[WE-News]:Worker’s View on new Labour Contract Law & Research on Furniture Industry in Pearl Delta Area



Worker Empowerment E-newsletter Issue 2/2007 23rd August, 2007


Worker’s View on new Labour Contract Law & Research on Furniture Industry in Pearl Delta Area




Workers’ Skepticism on the enforcement aspect of the New Labour Contract Law

Workers Training and Education are urgently needed for Substantial Worker Protection

Public Concern

On 29 June 2007, the 10th session of the National People’s Congress (NPC) Standing Committee (the Committee) passed the Labor Contract Law (the Law). This Law will take effect on 1 January 2008. The Law was first submitted to the Committee for reading on 24 December 2005. The second draft was released for public consultation on 20 March 2006. Following its release, the NPC then received over 19,000 pieces of public opinion (the second highest number since the establishment of the People’s Republic

of China).

Chessboard for Labour Protection and Enterprise’s Interest

From December 2005 to June 2007, players from the business sector, especially the multinational cooperates were extremely active in lobbying for the law, the American Chamber of Commerce and European Union Chamber of Commerce in China both expressed similar concerns on the issue of a potential cost increase which may ultimately led to the removal of foreign investments in China when the law takes effect on 1 January 2008.

Although the NPC said that over 70% of the opinions received were sent by individual workers, those workers still suffered from serious power imbalance since they were not organized. With the view to influence and participate in the law making process, workers have also encountered difficulties in engaging in a direct dialogue with officials and the mass media. As such, there is indeed no doubt that workers are in an extremely fragile position that urgently calls for a level playing field.

Objectives of the Law

Two of the most important objectives of the Law is the regulation of labour contracts and the standardi zation of the compensation level for termination. Article 14 of the law stipulates that if an employee has served over 10 years or two fixed-term contracts, the employers must sign an open term contract with her/him in order to provide the worker with a stable employment. Meanwhile, if the employer did not sign a contract with the employee, then the lack of a signed contract will be deemed as having open term contract with her/him.
The level for compensation that is to be awarded to aggrieved workers in cases where his/her employer violates that law is also clearly stipulated in the Law. Article 82 of the Law stipulates that where an employer fails to sign a contract with a worker, the employer will have to compensate the worker with an amount

double his/her wage. Likewise, in cases of unfair or illegal dismissal, workers are also entitled to double his/her wage.

The New Law is Not Flawless

First, the appendix of the Law states that the economic compensation on the termination of contract will be calculated from 1 January 2008. In other words, even if a worker had served the same employer for 20 or 30 years, she/he would only be entitled to 2 weeks to one month’s salary as compensation if their contract terms end in 2008. The new Law is absurd in the sense that it does not take into account the service years of a worker prior to 1 January 2008.

Second, the amended Article 41 of the Law is also defective in stipulating that if an employer was to lay-off more than 20 workers or 10% of its staff, the employer should “listen” to the opinions of the all its staff, instead of simply “getting their permission” as compared with the said draft. Commentators believed that this is a critical setback.

Enforcement Remains as Workers’ Ultimate Concern

Despite of the undeniable flaws inherent in the new Law, mainstream commentators unsurprisingly appear to welcome the new Law. Workers who are supposed to benefit from this new Law on the other hand are not that optimistic. According to a public opinion survey conducted by the China Youth Daily, only 5% of the interviewees believe that the Law can protect their labour rights for sure, while 74.3% believed that the protection of their labour rights under the new Law is heavily dependent on the relevant government departments’ implementation measures.

The result of the survey was not surprising to many workers and NGOs working on labour issues in China, since it basically reflects the real experience of every worker in China. At the moment, most of the workers in the Pearl River Delta (PRD) do not receive minimum wages and overtime payments. What is even more appalling is that even if these workers religiously follow every step of the administrative process in claiming back their overdue payments or compensations from their employers, they rarely get what they theoretically under the Law are entitled to. Workers under this regime have long been victims of administrative inaction by the labour department. We believe that it is really about time to have the theoretical aspect of the law align with the practical implementation of it to benefit workers at the grassroot level.

