Friday, August 1, 2008


Chinese Government and Trade Unions Are Pushing for Collective Wage Bargaining 

By Ma Jianjun
Jun He Law Offices

In early 2003, the Regulations on Minimum Wage were issued by the Ministry of Labor and Social Security in China. Together with the corresponding local regulations, they set up statutory minimum wages applying to enterprises. The government and the trade unions also provide non-mandatory guidelines for the rate of wage increases. The policy is that the rate of wage increases should correspond to the increase of profit for enterprises.

Since the Labor Contract Act became effective in China, collective labor contracts have received much attention in the public. The Labor Contract Act, which was promulgated on June 29, 2007 and came into force on January 1, 2008, has a whole section under the chapter of “Special Regulations” addressing this issue. It provides that, upon equal bargaining, employees may enter into a collective labor contract with employers regarding remuneration, working hours, rest and leave, labor safety and health, insurance and benefits, etc. Also, section 4 of this act provides that employers are required to consult the trade union or employee representatives when making decisions on important matters that directly involve the interests of employees, such as remuneration.

Against this legislative background, in May, 2007, a chief official of the Wage Department under the Ministry of Labor and Social Security announced that “China will endeavor to establish a collective wage bargaining mechanism among enterprises and form a regular wage increase mechanism within five years. To that end, China needs to improve relevant laws so as to make collective wage bargaining a statutory requirement.” Following that, the Labor and Social Security Bureau in Shanghai issued a “Three Years Action Plan”, indicating its effort to enforce collective wage bargaining.

Collective Wage Bargaining Mechanism As a matter of fact, up till this day no specific collective wage bargaining mechanism exists in China. The current collective bargaining mechanism in general is provided in the Collective Labor Contract Regulations and its corresponding local regulations. An overview is provided in the following paragraphs.

Either party, i.e. the employee or the employer, may initiate a collective bargain. The employer should respond within 20 days (15 days in Shanghai) upon receipt of a written letter for bargaining issued by the trade union. If the employer does not respond, the trade union may request its superior trade union for mediation. If the employer refuses the bargaining without reasonable cause, the labor protection administrative department may communicate with the employer and request such employer to have collective bargain with the trade union.

The two parties are to have an equivalent number of representatives, at least three persons representing each side, of whom one should be the chief representative. The employee representatives are to be designated by the trade union, or, in the absence of a trade union, recommended by the employees and accepted by more than half of the employees. Employee representatives are protected in various ways under the law. For instance, the time for attending collective bargaining must be considered as normal working time (in Shanghai, the employee representative is further allowed to take a maximum of three working days to collect materials for bargaining) and the employer is not allowed to change the position of the employee representative during the term of representative without reasonable cause. Penalties such as compensation for damages and fines may be imposed for violation thereof according to different local regulations.

After collective bargaining, a draft collective agreement must be produced and submitted to the congress of employee representatives or all of the employees. The draft may be passed if more than two-thirds of the representatives or employees attend and more than half agree. The passed agreement must then be submitted to the labor protection administrative department. If the department does not object within 15 days, the collective agreement becomes legally binding.

If disputes arise during the bargaining, the labor protection administrative department may be involved for mediation. In case disputes arise out of the performance of a collective agreement, the means of settlement vary. In provinces like Jiangsu, Hunan and Guangdong, either party may initiate labor arbitration; the party who disagrees with the arbitration award may file a lawsuit in court. In Shanghai, only the trade union may initiate labor arbitration or alternatively file a lawsuit.

Response from the Public Although the state authorities and trade unions are striving to establish a collective wage bargaining mechanism, it is still under consideration, and the enterprises do not see it as a big deal. The response from economists is quite interesting. Some economists warmly welcome such mechanism, arguing that governmental power should play a more central role in determining wages. Some insist that the invisible hand, i.e. the market, should play the leading role.

Inflation and appreciation of RMB has haunted China during the last year, which seems to have a major influence on the legislative trend. Before that, the State Council had indicated that it would put an end to the dispute over collective wage bargaining in its upcoming Wage Payment Regulation. Now, due to the macroeconomic situation, it will probably continue to be an issue.

As to the issue of strike, this is barely mentioned in the current discussion about the collective wage bargaining mechanism. In retrospect, the Constitution of China as amended in 1975 and 1978 provided that citizens have the right to strike; however, it was deleted in the Constitution as amended in 1982 and never found its way back into the Constitution or other laws. In the absence of a statutory right to strike, Chinese laws and regulations provide other remedies. In general, employees can resort to the administrative department for settlement; the department can demand employers to attend the bargaining. In Jiangsu Province, if an employer refuses or delays the bargaining and does not rectify as demanded by the department, such employer may be fined between 3000 RMB and 30000 RMB (417 US dollars to 4170 US dollars) and its legal representative or person in charge may also be fined between 500 RMB and 2000 RMB (69.5 US dollars to 278 US dollars).