PROVISIONS OF SHANGHAI MUNICIPALITY ON THE
ADMINISTRATION OF LABOUR AND PERSONNEL OF
SINO-FOREIGN EQUITY JOINT VENTURES

(Adopted on December 29, 1987, at the 33rd Meeting
of the Standing Committee of the Eight Shanghai
People's Congress)

SUBJECT: LABOR & EMPLOYMENT

ISSUING-DEPT: SHANGHAI MUNICIPALITY

ISSUE-DATE: 12/19/1987

IMPLEMENT-DATE: 02/01/1988

LENGTH: 4071 words

TEXT:

CHAPTER I GENERAL PROVISIONS

[Article 1] The present set of provisions are formulated in accordance with "The Law of The People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and its detailed rules and regulations for implementation, "The Regulations of The People's Republic of China on The Administration of Labor of Sino-foreign Joint Ventures" and other relevant laws and administrative regulations as well as the actual conditions in Shanghai city with a view to strengthening the administration of labor and personnel of Sino-foreign equity joint ventures in Shanghai city and promoting the development of the joint ventures.

[Article 2] All Shanghai-based Sino-foreign equity joint ventures (hereinafter referred to as joint ventures) should be abided by the present set of provisions.

CHAPTER II RECRUITMENT, DISMISSAL AND RESIGNATION OF EMPLOYEES

[Article 3] The joint ventures may decide themselves their organizational structure and the size of staff in accordance with their production needs.0 The employment plans decided by the board of directors of the joint ventures should be reported to the departments in charge of the joint ventures, the Shanghai Labor Bureau and the Shanghai Bureau of Personnel for the record and are to be carried out under their guidance.

[Article 4] The authoritative departments in charge of or the Chinese partners to a joint venture may recommend Chinese engineers, technicians, managerial personnel and skilled workers in their own respective trades to the joint venture if the joint venture needs the said staff and workers.0 The authoritative departments in charge may also recommend fresh graduates from post-secondary colleges, and secondary and technical schools to the joint venture. The joint venture is also allowed to publicly recruit such staff and workers locally in Shanghai city. However, all the above candidates are subject to examination by the joint venture and only those qualified ones will be hired. In individual cases where the need staff and workers cannot be found in Shanghai city may be recruited or invited to work for the joint venture on a loan-basis from other provinces or cities subject to prior agreement from the Shanghai Labor Bureau, the Shanghai Bureau of Personnel and the relevant district labor and personnel departments. Joint ventures are not allowed to hire students who are still studying at schools and those whose employment is not permitted according to the relevant State provisions.

The original employers of the qualified candidates who are publicly recruited by the joint ventures in the city should actively support their transfer and release the candidates accordingly. If any dispute arises over the transfer, the Shanghai Labor Bureau and the Shanghai Bureau of Personnel shall be the organs to consult and decide.

[Article 5] Chinese employees needed by the joint venture should be examined and recruited first among the employees of the Shanghai enterprise if that Shanghai enterprise is a Chinese partner of the joint venture; the departments in charge of that Shanghai enterprise shall be responsible for arranging new employment for those workers who have not been chosen by the joint venture.

[Article 6] The foreign partners of the joint venture may recommend to the joint venture their relatives in China who are considered to be competent in work and suitable according to the needs of the joint venture but are subject to examination by the joint venture.

[Article 7] The minimum age requirement of employees to joint venture is 16; the requirement of those who are engaged in activities that involve the handling of toxic materials or unusually heavy manual labor is 18.

Joint ventures can only hire those who are permanent residents of Shanghai city.

[Article 8] Joint ventures must go through the employment formalities with the labor and personnel departments of relevant districts or counties.

[Article 9] The probation period of employees hired by the joint venture is generally from three to six months.

[Article 10] Joint ventures shall adopt the contract labor system in recruiting their staff and workers. They are allowed to sign contracts of various terms of employment with their employees according to their production and management needs. Contracts must be prepared in line with the relevant needs.0 All contracts must be prepared in line with the relevant contract should include the following:

(1) Quantity and quality targets that should be reached in production or work, and the tasks that should be fulfilled;

(2) Length of the probation period and term of employment;

(3) Remuneration, labor insurance and other living welfare;

(4) Production and labor conditions and labor protection;

(5) Provisions regarding labor discipline, reward and punishments, and clauses on dismissal and resignation;

(6) Obligations of the party who has violated the labor contract, and

(7) Other stipulations that are considered to be necessary by both parties.

The labor contract is a legal document and is effective on the day when it is signed. Both parties shall strictly be abided by the contract.0 Any revision of the contract must have the agreement of both parties. A contract may be renewed if both parties agree to do so upon the expiration of the contract.

