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Tips and rules of overtime salary/wage of China employment law

Some clients sometimes ask me what is Chinese Overtime, and is it legal or not? Well, it's a complicated question and it's even hard to reply for non-employment lawyers. In order to give readers a general picture of Chinese employment law, now I would like to provide you some knowledge regarding Chinese employment law or labor law in connection with overtime wage or salary as following,

China's overtime policies are governed by a labor contract that took effect Jan. 1, 2008. This 98-article contract, titled Labor Contract Law of the People's Republic of China outlines employment categories such as types of contracts and contract obligations, definitions of employment, labor rules and regulations and legal liabilities.

The contract sprang from surveys that showed large numbers of employees lacked formal labor contracts and from reports of rampant cases of wage default and forced labor. Typically, overtime in China is defined as a workweek that exceeds 40 hours. Wages are generally time-and-a-half or doubled. According to the All-China Federation of Trade Unions, the contract was adopted in order to strengthen China's economy, the protection of its citizens and the regulation of workplace conduct.

General Rules
Employers are bound by all work quotas outlined in the labor contract. Should an employee work past this time limit, she must be compensated with overtime with wages that are in compliance with the state. Employers don't have the right, under the policy, to force an employee to work overtime either explicitly or by disguising actual hours worked and manipulating rules and regulations. The People's Republic of China's policy calls for strict adherence to these work quotas, and outlines that any overtime must be arranged with and agreed to between both parties.

Employer Obligations
Any employer who administers overtime must adhere to the following standards: State labor laws pertaining to working conditions must be followed; job requirements and wages must be discussed up front; overtime wages, benefits and performance bonuses must be provided; employees must be properly trained to handle the conditions and skills sets required for overtime work, in the case that overtime work becomes long term, the employee's salary scale must be adjusted accordingly.

Other Circumstances Requiring Overtime
The labor administrative department can require an employer to pay overtime based on circumstances other than the amount of hours worked. Employers must pay these overtime wages or face economic compensations within a time limit given by the department. If this wage happens to be lower than local salary, the employer must pay the shortfall. Employers who don't meet the deadline requirements will be ordered to pay an extra compensation at a rate of time-and-a-half or double. These circumstances in which overtime is required are outlined as follows: The employer fails to compensate an employee with full wages as outlined by the contract or the state in a timely manner; the employer pays a worker less than minimum wage; the employer arranges overtime work but fails to pay overtime wages; or an employee is terminated or discharged and not given proper severance in accordance with the law.

Base for Overtime Pay Includes Fringe Benefits and Bonus

According to the labour and wage department of the Guangdong Provincial Labour and Social Security Office, the correct way of calculating overtime pay in Guangdong is to take daily wage under normal working hours (8 hours) as the base. The calculation formula is monthly wage under normal working hours divided by 20.83, which is the number of working days a month.

The number of working days each month has been reduced from 20.92 to 20.83 when the Regulations on Public Holidays for National Annual Festivals and Memorial Days were amended, increasing the number of statutory holidays each year from 10 to 11.

According to the Regulations of Guangdong Province on Payment of Wages promulgated by the provincial people's congress pursuant to the Labour Law and other relevant laws, when an employing unit requires employees to work overtime or extends their working hours, the workers should be paid overtime based on their normal daily or hourly wage. The overtime pay should be 150% of daily or hourly wage for working days, 200% of daily or hourly wage for rest days, and 300% of daily or hourly wage for statutory holidays.

As stipulated in the Regulations of Guangdong Province on Payment of Wages, daily wage is monthly wage divided by the average number of working days each month prescribed by the state, and hourly wage is daily wage divided by daily working hours, which may not exceed eight hours.

The Guangdong Provincial Labour and Social Security Office also emphasised that the base for calculating overtime pay is monthly wage divided by the average number of working days each month (i.e. 20.83) based on an eight-hour working day. For example, if an enterprise signs a labour contract with a worker offering him a monthly package including Rmb1,500 in basic wage, Rmb200 in attendance bonus and Rmb300 in other fringe benefits, it must take all three parts of the package and not just the basic wage of Rmb1,500 as monthly wage under normal working hours in the calculation of this employee's overtime pay. Benefits, bonus and attendance bonus are also wage and remuneration for work done under normal working hours and should therefore be included in the base for calculation. In other words, the overtime paid to this worker should be Rmb2,000 divided by 20.83, and not Rmb1,500 divided by 20.83.

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