hour Scheme involves the regulation of overtime hours and pay. For instance, the standard working hour scheme may not be a suitable scheme for retail staff, as they typically have to work on weekends, which make up the weekly peak retail period. As such, they must receive overtime pay according to China’s labour regulations.

Regularly updated regulations

Retailers in China would do well by keeping themselves up to date on the Country’s labour regulations to ensure smooth operation.

In June 2019, the Government sought to lighten the burden of social insurance on employers, a change supported by the Ministry of Human Resources and Social Security, State Taxation Administration, Ministry of Finance, and National Healthcare Security Administration. This change entails the following updates:

  • Lowering employers’ maximum pension contribution from 20 to 16 per cent
  • Adjustment to the calculation formula for employees’ basic salaries to reduce future social insurance contributions, leading to lower payable contribution amounts
  • Continuation of temporary reduction of employer contributions to unemployment and work injury insurance

If you are planning to open a store or multiple stores in China, you must also be familiar with the 1995 Labour Law of the People’s Republic of China and the 2008 Labour Contract Law of the People’s Republic of China, on which the bulk of employment regulations in China are based.

The 2008 Labour Contract Law of the People’s Republic of China covers three types of employment contracts:

  1. Fixed Term
  2. Open Term
  3. Project Based Labour Contracts

Failure to produce or honour written employment contracts will incur penalties, such as fines, legal obligation to double a full-time employee’s wages if he has been working for up to one month without a contract, and legal obligation to retain an employee until he reaches retirement age if he has been working for up to one year without a contract.  

Consider consultation

Retailers planning to establish your businesses in China can consult SBA Stone Forest (“SBASF”) and tap into their extensive services:

Tan Lee Lee
Director of Business Advisory
Tel: +86 21 61867602
Mobile: +86 1381 611 8112
WeChat ID: Lee2TAN

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