The standard copy of the contract should be reported to the departments in charge, the Shanghai Labor Bureau, the Shanghai Bureau of Personnel and the Shanghai Municipal Council of Trade Union for the record. The above mentioned departments may may supervise and inspect the implementation of the contract.

[Article 11] Joint ventures should have a "Labor Manual" for their Chinese employees. The manual is a token of their employment, entitlement to pension while unemployed, and the retirement pension and for job transfer purpose.

[Article 12] Joint ventures may only terminate a labor contract and dismiss the employee in accordance with one of the following cases:

(1) The employee is found to be not in line with the employment requirements during the probation period;

(2) The employee is found to be incompetent for his work after he has received the prescribed medical treatment due to illness or injury caused in a non-service accident;

(3) The employee has serviously violated labor discipline and should be dismissed according to stipulations in the labor contract;

(4) Overstaffing because of changes in production, business or technology of the joint ventures, and

(5) The joint ventures declare solvency or the joint ventures dissolve upon expiration of the contracts.

[Article 13] A labor contract will become void automatically if the employee has been unlisted from the venture, dismissed, put under labor education by the relevant authorities or jailed.

[Article 14] Joint ventures can not terminate a labor contract and dismiss the employee in one of the following cases:

(1) The employee is currently receiving the prescribed medical treatment due to illness or injury caused in a non-service accident;

(2) The employee has been injured on service or is suffering from an occupational disease and he is receiving medical treatment and is in the recuperation period, or he has partially or completely lost his working ability after the treatment and his situation has been verified and confirmed by the Labor Appraisal Committee;

(3) Female employee who is pregnant, on maternity leave or undergoing a nursing period after the delivery provided the female employee observes the family planning program, and

(4) Terms of the labor contract is still in effect and none of the conditions mentioned in Article 12 of this set of provisions applies.

[Article 15] An employee may terminate his labor contract in accordance with one of the following cases:

(1) The labor safety and hygienic conditions of the joint venture are so bad after it has been confirmed by the relevant government departments that the conditions may have detrimental effects on the health of the employee;

(2) The joint venture has not fulfilled its obligations concerning the remuneration of the employee as stipulated in the labor contract; and

(3) The joint venture has violated provisions stipulated in the labor contract or other relevant Chinese laws and regulations, and infringes on the legitimate rights and interests of the employee, and

(4) The employee may resign for his own reasons, subject to approval by the joint venture.

[Article 16] Any party who wants to terminate a labor contract should consult the trade union of the joint venture and should inform the other party one month in advance of the termination. They shall then go through the termination formalities.

Any party who has not fulfilled his obligations as stipulated in the labor contract and caused economic losses to the other party is liable of making a compensation for that party.0 The amount of the compensation shall be determined according to the damage and the obligations which has not been fulfilled.

[Article 17] Joint ventures should pay living allowance to those Chinese employees who have terminated their labor contracts, or have been dismissed according to (2), (4) and (5) of Article 12, or have resigned according to (1), (2) and (3) of Article 15.0 The amount of the allowance should be determined on the basis of their tenure with the joint ventures as follows: those who have worked for the joint ventures for less than one year, 50% of the actual monthly income of that employee; those who have worked for the joint ventures for more than a year, a full month pay for that employee for each year he worked for the joint ventures, but the total amount of the allowance can not be more than the combined total of a 12-month pay for that employee.

Apart from living allowance, a joint venture should also pay a Chinese employee who has been dismissed under (2) of Article 12 medical allowance equivalent to three to six months of the actual income of the employee. On the other hand, a joint venture should also, apart from living allowance, pay a Chinese employee who has been dismissed under (4) of Article 12 compensation for dismissal equivalent to three to six months of the actual income of the employee.

[Article 18] An employee whose training was funded by the joint venture should pay the joint venture a certain amount of training fee compensation if he resigns according to (4) of Article 15 but has not completed his service terms with the joint venture after having finished the training.0 The amount of training fee compensation should be determined according to provisions stipulated in the labor contract.

[Article 19] The arrangements for Chinese employees who have their labor contracts terminated and cancelled are as follows:

(1) Those hired by the authoritative department in charge of the joint venture and the Chinese investors from among their own trade and those fresh graduates will be assigned by the authoritative departments in charge and the Chinese investors except those who are dismissed by the joint ventures according to (3) of Article 12 and those who resign according to (4) of Article 15, and

(2) Those hired publicly by the joint venture from among the unemployed or working Shanghai residents and those who are dismissed by the joint venture according to (3) of Article 12 and those who resign according to (4) of Article 15 shall return to their own residential areas to register for new employment.0 Their employment with the joint venture will be accepted when calculating their total service period after they have found a new job.