New Law, New Wrestling

Since the passing of the new law on 26 June 2007, Human Resource Departments in the corporate sector had carried out numerous trainings and studies for the adaptation to the new law and searching for loopholes to “minimize” the labour costs. The first battle relates to economic compensation upon the termination of a contract. Based on the Shenzhen Labour Contract Law, employers do not need to compensate their workers if the labour contract is discontinued or not extended. This article will soon be invalided once the new Law takes effect on 1 January 2008 . From 1 January 2008, employers will have to pay for compensation amounting to one month’s salary for every year of service regardless of whether the termination of contract happen during or by the end of the contract term.

Cases of non-continued labour contracts for workers with more than ten years of service were reported frequently this year. It is argued that this kind of corporate tactic is used to benefit the corporate bosses prior to the passing of the new Law. Nanfang Gongbao, a union newspaper in Guangdong, reported that factories

in PRD area already triggered a wave of “kick the old workers out”2. A month prior to the passing of the new Law, an electronic product factory had dismissed over 500 workers while their contract term ended in May. In addition, the factory also exhausted all means to force its 300 workers with open term to resign by themselves. Tactics used by the factory owner include transferring the workers to unfamiliar position, or degrading them by asking them to act as factory gatekeepers and excoriating them in front of their co-workers.

The multinational corporate also joined this battle. Coverage3 reported that KFC, an American fast food chain had recently dismissed an old worker with ten years of service when his contract term ended on 20 June, eight days before the Law was passed. The worker was a full-star trainer who had obtained more then ten

awards, including “high quality”, “best staff”, “customer satisfying”, etc. It is widely believed that this case is a reflection of the corporate’s intention to shrink their legal and social responsibility.

More Training is Needed to Gear up the Workers

While employers are busy manipulating the law, workers remained almost clueless as to how to go about defending their rights under the new Law. During a labour law seminar in WE’s partner labour centre in Shenzhen, workers showed no very limited knowledge about the new law, as well as little confidence on the successful implementtation. The new law means a new learning process for the workers to pick up this

tool to re-claim their right and attain to the compensation and stable working condition, therefore, as a labour NGO concerned Chinese migrant workers, how to string up the daily experience and the legal right, so to help the workers explore the route for right re-claiming will be the challenge for WE and the partner organizations

on the Labour Contract Law issue.

In the coming future, WE will join hands with the partner labour centre, to provide training of trainer to equip the volunteers and local crew members for legal knowledge and build up the worker’s point of view to the new law. Thus, the learning experience and conclusions will be adopted in the outreach labour education activities, labour law seminars and factory visits.

* Direct translation by the writer

1 http://www.nanfangdaily.com.cn/jj/20060512/zh/200605120006.asp

2 p.4, Nanfang Gongbao, 27th July, 2007.

3 p.4, Nanfang Gongbao, 3rd August, 2007.




Extensive and Serious Labour Problem in the Furniture Industry

Call for Legislation and Inspection


In December 2005 to April 2006, WE and its migrant worker center partner with in Shenzhen carried out a research in the furniture industry in order to stir up discussions among furniture industry workers and to find ways to improve their working conditions and . The methodology of this research involved in-depth interviews and surveyed workers from over 15 furniture factories selected randomly to analyse the labour conditions and workers’ rights in the industry.

Based on our findings, labour problems in the furniture industry are very common and these problems has great ramification on every part of a worker’s life. Problems we have identified include:

  1. Factories commonly adopted complicated wage system with low
  2. transparency;
  3. Long working hours and unpaid overtime work;
  4. Poor food and living condition;
  5. Illegal deposit and unlawful wage deduction;
  6. Factory rule as a tool for illegal wage deduction;
  7. Lack of labour insurance protection;
  8. Insufficient fire prevention facilities;
  9. Lack of leisure time and facilities;
  10. Infrequent and notified inspection have no effect;
  11. Active and varied responds form workers reflect urgent need for improvement.

