Reform of Labour Contract Law unlikely at this year’s National People’s Congress

27 February 2018

Despite persistent lobbying by the Chinese business community and sections of government to water-down the Labour Contract Law, further revision of the law is unlikely to be on the agenda at the National People’s Congress (NPC) when it opens in Beijing next week a senior legislator has confirmed.

“The views of different parties are too far apart and the problems have not yet been clearly articulated. As such, the conditions are not right for revision of the Labour Contract Law at this time,” said Guo Linmao, Director of the NPC Law Commission’s Social Law Office.

The law’s detractors, led by former Finance Minister Lou Jiwei, have long argued that the Labour Contract Law has increased costs for businesses and made the labour market too inflexible. Guo Linmao pointed out however that increased costs for businesses cannot be blamed purely on the law.

Moreover, Guo added, it is one-sided and simplistic to argue that giving employers more power to hire and fire employees will improve labour market flexibility.

Only when these outstanding issues have been resolved will the NPC Law Commission consider putting reform of the Labour Contract Law on the agenda, he said.

Workers consider their options at a recruitment centre in Shenzhen

The Labour Contract Law, which first went into effect in 2008 and was revised in 2013, is deeply unpopular with many in the central government. However, creating a consensus on how to amend it has proved politically challenging, especially at a time when President Xi Jinping has committed the Communist Party and government to improving the living standards of ordinary people.

In the meantime, it seems likely that local governments will continue their policy of selective enforcement of the law and businesses will continue to exploit loopholes, as has basically been the case ever since the law was first enacted.

Companies have routinely reassigned or rehired workers as agency (劳务派遣) employees with fewer benefits and less protection than regular employees. Other workers in China’s fast-moving cities are having their contracts amended to allow for more flexible working practices, while the majority of workers in the new internet-based economy are simply hired as individual contractors or service providers rather than formal employees.

The rapid development of the gig economy in China will almost certainly increase the proportion of employees in precarious work and further erode the effectiveness of the Labour Contract Law. As a consequence, there is a chance that the Labour Contract Law will die of neglect even before legislators get the chance to revise it.

The All-China Federation of Trade Unions, meanwhile, will focus its attention at this year’s annual parliamentary gathering on the perennial and increasingly serious problem of wage arrears for migrant workers. The non-payment of wages was by far the most important cause of collective labour disputes in China last year accounting for 82 percent of all collective actions logged on CLB’s Strike Map last year, while the Ministry of Justice said it helped migrant workers claim back some 8.3 billion yuan in wage arrears in 2017.

The plight of rural migrant workers has been high on the political agenda during the Lunar New Year holiday, especially after the evictions of the so-called “low-end population” from Beijing in December and the high-profile story of “frost boy” who reiterated once again the problems of rural poverty in China. 

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