Guides - Human Resources & Payroll in China 2016

Human Resources and Payroll in China 2016-2017 (5th Edition) -

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Revision of the Mass Lay-off Procedures

On December 31, 2014, the Ministry of Human Resources and Social Security released a revised

draft on mass lay-off and sought public opinion, in which two major changes were introduced

in the suggested rules:

1. For a branch company with its own business license, the relevant calculation for eligibility as

a “mass layoff”is based on the staff number and percentage at the branch company specifically,

not the whole company.

2. More details were added to each step of the mass lay-off procedure.

Until the writing of this Guide, the formal legislative document remains unpublished.

Step 5

: The company shall then formally announce themass lay-off scheme, handle the procedures

for terminating contracts with the staff to be reduced, pay economic compensation personally and

issue certificates of redundancy.

Note that reporting to government labor administrative authorities is not simply a formality to receive a bureaucratic

rubber stamp. Government officials use their discretion to determine whether a company qualifies for economic

redundancy and, in some cases, canbe quite strict. There alsoappear tobe unofficial regional variations in enforcement

standards. For example, Beijing has a reputation for being tough on employers, while Shanghai is generally more

amenable to green lighting layoffs. In any case, liaising with the local labor bureau before formally submitting an

application helps mitigate uncertainty and increases the likelihood of success

Beyond complying with government requirements, companies must be conscious of the impacts

that merely applying for economic redundancy can have on its employees. Announcing layoffs 30

days in advance inevitably introduces various complications to the workplace. Employees may feel

dejected and protest, and particularly desperate workers may try to seize or damage company assets,

such as official company chops. On the other hand, if the economic redundancy application ends up

being rejected, employees are empowered to negotiatemore lucrative severance payments from the

employer. Developing a strategic plan to approach certain employees before formally announcing

mass layoffs can help employers retain control over what is often an unpredictable process