Utilisation of complicated wage system with low transparency

We found that it is not unusual for factories to use a complicated wage system with low transparency. For instance, among the 15 factories that we investigated, only four of them by their workers by hourly rate

and four of them pay their workers by piece rate. The remaining seven factories paid in mixed rate by selecting the most profitable rate during the peak and low season to control and maximize the production by the workers. During peak season, these factory owners, pay their workers in piece rate to promote quantitative production, and only pay their workers on an hourly rate without paid leave to minimize the labour cost. This is a clear example where factories can easily transfer their business risks to the workers and forced them to bear the unstable income level. Interestingly enough, regardless of whether these workers are paid on an hourly basis or by piece rate, they all have one thing in common. All of the workers that were interviewed and surveyed all have one common denominator, that common denominator is their unawareness as to how their wages are calculated. The problem of not knowing what kind of formula is used to calculate their wages are proven to be one of the greatest obstacles workers face when making a labour

right claim.

Long Working Hours and Unpaid Overtime Work

Overtime work is widespread among the factory workers. They usually work overtime for 3 to 5.5 hours per day, They also do not have leave on weekends. Ten of our respondents reported that they do not have any sort of rest day arrangement per month. 8 out of 15 reported that they do not receive any overtime payments. In cases where they do receive some overtime pay, these are nonetheless far less than the legal standard.

Illegal deposit and Unlawful Wage Deduction

We also found that most of the factories classify their workers into two kinds: experienced and inexperienced. This is done so in order to curb the wage of inexperienced worker below the legal level. Another interesting finding is that factory owners usually require workers to pay a deposit prior to entering their workplace. In two of the factories that we looked at, workers’ identity cards were withhold as a tactic to control their workers. These factories usually deduct part or of the entire wage of that mobth if a workers leave their

factories, as well as they deduct the wage by irrational, law-violating “factory rule” and forced the workers leave the factories themselves, to avoid the economic compensation according to the service year of the workers.

Factory Rule as a Tool for Illegal Wage Deduction

The workers believed that the so called “factory rule” were concern about “penalty”, “fine”, and “control”. Workers were told that if they want to apply for an unpaid leave, then the factory would deduct one more day’s wage as fine. For every minor mistake, 30-50 RMB (US$ 5-6.5) is deducted. For major mistakes, 100-200 RMB (US$13-27) is taken off, while their total monthly income is around 1000-1500 RMB (US$120-190).

The regulation is also designed to control the workers’ leave entitlements and the reassignment of workers. It is also perceived that the regulation is a means to control workers’ freedom of movement at work.

Infrequent and Notified Inspection Have No Effect

Only three factories had labour inspections, but with prior notice. When a factory receives such notice, they are able to prepare for the inspection. As part of this preparation, workers are required to clean the entire workshop with no overtime pay. So really when the inspector comes in, they do not see the real state or condition of factory workers because any mess have already been cleaned up. Workers also be ordered to told a standard answer to the inspectors, and would be fined or fired if the factory owner found that they told the problems of the factories.

Call for Improvement though Legislation and Effective Inspection

Our research shows that the working condition and remuneration of factory workers in the furniture industry is appalling. Such conditions creates extensive distress and disaffection to the workers, ,As a response to these problems, we believe that substantial improvement is urgently needed for a harmonized labour relations. Our recommendations are as follows:

  1. Accelerate the legislative process for specific industries to provide legal protection that suit the needs of the industrial workers;
  2. Lobby for a detailed regulation to restrain the wage deduction by factory rules, and this regulation should be implemented by the Labour and Social Protection Department;
  3. Enhance the occupation safety inspection of the furniture industry on labour insurance and precaution, to protect the workers and safeguard the worker can obtained reasonable compensation if there is any injury events;
  4. Reinforce and the quantity and quality of inspection by more often and sudden inspection, and sending inspector though recruitment process for active evidence collection;
  5. Increase the penalty and punish the illegal factories severely to ensure the receiving and amount of workers’ remuneration.

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