In China, the issue of overtime appears complex and quite often controversial. As other critical issues related to the management of commercial activities in China, it requires particular attention in order to understand the relevant legislation and avoid facing with employment law issues.
These difficulties do not involve only foreign companies or less structured operators, but recently also the Chinese big tech company have been involved in the declaration of the “996” as unlawful practice. The “996” refers to a working practice that requires employees to operate from 9 a.m. to 9 p.m. for six days per week. Pursuant to Articles 26, 41 and 43 of the current law, it is not allowed to extend the overtime over 36 monthly hours, therefore the “996” practice has been declared unlawful. For this reason, it was deemed useful to address the issue concerning the overtime remuneration.
The chapter IV of the Labour Law (hereinafter the Law) of the PRC specifically regulates the aspects related to working hours, rest, vacation and overtime.
Pursuant to Art. 36 of the Law, the total number of hours applicable to the employee provides for a maximum of 8 hours per day and 44 hours per week, with a day of rest. However, in some circumstances the employee is required to extend his working hours, which are consequently classified as overtime.
Overtime is regulated by the Art. 41 of the Law, in which it is defined as conditional, implying that work performance exceeding the 8 hours per day shall be required only if correlated to the production or business operation of the company. Furthermore, the consultation with trade union and labourers is required, as long as they legitimate the applicability of overtime.
Basically, the overtime shall not exceed the duration of 1 hour per day or, in special cases, 3 hours per day. In any case, there is a limit of 36 monthly hours, as long as the physical condition of the employee is always granted.
The law defines those cases in which the performance of overtime is not allowed, namely:
- a) Where in the event of natural disasters, accidents or for other reasons, the life and health of labourers or the safety of property is endangered;
- b) Where in the event of breakdown of production equipment, transportation lines or public facilities, production and public interests are affected and rush repair must be done without any delay;
- c) Other circumstances stipulated by laws, administrative rules and regulations.
Furthermore, minors, pregnant women and women with infants below one year of age are excluded from work performance during overtime hours.
When the hours provided for in the contract are exceeded, therefore the employee carries out the so-called overtime, the employer is required to grant an additional percentage of basic remuneration, which varies according to the time in which the performance takes place. There is, therefore, a distinction between “working days overtime” and “non-working days overtime” depending on whether the activity is carried out respectively during weekdays or holidays defined in Art. 40 of the Labour Law.
The Art. 44 of the Law provides for an increase of the basic remuneration equal to:
- 150% in case of overtime work;
- 200% in case of overtime work carried out during the days of rest;
- 300 % in case of overtime work carried out during national holidays.
However, there are some cases in which employees do not have the right of remuneration for the overtime. The Chinese law allows employers to organize the overtime system according to the so-called “Comprehensive Working Hour System” and the “Flexible Working Hour System”. In the former case, when the agreed number of hours has been exceeded, the employee has the right to receive a remuneration for the extra hours. In the second case, instead, some categories of employees (as salespeople) do not have the right of compensation for overtime hours. However, in this latter case, it is necessary to refer to local law in order to verify an eventual different regulation.
It is evident that, theoretically, the regulation related to overtime system is clear and well-defined. However, several events confirm the wide gap between the theory and the interpretation, therefore the application of the law, highlighting a series of contradictions that limit the correct law implementation. It is therefore fundamental to treat this issue within the employment contract and regulate these aspects in detail, while limiting the risks linked to an uncertain application of the rules.
China Desk
