Working hours for most China employees are usually determined under China’s “standard working hours system,” and in most places in China, that means a 40-hour work week — 8 hours a day and 5 days a week. This system does not allow for a lot of flexibility since work done outside the normal working hours is considered overtime that obligates the employer to pay overtime. I am finding that foreign employers are often (virtually always, actually) confused about China’s working hours and they often believe (and repeat to me) the following six myths regarding working hours and overtime in China, all of which are daily costing foreign companies extra money in China.
Myth 1: China’s overtime rules are similar to the exempt employee rules in the United States. Wrong. For example, it does not matter how much your China employee gets paid. Your China employee might be making three times the average salary in the city where you are located (this amount is a common threshold for a number of things under Chinese employment law). Generally speaking, you must pay all overtime.
Myth 2: Managerial employees are exempt from overtime pay. If a manager works under the standard working hours system overtime incurred must be paid. If your manager(s) have been approved to work under an alternate working hours system (usually the flexible working hours system) you can avoid paying overtime on most occasions, except for (and this depends on the locale!) time worked on a legal holiday such as New Year’s day, Chinese New Year, National Day, etc.
Myth 3: An employer and employee can contractually agree to have the employee work under an alternate working hours. Nope. Most places in China require prior government approval for an employee to work under a non-standard working hours system. The employee’s written consent alone is usually not sufficient.
Myth 4: Comp time can negate overtime obligations. Not necessarily. This depends on the employee’s situation and the locale in China. If an employee working under the standard working hours system stays beyond the normal 8 hour work day, you must pay overtime, which is usually 150% of that employee’s normal wage. But in most locales in China, an employee who works during a weekend can be compensated with comp time. However, if you are unable to give the employee comp time (perhaps because you mistakenly failed to do so or because you simply were too busy), most locales in China will require you pay 200% of the employee’s normal wage or 300% if the work was on a legal holiday.
Myth 5: An employee on an alternate working hours system needs never be paid overtime. Be careful. Again, this — like pretty much everything else employment related in China, depends largely on the locale. Most places in China require the employer pay even alternate hour employees overtime for time worked during a Chinese legal holiday. Also, we cannot even count the number of times a foreign employee has insisted that such and such employee is under the alternate working hours system and one of our China labor lawyers has discovered that was never the case or is no longer the case due to a failure to timely renew.
Myth 6: The employee (not the employer) is required to keep track of time for overtime pay. Tell this to the many foreign employers who thought this was the case and then ended up having to pay all sorts of back overtime pay when the employee has left, to avoid getting sued for having done so. You as the employer need to document what is going on with your employees on overtime and just because an employee has not yet hit you up for it, does not mean you don’t owe it. Your rules and regulations should contain a section setting out your company’s overtime policy, including your internal procedures your employees must follow for securing approval before incurring overtime and your procedures for reporting such overtime.
Bottom line: Make sure you understand the national, the regional, and the local laws that apply to overtime in the city in which you are located.
For more China employment myths, check out Six Myths About China Employee Probation.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.