(3) Those hired from among the rural areas by the joint venture shall return to the rural areas, and

(4) Those hired and recruited by the joint venture from other provinces and cities shall return to where they were recruited or invited to work for the joint venture on a loan basis.

[Article 20] The joint venture should have special funds for the education and training of its employees so as to improve their competence, both technically and commercially, to better meet the needs of the joint venture.

[Article 21] The senior managerial personnel recruited by the board of directors of the joint ventures should be professionally competent, know how to manage the joint venture and should be well-versed in legal matters and should be able to work with his colleagues.0 Any change to their employment must have the agreement by the board of directors. The authoritative departments in charge of the joint venture should actively support their work.

[Article 22] Joint ventures must report statistics of their payroll to the Shanghai Statistical Bureau, Shanghai Labor Bureau and the authoritative departments in charge of the joint venture according to stipulations of relevant statistical regulations of China.

CHAPTER III REMUNERATION, REWARD AND PUNISHMENT

[Article 23] Joint ventures shall decide the wage scale, forms of payment, reward and allowance of their employees.

[Article 24] At the early stage of operation, the board of directors of a joint venture shall decide the actual wage level of its Chinese employees (including salary, bonus and allowance etc.) The amount of which shall not be less than 120% of the actual wage level earned by the Chinese employees of Shanghai state-owned enterprises of the same line of trade of the joint venture. The joint venture shall raise the actual wage level of its Chinese employees according to their improvement in technical skills and efficiency and its production situations. The joint venture shall consult the trade union and its employees if it wants to adjust the actual wage level of its employees when it is suffering from losses due to production or business difficulties.

The authoritative department in charge of a joint venture shall join the Shanghai Labor Bureau in examining the actual wage level of Chinese employees of Shanghai state-owned enterprises of the same line of trade of the joint venture and notify the joint venture after they have reached a decision.

[Article 25] The remuneration of the general manager, deputy general manager, chief engineer, deputy chief engineer, chief accountant and deputy chief accountant of a joint venture shall be decided by the board of directors of the joint venture and reported to the authoritative department in charge and the Shanghai Labor Bureau for the record.

[Article 26] Joint ventures should work out their company rules and regulations concerning the reward and punishment of their employees in accordance with Chinese law and regulations and the actual conditions of the joint ventures.

Joint ventures should give encouragement or material rewards to those employees who conscientiously observe the company rules and regulations and who have outstanding performance in their jobs.

Joint ventures may give criticism, advice and disciplinary actions to or even dismiss those employees who are found to have violated the company rules and regulations. The degree of action to be taken shall be determined according to the seriousness of the individual case involved. Before a joint venture considers to take disciplinary action against an employee, the joint venture should first consult the trade union and the employee should be allowed to explain himself. If the employee disagrees with the final decision of the joint venture, the case shall be handled according to the provisions concerning labor disputes as stipulated in Chapter Six of the present set of provisions.

Chinese employees dismissed by joint ventures shall report to the authoritative department in charge and the district or county labor bureau the district or county of which the employees reside.

CHAPTER IV LABOR INSURANCE, BENEFITS AND UNEMPLOYMENT INSURANCE

[Article 27] All joint ventures must enter into the old age pension scheme with the Chinese People's Insurance Company Shanghai branch for all their Chinese employees from the date the joint ventures are approved to establish.

The premium of the old age pension scheme should be equivalent to 30% of the total actual payroll of the in-service Chinese employees on active service of the joint venture. When necessary, the insurance company may adjust the rate of the premium according to changes of the actual situations subject to approval of the Shanghai Municipal People's Government. The collected fund shall be deposited into a special account and can be used for old age pension payments only. It should be separated from other accounts of the joint venture and independent accounting should be practised. No organization is allowed to divert fund from this account.

The old age pension covers pension, medical expenses, funeral expenses and condolence money for the family of the deceased.

[Article 28] Chinese employees on active service of joint ventures are entitled to three to twelve months of sick leave for medical treatment when are ill or injured in a non-service accident. The length of which shall be determined according to the length of service of the employees with the joint ventures. The medical treatment period may be properly extended for those who have a long service period with the joint ventures or other enterprises and who have outstanding performance in their jobs. Living expenses, medical expenses, funeral expenses and condolence money for the family of the deceased shall be borne by the joint ventures in accordance with the standards set by Shanghai state-owned enterprises for their employees. Joint ventures may buy health insurance for their employees.

The medical expenses and living expenses of a Chinese employee who is in active service, and the funeral expenses and the condolence money for the family of the deceased shall be borne by the joint venture if the employee is injured while he is on service or has occupational disease.0 The standards shall be determined according to those set by the Shanghai state-owned enterprises for their employees. Joint ventures may buy safety insurance for their employees.

