Overtime pay in China is determined by which kind of work hours plan the employer adopts, of which there are three options: standard hours, fluctuating hours, and irregular hours. Methods for calculating pay are classified as the standard method or one of several alternative methods: piece rate pay, fluctuating workweeks, irregular hours, reduced hours, and extended hours. In this article, we will go over each of the overtime plans and discuss how many work cultures in China are unlawful. China’s standard work hour plan is extremely rigid, so we’ll also learn how fluctuating work hour plans work.
Contents
Work hours plans available in China
Compliance with plan requirements
How to use fluctuating work hour plans
Work hours plans available in China
Standard
The standard work hours in China are 40 hours a week worked 8 hours a day. The initial China Employment Act of 1995 provided working hours may not exceed 8 hours in a day or 40 hours a week on average. Although the Employment Act was amended in 2009 and 2018 to say that working hours may not exceed on average 44 hours in a week, subsequent Chinese court precedents have applied the 40 hours a week standard.
As a benchmark legal system for labor and employment, it provides certainty for employers to hire workers and for workers to work, and in China’s socialist culture is characterized as providing certainty and stability for workers. Overtime pay is required whenever an employee exceeds these requirements; however, employees who work overtime hours without approval, not at the direction of management, are not eligible for overtime.
Fluctuating Workweek Plan
The fluctuating workweek plan in China averages the number of hours worker per day over the applicable period (week, month, quarter) to determine if overtime pay is owed. The full name of the plan in Mandarin Chinese is “combined work hours calculation,” and in Chinglish is called “comprehensive” because of these translators’ unfamiliarity with English terminology. The fluctuating workweek method allows individual days to exceed 8 hours or weeks to exceed 4 hours, so long as the total number of hours worked does not exceed the total statutory ordinary working hours, above which overtime is owed, and the additional hours cannot exceed an additional 36 per month.
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China’s rules for fluctuating workweek plans are confusing for most people who work with them, including local managers. While the benefits of such a plan are highly attractive, they come with a complex regulatory procedure with significant consequences for violation. For example, Wal-mart began using a fluctuating workweek plan for its retail staff, which is common around the world, but did so without following the correct regulatory process. As a result, it saw backlash from both regulators and labor unions in China, and risked legal liability. We’ll cover exactly how to follow the required process and avoid those kinds of risks in a section below.
Irregular Working Hours Plan
Irregular working hours in China are used for employees for whom it is not feasible to work on a fixed schedule, based on the nature of the industry, the job, or the employee’s duties. Such employees may need to work continuously or are unable to get off work at a predictable time, or have been dispatched to a particular work site.
Under the Irregular or Fluctuating Work Hour Calculation Method Procedures (Labor Ministry No. 503 (1994)), typical workers eligible for this system are executives, salespeople, and transport workers. A key difference from other countries’ irregular work hours system is that there is no specific provision for “professionals.”
Other methods of calculating pay
Piece rate pay is allowed under China Employment Act §37, but is not widely used by companies today.
A reduced working schedule is permitted under special circumstances.
An extended work hours schedule is permitted but only for emergencies, in particular national disasters, equipment failures affecting public interest (typically transit infrastructure), and national defense.
Part time working schedules under China Employment Act §86, are those with fewer than 4 daily worked hours and no more than 24 hours worked per week.
Compliance with work hour plan requirements
Most workers use the standard plan, and it is also the default selection for contracts not providing otherwise. Disputes in China frequently center on the contract establishing the standard plan but the employer actually using a fluctuating or irregular hours overtime calculation method for the employee.
Alternative work hour plans must be agreed upon by the parties and receive regulatory approval, which will look at the nature of the work and necessity of using an alternative plan.
(See China Employment Act §39) Regulatory approval requirements were extended to the fluctuating work hours plan under the Labor Ministry Circular 503 (1994).
China’s 996 and other extreme work cultures
China has three different kinds of extreme work cultures that have widespread adoption, even in foreign owned companies: (1) 996: work from 9AM to 9PM, 6 days a week. (2) 007: being at work 24 hours a day, i.e. from 0:00 to 0:00, 7 days a week, typically referring to workers literally living in their offices, and gained some notoriety during the COVID pandemic. (3) Alternating schedule: working one Saturday on alternating weeks, i.e. taking half of the Saturdays off. In China, the well-known 996 system emerged in the tech industry but otherwise is strictly illegal under Chinese law.
The alternative schedule for extra work is not necessarily unlawful, because the China Employment Act §38 provides that employers are required to provide one day of rest per week. Under §41, the employer may as needed increase work hours but typically no more than by 1 hour per day, but under special circumstances by no more than 3 hours per day. Thus, the alternating schedule can be structured lawfully such that overtime is paid for work in excess of 8 hours per day or in excess of 40 hours per week.
The 996 work culture violates labor law, which creates a compliance risk if you hire a local manager who believes in the culture. The China Employment Act §41 provides that overtime work may only be provided up to an additional 3 hours a day or 36 hours per month. Applying Ministry of Labor Circular No. 3 (2008), an employee on the standard plan works 166.64 hours per month (20.83 x 8), and every month is limited to 202.64 hours (166.64+36). The extreme 996 work culture involves 248.3 hours of work per month. (10 x (20.83+4), which you can see clearly violates the law.
Using the 996 system can expose your business to significant legal liability. You will be liable to pay for all overtime hours actually worked, as required by Employment Act §44, and are also liable for regulatory penalties under the Employee Rights Oversight Administrative Regulations §25.
