1.8 Million Workers Employed without Labour Contracts in Zhejiang

It was reported in Xinhua on 1 September 2003 that according to their estimates, some 1.8 million workers are employed without work contracts in Zhejiang Province alone.
Despite national laws obliging all employers and employees to sign work contracts, it remains common for many workers to be given a verbal agreement instead of a signed contract, leaving their rights and their legal status unrecognized and often unenforceable. These workers are often called “underground workers”.

According to the Xinhua report, the Zhejiang Labour Inspection Division’s statistics (a department under the Labour Bureau), show that in the first half of 2003, only 40% of private enterprise staff have signed employment contracts. Indeed, in the Longwan District of Wenzhou City, where private enterprises are concentrated, the rate is below 20%. In Zhejiang, there are more than 3 million workers in some 209,000 private enterprises. This means that according to the statistics given, nearly 1.8 million workers have no legal contract with their employers, relying instead on verbal agreements.

Even for those who have signed work contracts, these contracts are more likely to be based upon workers’ handbooks or rules and not a formal contract between the two parties. Most contracts concentrate on listing the workers’ obligations but seldom give the employers’ obligations towards its workers – resulting in unfair and unjust agreements. Some employers use contracts as a reward and generally only offer them to management staff or staff in technical and sales departments – manual workers are rarely offered contracts. Some enterprises only provide contracts to local workers, ignoring the rights of migrant workers.

The Xinhua report highlighted the situation in a small rush-processing factory in the district of Yinzhou, in Ningbo City, where some workers from Anqing, a city in the province of Anhui, share their experiences. The workers interviewed stated, “we have been working here for more than two years and we don’t have the slightest idea of what an employment contract looks like.” In regards to wages they retorted that, “our payments…they depend on how much the boss feels like paying and we haven’t heard anything about insurance”. The workers believed that they remained at the factory for only “as long as the boss wishes and once he doesn’t want to see your face; you have to pack and go, no chance to argue”. Their situation is one of almost total insecurity and they themselves realize that there is little they can do if they are summarily sacked or if they are not given their wages, “What can we do if there are arrears with payments? Well nothing”.

There are many reasons why so many workers throughout China remain without work contracts, including the fact that it is generally in the enterprise best interest to employ workers without contracts. The laxity in enforcing China’s Labour Law and the lack of effective and independent union’s means that enterprises can usually continue employing people illegally without official discovery or punishment. Regarding the situation in Zhejiang, Zheng Jun, the National People’s Congress’s Internal Affairs Deputy Executive for Zhejiang, is reported to have stated that he believes that a prime reason for the widespread lack of written contract is that enterprises do not have a good understanding and awareness of the legal need for contracts while workers have no legal knowledge of the rights that the Labour Law grants them. In addition, he also admits that some enterprises are able to bully their workers into accepting their work situation because of the workers lack of legal knowledge. In CLB’s experience however, enterprises generally are much more aware of the legal need for contracts and they choose not to issue them with the full knowledge of the law.

Many industries in Zhejiang are labour-intensive, and some basic level production factories employ workers as long as they have the physical strength to do the work. As there is an abundant supply of labour in Zhejiang, workers are employed for short periods and overworked, discarded and new ones employed. In practice, the excess of labour in Zhejiang means that even if workers had a firm grasp of their legal rights, they would not be able to enforce them if they wanted to work, as they can easily be dismissed and younger or more pliable workers employed. According to Xinhua, some of the workers who do go to the Labour Departments (the example of Jianggan District, Hangzhou is given), to complain about the lack of contracts are unwilling to leave their names and their details for fear of being dismissed by their employers.

Another major reason for the situation is that enterprises want to avoid paying social security for their workers, Wang Gensheng, section chief of the Labour Inspection Division in Zhejiang estimated that without a formal work contract, private enterprises can save 120 Yuan in social insurance premiums for each employee it recruits. In one example from Lishui City, a private enterprise paid a full year of social insurance for its employees during 2002 when the National People’s Congress was investigating the situation of retirement and unemployment last year. However, starting from 2003, premiums have been stopped and no new contracts with workers drawn up.

Many workers work without even knowing they should have received formal contract. The majority of migrant workers come from farming communities with little previous contact with labour laws or formal employment rights. On the other hand Xinhua reported that some skilled workers do not want to get contracts as they do not want any possible restrictions on them leaving their current workplace and looking for better employment elsewhere. One migrant worker from an enterprise in Jianggan District said, “A contract is like a life-indenture, it would restrict me and make leaving difficult.”

The huge numbers of “underground workers” inevitably leads to violations of workers’ rights. The absence of labour contracts means that enterprises are often guilty of arbitrary dismissal and dodge legal responsibilities. It also leads to confusion over payment, overtime work, pensions and other violations of labour laws, for example, some enterprises do not compensate employees in accordance with the law, some take away worker’s identity papers, charge workers huge sums for obtaining employment or ask them to pay deposits on starting work and a myriad of other infractions which allow for workers to be mistreated and paid the most minimal wages possible.

In March 2003, some 20 workers from Henan Province flied a complaint with the Labour Department in Jianggan District. It claimed that the manager of their garment factory in 82, Shitangnan Road, paid them each only 200 Yuan after a whole month work, instead of the basic wage of 800 Yuan they had agreed to, However, as they could not provide any contract or legal evidence, it was almost impossible for the Labour Department to investigate the case. The result of the complaint is not known.

The absence of work contracts means that there are an increasing number of labour disputes which in turn increases the role of local labour departments. However, these are impossibly short staffed and, according to the report, there are only two labour department inspectors for each county in Zhejiang while there are more than 10,000 workers per county in Zhejiang. The current economic development and increasing privatization and complexity of regulations also means that disputes have become more complex and that one dispute alone could take up the time of one or two inspectors.

In the Xinhua report, a labour inspector in Zhejiang spoke openly about the difficulties in his work, reporting that the Labour Inspection Department can only serve as a sort of “first-aid” station, patching disputes up. If a serious dispute occurs, they will become involved. However, despite knowing of abuses and hearing complaints of abuses, due to staffing levels and the complexity of their work, they do not get involved in minor disputes which involve small or individual groups of workers, if they believe the disputes will not lead to any social disturbance. The inspector interviewed himself concluded that the shortage of inspectors revels clearly that the issue of protecting and promoting worker’s rights has never been seen as one of importance.

Throughout China many local government leaders do not know how to balance the twin objectives of developing the local economy at the same time as protecting the rights of workers and enforcing the labour law. Many see the problem as an impossible dilemma and choose to trade off workers rights in favour of developing the economy. This is a short term view and cannot lead to a sustainable and economically viable future.

6 September 2003

Archived Status: 
Back to Top

This website uses cookies that collect information about your computer. Please see CLB's privacy policy to understand exactly what data is collected from our website visitors and newsletter subscribers, how it is used and how to contact us if you have any concerns over the use of your data.