Members are invited to note that the Mainland’s Labour Contract Law was adopted by the Standing Committee of National People’s Congress on 29 June 2007. The legislation will come into effect on 1 January 2008. Its full text is available at the following web link:
     
       www.npc.gov.cn/zgrdw/common/zw.jsp?label=WXZLK&id=368169&pdmc=1503

        The Labour Contract Law provides for a grandfather clause (Clause 97) in respect of the calculation of economic compensation and the application of Clause 14, which requires an employer to enter into a non fixed-term contract with an employee under certain conditions.  The specific requirements are as follows:

Calculation of Economic Compensation

        Under Clause 46 of the Labour Contract Law, an employer is required to pay economic compensation to an employee when a labour contract expires or is terminated under certain circumstances. The economic compensation shall be calculated on the basis of the employee’s wage and the period he/she has served in the enterprise (Clause 47). According to Clause 97, for economic compensation that is due to an employee after the commencement date of the Law, only the service period accumulated after 1 January 2008 shall be counted in the calculation; whereas economic compensation payable before commencement of the Law shall be calculated in accordance with the relevant methods in existing regulations.

Non Fixed-Term Labour Contracts

        Clause 14 of the Labour Contract Law provides that when an employee has served an enterprise for more than 10 years or completed two fixed-term labour contracts, the employer shall enter into a non fixed-term contract with the employee on contract renewal（unless the employee requests otherwise）. According to Clause 97, fixed-term contracts mentioned above shall refer to those an employer enters into with an employee after 1 January 2008. 

        If members have any queries about this circular, please contact Ms. Lily Ge at 2732 3163.