Shenzhen Ushers in Working Hours Reforms – By Helen Liao, Partner, Deacons, Hong Kong；Ji Li, Corporate Commercial Executive, Deacons, Hong Kong

The general offices of the Communist Party of China Central Committee and the State Council issued the Implementation Plan for the Pilot Comprehensive Reforms of Building a Pilot Demonstration Zone of Socialism with Chinese Characteristics in Shenzhen (Pilot Reforms Plan), which coincides with the 40th anniversary of the city’s establishment as a special economic zone.

The release of the plan will grant greater autonomy to Shenzhen to carry out reforms in important fields and make the city more international. More specifically, it will increase market access for foreign investors, introduce legal and finance reform measures, and implement a set of business-friendly policies. For instance, local enterprises will be encouraged to finance and list outside mainland China. Furthermore, the city will be encouraged to advance the internationalisation of the Chinese Yuan, as well as establish capital market and financial innovation where Hong Kong currently enjoys clear advantages or is actively working to develop.

Qualified foreign or Hong Kong companies or institutions will be able to list in Shenzhen, while foreign or Hong Kong investors in high-tech industries and digital infrastructure construction can also access the city’s market. Shenzhen will optimise the approval process of work visas and residence permits for foreigners in China and provide better entryexit convenience for high-level foreign talent in investment and entrepreneurship, cultural exchange, and trade activities.

The objectives are to create a marketdriven legalised business environment, establish a highly open economy, improve the systems of marketoriented allocation, technological innovation, people’s livelihood services, environmental protection and urban space governance. Moreover, it could effectively boost cooperation between Shenzhen and Hong Kong, further develop the Greater Bay Area (GBA), and build a more integrated platform.

Shenzhen has previously taken steps to amend the laws and regulations related to labour relations. The local special economic zone government, for instance, was recently given permission to make full use of its legislative power, to issue special interpretations and implementation of the national labour and labour contract laws.

Although no further details for the review of existing laws are currently available, the special legislation on the working hours system in Shenzhen seems to be necessary, as it is related to the interpretation of “overtime” and the calculation of “overtime pay”, which may have significant impact on labour costs. HR and management teams are recommended to pay close attention to this legislation development. It is also recommended that HR practitioners read the evolvement of the relevant laws, including the PRC Labour Law and the newly published Regulations of Shenzhen Special Economic Zone on Optimization of Business Environment.

Current working hours system

Similar to the practices at the national level, Shenzhen currently implements three types of working hours systems, of which the Standard Working Hours System is by default commonly adopted and implemented under the law.

Under the Standard Working Hours System, employers need to be aware of the following specific rules: 

• The typical work schedule for an employee is 8 hours per day and 40 hours in total per week.

• An employee is entitled to at least 1 rest day per week.

• Overtime shall not exceed 3 hours per day and 36 hours in total per month.

• Overtime incurred on a working day shall be compensated by at least 150% of the employee’s regular salary.

• Overtime incurred over weekends (without the arrangement of days in lieu) shall be compensated by at least 200% of the employee’s regular salary.

• Overtime incurred on statutory holidays in China shall be compensated by at least 300% of the employee’s regular salary. 

Any violation of the rules under the Standard Working Hours System may result in unilateral terminations initiated by the employee together with the statutory severance claims, administrative fines and sanctions such as being ordered to rectify the previous practices.

Alternative systems

In addition to following the Standard Working Hours System, employers can apply to the local labour bureau for approval of the implementation of other special working hours systems under certain conditions. For instance, the Comprehensive Working Hours System is more suitable for employees required for continuous operations due to the special nature of their work, such as work related to transportation, shipping, fishing, postal and telecommunications service industries; as well as those subject to natural constraints, such as in the mining, construction, salt production, and tourism industries.

The Flexible Working Hours System usually accommodates employees whose working hours are impractical to be measured, such as senior management, salespeople and employees in the transport and warehousing sectors. The determination of “overtime” and the calculation of “overtime pay” under special working hours systems usually differ from those under the Standard Working Hours System. For example, normally no overtime cost is associated with the Flexible Working Hours System.

However, it is particularly challenging for employers to apply for a special working hours system, which is generally subject to special examination and continuous supervision from the local labour bureau and relevant government departments. As such, HR teams are recommended to pay particular attention to the local regulations in Shenzhen since several special rules have been set under the Flexible Working Hours System, including:  

• Senior management staff prescribed under the “Company Law” (i.e. the manager, deputy manager, personnel in charge of finance, board secretary of a listed company, and other personnel prescribed in the articles of association) are exempted from examination. 

• Employees under an annual salary system or whose salary as specified in his or her labour contract is at least three times the average monthly salary of employees in Shenzhen City in the previous year, and who can arrange his or her work and rest time at his or her own discretion, are eligible under this system. 

Legislative trends

As they stand, because of their inflexible statutory restrictions, current mainland China labour laws are not particularly business friendly. This is particularly relevant when they are applied to Shenzhen’s fast-moving business sectors, from manufacturing to technology. To balance the rights of employees with economic development, the reform plan related to these areas may be extended under the special working hours systems.

Furthermore, the Regulations of Shenzhen Special Economic Zone on Optimization of Business Environment have recently been passed by the Standing Committee of the Shenzhen Municipal People’s Congress and came into effect from 1 January 2021. Under the new regulations, a Filing and Commitment System will be introduced, which replaces the time-consuming application and examination process of the Comprehensive Working Hours System and Flexible Working Hours System for eligible enterprises. The new process only requires the simple declaration of the implementation of a special working hours system. This will improve business efficiency and lead to a significant change in the current labour law system.

Notwithstanding the above, it remains unclear whether such reforms will be extended to other cities in mainland China. Close attention will be necessary to monitor the latest developments in the relevant policies and laws.