State Council measures to increase job stability

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In a move to stabilize employment in the face of a slowing economy, in December 2019, the State Council issued a notice on Further Measures on Job Stability. In March 2020, the General Office of the State Council issued another notice on Measures on Job Stability in Response to COVID-19. Key highlights of the notices for employers include:

  • Continuation of temporary reductions in employer contributions to unemployment insurance and work injury insurance. China has lowered the contribution rates for social insurances gradually since 2015. On 1 April 2019, the State Council issued a notice to continue the reductions in employer contributions to unemployment insurance and work injury insurance to 30 April 2020. The notices further prolong the reductions for another year, until 30 April 2021.
  • Continuation of return policy for unemployment insurance contributions. Since March 2019, China has implemented a temporary policy for returning a certain percentage of unemployment insurance contributions (generally 50%) to companies that face temporary operational difficulties without implementing redundancies, or with only a few redundancies. The notices have prolonged this policy for another year, until 31 December 2020, and allowed the return percentage to be increased to 100% for certain companies (such as all types of companies in Hubei province, and small to mid-sized companies in other provinces).
  • Regulation of companies’ practice of redundancies. On one hand, the notices encourage companies to negotiate with employees about salary adjustments, working hours and work shift adjustments, in order to avoid layoffs. On the other hand, for companies that need to implement economic layoffs, governments will instruct them to comply with relevant laws, including stipulating and implementing compensation plans for employees, notifying the labour union, or all employees, 30 days in advance, paying severance in accordance with laws, paying unpaid salaries, and making back payments for social insurance contributions.
  • Supporting flexible working arrangements. The notices encourage alternative employment arrangements such as temporary, part-time, seasonal and flexible employment. Policies will be improved and/or revised in order to further support flexible working.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com.