New labor laws implemented for Taiwanese businesses in China

This article was published by the Taiwan Headlines on April 6, 2006. It reports that with the imminent implementation of the Labor Contract Law in China, the 100,000 Taiwanese companies operating there will confront stringent conditions in their personnel management and much higher labor costs.

The new law covers a wide range of labor-related affairs, including lay-off, severance pay, massive layoff, temporary help supply and competitive clause, whose contents are even more stringent than those in Taiwan's Labor Standards Law. In the future, Taiwanese businesses in China will not be able to dismiss their employees recklessly. They also will have to pay severance pay to laid-off employees, which will boost their personnel cost considerably.

In other words, after the implementation of the law, it will be more difficult for Taiwanese businesses in China to lay off their employees. This means that the golden days for Taiwanese companies to enjoy the cheap labor in China are coming to an end. It is expected that major coastal cities will be the focal points for the enforcement of the law in the future.

The drafting of the law is in line with China's recent economic development plan, with the purposes of maintaining social harmony, stabilizing labor-management relations, and lowering unemployment rates. More specifically, the law is designed to stem the spreading labor-management disputes and to stabilize the job market. It will be put into force in September 2006 at the earliest.

At present, in order to lessen their burden for labor management, many Taiwanese businesses in China rely heavily on temporary help supply in their employment. However, the new law stipulates that companies using temporary help supply must appropriate 5,000 yuan of deposit for every temporary worker, in order to prevent the problem of back pays. The costs of the deposits will inevitably be passed on to Taiwanese businesses. Moreover, Taiwanese businesses will have to bear associated liabilities for any damage on the rights of the temporary workers.