[Article 29] Joint ventures must provide the necessary welfare facilities and benefits for their Chinese employees. Expenses thereof shall be treated as a production cost of the joint ventures accordingly.

[Article 30] Joint ventures shall take 15-20% from the total payroll of their Chinese employees on active service each months as housing allowance. The Chinese parties to the joint ventures shall then use the money to buy or help build living quarters for the Chinese employees.

[Article 31] Joint ventures shall pay the State Price Subsidies for Grains, Oil, Non*staple Food and Fuel to the Shanghai Financial Bureau for their Chinese employees the amount of the subsidy shall be calculated with reference to the total number of their Chinese employees on active service. Export-oriented and technologically advanced foreign investment enterprises are exempt from the subsidy.

[Article 32] The bonus and welfare funds a joint venture deducts from its after-tax profits can only be used as bonus and for the public welfare of its employees. Welfare funds are belonged to all employees and should be used under the supervision of the trade union.

[Article 33] Joint ventures shall adopt the unemployment insurance scheme for the Chinese employees on their payrolls. A joint venture shall pay a certain sum each month into the unemployment insurance fund administered by the district or county labor service company where the joint venture belongs for the Chinese employees on its payroll in accordance with the standards set for Shanghai state-owned enterprises. The living expense of an employee who has been dismissed by the joint venture and is looking for a new job shall be covered by district or county labor service company the district or county of which the employee resides in accordance with the standards set for Shanghai state-owned enterprises.

[Article 34] The recruitment, dismissal, remuneration, benefits, social insurance and other matters of foreign employees and employees from Hongkong, Macao and Taiwan shall be decided by the boards of directors of joint ventures and stipulated in the employment contracts. Such information shall be reported to the authoritative departments in charge and the Shanghai Labor Bureau for the record.

CHAPTER V LABOR PROTECTION AND WORKING HOURS

[Article 35] Joint ventures must follow China's laws and regulations concerning labor protection, industrial hygiene, supervision and inspection of the pressure devices of boilers and special protection for female employees in order to improve the labor protection of their employees. Joint ventures should have the necessary personnel to be in charge of their labor protection and industrial hygiene work, and these enterprises should take practical and effective measures to improve the working conditions and ensure a safe and healthy working environment for their employees.

Joint ventures shall issue their employees labor protection articles and health-care food in accordance with the actual needs in production and work.

[Article 36] Joint ventures should report to the relevant departments in time in cases of employees killed while on duty and serious cases of poisoning or injuries due to accidents of an occupational nature, and cooperate with the departments during the investigation and handling of the case in accordance with China's relevant laws and regulations.

[Article 37] Joint ventures should follow China's existing system regarding the number of working hours. They may shorten the number of working hours according to their own needs.

Joint ventures should strictly limit their overtime. If it is found necessary to have the employees worked overtime, the joint ventures should consult the trade unions and issue overtime pay to the employees accordingly.

[Article 38] Joint ventures' employees are entitled to full pay on all official Chinese holidays, annual leave, home leave (visit), wedding and funeral leaves, leave allowed for birth control medical attention and maternity leave.

CHAPTER VI LABOR DISPUTES

[Article 39] Labor disputes between the joint ventures and employees arising from implementation of labor contracts, or firing, removal or dismissal due to violation of labor discipline shall be first dealt with through consultation. If both sides fail to reach an agreement through consultation, both parties can apply for arbitration with the Shanghai Labor Dispute Arbitration Committee. Any party that does not agree with the committee's adjudication may bring the case to the people's court of the district or county where the joint ventures are located within 15 days upon receipt of the adjudication letter from the committee.

CHAPTER VII SUPPLEMENTARY PROVISIONS

[Article 40] Unless otherwise stated, the present set of provisions shall apply in all labor and personnel administration matters of Sino-foreign contractual enterprises, wholly foreign-owned enterprises, and enterprises established with investment by overseas Chinese, Hongkong, Macao and Taiwan companies, enterprises, or other economic entities or individuals in Shinghai.

[Article 41] The Shanghai Labor Bureau and the Shanghai Bureau of Personnel shall supervise the implementation of the present set of provisions and the authority to interpret the present set of provisions is vested with the Shanghai Labor Bureau.

[Article 42] The Shanghai Labor Bureau and the Shanghai Bureau of Personnel may together work out the detailed rules for the implementation of the present set of provisions.0 Implementation of the detailed rules is subject to approval by the Shanghai Municipal People's Government.

[Article 43] The present set of provisions was adopted at the Standing Committee Meeting of the Shanghai Municipal People's Congress and went into effect on February 1, 1988. This present set of provisions shall be the final reference in case of any contradiction between this set of provisions and other previously issued provisions.