After establishing a foreign invested enterprise in China, foreign investor then needs to consider establishment of labor system in the company. They need to craft employment contract, non-compete agreement, and also employee handbook to make sure the company will operate very well..
The company usually wonder what issues should be stated in an employee handbook. Some of the companies would like, from our experience, to put all issues associate with management into the employee handbook, such as reimbursement procedure, expense report guideline and approval procedure of price deviation so on.
We would like to point out that the company does not have to include the above issues into an employee handbook, and, if the company put these issues to an employee handbook, it would cause inefficiency to the management of the company due to the requirements of PRC Employment Contract Law(“ECL”) on formulation and amendments of ECL.
Article 4 of PRC Employment Contract Law(“ECL”) states what issues should be included in the employee handbook, which are labor compensation, working hours, leave and rest, occupational safety and hygiene, insurance and welfare, training, work discipline or work quota management, etc.. A company must include the aforesaid issues into an employee handbook.
Also, Article 4 of PRC Employment Contract Law stipulates the statutory procedure to formulate and amend the employee handbook, namely, formulations and amendments of the employee handbook should be presented to and discussed with the employee representative congress or all the employees, and the proposal and advice thereof shall be determined after consultation with the labor union or employee representative on the basis of equality.
In light of the foregoing, ECL does not require the company to include other issues, such as reimbursement procedure, expense report guideline and approval procedure of price deviation, into an employee handbook. If a company includes such issues into the employee handbook, and one day they want to amend such issues, they need to presented to and discussed with the employee representative congress or all the employees, and the proposal and advice thereof should be determined after consultation with the labor union or employee representative on the basis of equality, which will obviously cause inefficiency to the management of the company.
Thus, we would suggest that a company should only state the ECL-required issues in their employee handbook, and leave other issues to the company’s management rules.
By Adam Li