An Investigation on the Implementation of the Labour Contract Law in the Manufacturing Sector

Labour Contract Law 2014 cover

        The Labour Contract Law of China, which aims at regulating employment and protecting workers’ legally abided rights, has been in controversy since its implementation in 2008. Recent trends in industries, such as factory relocation from well-developed coastal areas due to industrial upgrade and the subsequent labour disputes, also the employment of dispatched workers becoming popular in factories, show the need to strengthen legal protection for workers. An amendment of the Labour Contract Law was introduced in July 2013 to serve this function, but the effectiveness is yet to be observed.

        As a grassroots labour organisation based in the Pearl River Delta, Worker Empowerment concerns about the welfare of workers in the manufacturing sector and supports their right-defending efforts. Therefore, following our long-time interest in the Labour Contract Law, a survey to investigate its implementation in the Pearl and Yangtze River Deltas was conducted in 2014, in order to have a better understanding of how the law works to protect workers, particularly the dispatched ones.

        The survey covers eight cities in the Pearl and Yangtze River Deltas, namely Shenzhen, Guangzhou, Dongguan, Huizhou, Shanghai, Nanjing, Suzhou and Jinhua. With the help of a number of labour organisations and university students, questionnaire survey and field study were conducted. 515 valid questionnaires were collected. Some case studies offered by the co-operating labour organisations were also adopted for analysis.

        Among workers who completed a valid questionnaire for us, 60% of them are male. 70% are below 36 years old. A significant proportion of them work in electronics factories. 80% of them are formal workers, and the rest are either dispatched or temporary workers.

        In general, 84.3% of the surveyed workers signed a labour contract with their employer. The proportion has increased in comparison with a survey of similar scale that we conducted in 2009, and is slightly lower than the figure officially announced by the Ministry of Human Resources and Social Security. However, it is shown that establishing an employment relationship in written form is still not a compulsory practice between enterprises and workers. A higher percentage of surveyed workers from big cities signed a labour contract, but the figure is significantly lower in lower-tiered areas. Enterprises of domestic capital are less inclined to sign a labour contract with workers.

        The rationale of the Labour Contract Law is to establish a legal framework for stable employment relationship between workers and their employers. Labour contracts should also be signed under the prerequisite that both parties are entitled to equal rights to negotiate on contract terms. From the survey, however, many workers are not protected as such. For example, contracts are often incomplete, and the terms are not the same as what workers are required to do in the workplace in reality. Due to a low risk in violating the law, employers still tend to act in expediency. Examples include making working overtime regular, signing fixed-term contract with workers continuously, propelling resignation of workers to evade from paying compensations, and many more. The workers’ lack of knowledge and confidence in the law, as well as low capacity to fight against the employer collectively become an obstacle to tackle the problems from the deep root. They are also discouraged to strive for better working conditions and remunerations by renewing the contract.

        In terms of employers’ malpractices related to labour contracts, some improvements are apparently shown over the years, but mostly in big cities. During the relocation of industries and labour power from coastal to inland areas, it is observed that the law is worse implemented in the latter, meaning that demonstrative effect of big cities is often limited. When improvements in coastal areas are achieved only after years of monitoring and supervision, whether inland regions would be benefited is still questionable.

        The amendment of the Labour Contract Law has been implemented since July 2013 to regulate labour dispatch. Measures include keeping the use of dispatch workers within the bound of temporary, auxiliary and substitutive positions; ensuring equal pay of formal and dispatched workers; and setting a higher bar for starting a labour dispatch business. The Interim for Labour Dispatch announced in April 2014 also restricts the proportion of dispatched workers in an enterprise to 10%. From the survey, it is found that many enterprises still use an exceeding proportion of dispatched workers. Most dispatched workers do not know how their work nature is different from formal workers, and they are also generally less well paid.

        Adding insult to injury, although more legal measures are introduced to regulate labour dispatch, the demand of enterprises on a flexible workforce remains high. Even if labour dispatch no longer works, hiring temporary workers and outsourcing still enable them to play down their role as employers. This makes it harder for workers to identify the party to be held responsible in case disputes arise in an employment relationship.

        To strengthen the enforcement of the Labour Contract Law to protect the legal rights of workers, we reckon that the labour department should make an effort in the following perspectives:

  1. Inputting resources in promoting and enforcing the Labour Contract Law, in order to increase the awareness of workers and understanding of their own rights;
  2. Closer supervision in inland areas and enterprises of domestic capital, to block transfer of bad practices by relocation;
  3. Increasing risks for enterprises by more proactive prosecution and criminalisation of repeated violation of the law;
  4. Monitoring labour dispatch and other forms of flexible employment which are out of the legal framework;
  5. Opening up rooms for workers to organise and negotiate with their employers on equal grounds.

         This investigation may have its own limitations due to restraints in resources, but surveys as such from a grassroots perspective should continue. It is hoped that the survey would keep going year after year and extend to more regions, so that more workers would be better informed of the Labour Contract Law, fight for their own rights and ultimately benefit from it.

The full report in Chinese can be downloaded here: Labour Contract Law_WE_2014-7