China’s New Labor Law No Help to Chinese Workers

Many Chinese workers could face layoffs in the face of the new contract labor law that will take effect next January. As the new law makes it more difficult for employers to fire their workers and obliges them to pay special retirement compensation, many employers are taking action before the law takes effect.

In response, workers complain that they are being hurt by the new contract labor law that was originally designed to protect them.

China’s largest communications device producer, Huawei Technologies, showed 11.7 percent of its 60,000 employees, or 7,000, the door since the end of September in the form of voluntary retirement. Although these former employees were paid compensation in accordance with the total number of years they had worked, most of them believe they had to leave against their will. Many of them had more than eight years of experience at Huawei. Since the new contract labor law requires employers to guarantee the jobs of their workers with more than ten years of experience in their companies until their official retirement age, the layoff by Huawei was an attempt to avoid such obligations.

China’s state-run media CCTV has also fired 1,800 employees, or 20 percent of its total workforce, in the last three weeks. They were all temporary workers who can be shown the door legally under the current labor law. The new law mandates employers to guarantee indefinite employment for temporary workers who have had their contracts renewed more than twice.

In contrast, only a small portion of workers in foreign firms in China were let go.

When LG fired ten percent of its total workers in June, following their custom of letting go underperforming workers after annual evaluations, it faced a strong backlash from the Chinese, who regarded LG’s action as a “smart move” before the new law takes effect.

Walmart’s procurement center, which employees 1,200 people, were also criticized for letting go 100 workers on October 22. The Chinese media said that half of the job cuts undertaken by Walmart worldwide took place in China.

The new contract labor law places more weight on stable employment, in contrast to the current law, which took effect in 1995. If a worker is employed for more than ten years, his or her job will be guaranteed for life. If a temporary worker has his or her contracts renewed more than twice, the company must guarantee their jobs until retirement age, when it renews contracts for the third time and onwards. The new law states a new provision for retirement compensation, and temporary and regular workers will be paid the same for the same work under the law.

On the whole, companies will experience a 15-percent increase in wages, and it will become more difficult to fire workers.

A CEO of a small firm which has a branch in China said, “Firing workers is not a panacea in dealing with the changes occurring from the new law. We are currently looking for ways to adapt to the new law while maintaining our profits.”

orionha@donga.com