Labor contract law enhances workers' rights

Updated: 2008-01-01 10:05

A brand-new labor contract law comes into force from the New Year's Day that is expected to markedly propel rights for billions of Chinese workers.

"The government that is making the most concerted effort to protect workers rights is China," said Auret van Heerden, Geneva-based head of Fair Labor Association, which monitors work conditions in 60 countries.

That "goes against the conventional wisdom that China is leading the race to the bottom," the Bloomberg News quoted Heerden as saying on Tuesday.

The Labor Contract Law aims to improve job security for workers, making open-ended terms of employment for those employees who have completed two fixed terms with the same employer. The legislation limits overtime, sets minimum wages and guarantees one month's pay for each year worked for sacked employees. It is the first time that China's top legislature, the National People's Congress Standing Committee, has ruled on open-ended work contracts and severance pay for fired workers.

The new law will make it more difficult for companies to hire temporary workers, a practice favored by exporters to cope with fluctuations in orders.

One side-effect of the legislation will be higher labor costs for all employers in China. It is estimated that some labor-intensive businesses will have to raise their selling prices, or move to other places with lower cost.

Olympus Corp., the world's No.4 digital camera maker, and Yue Yuen Industrial (Holdings) Ltd., the biggest maker of shoes for brands such as Nike Inc., are among companies shifting some production to Vietnam to cut costs.

According to Chinese press reports, some companies have been terminating contracts and asking employees to resign ahead of the introduction of the law.

Huawei Technologies Co., China's largest maker of telecommunications equipment, offered 7,000 workers new contracts with benefits if they terminated their old agreements, spokesman Ross Gan said.

Some employees accepted, while others chose not to sign and left, he said, without providing details. The move wasn't aimed at evading legislation, Gan said in an email to the Bloomberg News.

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