Flexible Work Schedules
Flexible work arrangements in China involve allowing employees flexibility and autonomy in selecting and completing tasks instead of using a fixed work schedule. Typically, these are filed as independent contractor working arrangements. The translation industry in China is dominated by freelance translators who are classified as being on a flexible work schedule. Many workers in China say they like flexible work because it provides more freedom and autonomy, and for employers it can also help reduce costs.
China’s work hour rules are actually based on factory production where assembly lines could be structured and aligned based on quantifiable large-scale production metrics, and where fixed working hours make it easy for management to organize efficient, large-scale management. However, since the start of China’s “Robot Revolution“, repetitive low-skill work is being automated and its 2024 industrial policy is now emphasizing skilled professional work, and policymakers hope that consumption can be increased by allowing skilled workers free time to use their money. Additionally, there has been a major “quiet quitting” movement in China, which in Chinglish is widely called “touching fish,” from an idiomatic expression meaning “it’s easier to grab fish in muddy waters.”
Image by the Geili Dictionary
As you can see from the image about the metaphor, mainstream media translators widely misunderstood what “touching” means in English.
The trend reflects interest in being able have the freedom to relax when they want. Flexible work systems in China are structured around projects and goals, rather than around being present for a certain work schedule, and is usually reserved for tasks where different steps on a workflow do not need to be occurring simultaneously.
Flexible working arrangements are typically used where there is high volatility in client demand or where just-in-time service is required, which creates a mismatch between the time a worker is in the office and when a client has requirements. However, employees that work more than 24 hours a week for your company must be put on one of the three available work hour plans.
Given that China’s labor laws are highly outdated and fit poorly with the nature of today’s work, the instinct of most local managers is to attempt to circumvent labor law without the knowledge of headquarters. Prevent local risk taking by being informed about the law and compliance risks; get legal advice from local legal counsel and audit for labor compliance. Have memoranda translated to English by professional translators, and not unprofessional workers such as in-house staff or LSP freelancers. Advice containing any “Chinglish” obscures important facts and is usually misleading.
How to use fluctuating work hour plans in China
Recall that the fluctuating work hours plan in China is available if made necessary by the nature of the job or industry conditions, and is calculated by taking the average daily or weekly working hours worked for a longer time period, and can be as long as one quarter.
An application to the government regulator is required for approval of a proposed fluctuating work hour plan, and in general they will approve schedules where workers need to work continuously for an extended period of time or where there are seasonal work conditions. Under the Ministry of Labor Circular No. 503 (1994), the representative categories of workers intended for fluctuating work hours includes long-haul workers in transportation, airline, or fishing boat workplaces, or some seasonally affected work such as tourism or construction.
Each province or home rule city is also empowered to pass local laws. In this article, the representative local law is the Beijing Fluctuating and Irregular Work Hour Plan Procedures, which provides more detail about eligible job categories, providing
that positions requiring continuous work, are seasonal, have volatile demand, or require travel to distant work sites.
Suggestions for regulatory approval and compliance
Labor lawyers preparing an application to request fluctuating workweek approvals in China will typically instruct the client’s human resources department or management to export all of the past 12 months’ data to excel, consolidate the data, and generate graphs that clearly visualize whether work requirements are fluctuating. Then, make a legal determination as to whether the work requirements shown fit the statutory requirements for a fluctuating schedule. This data and the visualizations should be provided to the labor regulatory official in the application so that they can see a clear visualization showing that the working conditions and requirements conform to the fluctuating schedule definitions; this approach traditionally has had a high success rate in China.
Prior to sending an application, you can also consult with local regulatory staff, who are typically happy to provide guidance about how their agency interprets labor law requirements, and how local conditions may affect how they exercise administrative discretion.
The legal risks of applying the fluctuating work hours overtime calculation method without regulatory approval are extremely high, but nonetheless managers will often make an agreement with employees to adopt the system without involving regulators. Under the Employment Contract Act, such agreement with employees are unenforceable because they seek to make an agreement prohibited by law, which means employees will have the legal right to demand overtime for all excess hours worked according to the standard work hours plan.
When seeking approval for a fluctuating work hours plan, you may need to obtain separate regulatory approval from each jurisdiction you are hiring employees.
Some jurisdictions will allow you to use an approval obtained in a different jurisdiction, but some jurisdictions insist on local approval. For example, Beijing requires that workplaces set up in Beijing must obtain all labor regulatory approvals locally.
Therefore, check with the local government’s labor department to see if a separate approval application for their locality is required.
The plan’s implementation on site also has inclusiveness and notice requirements; the Employment Contract Act §4 in particular requires that major matter such as this be discussed by the labor union or by a meeting of all employees. Therefore, a fluctuating work hours plan should be implemented following meetings with employees to discuss and negotiate on how the policy will be implemented, and after its approval, open notice must be posted in a manner such that all employees can receive information about the plan. Under Chinese labor law, a fluctuating work hours plan that is adopted without consultation from employees is not an enforceable employment contract provision. As described above, that means employees can demand and obtain overtime compensation for any hours that would qualify under the standard plan.
Fluctuating work hour plans are also limited to jobs that are less physically demanding. Under the legacy China labor ministry’s Work Hour Opinion Letter §9, employees in physically demanding jobs cannot be asked to work more than 11 hours per week and must have one day off per week. Physically demanding jobs are any jobs the regulator classifies as being “Grade 3” or above.
Overtime hours and pay are calculated once at the end of each calculation period to determine if overtime hours are worked. The process requires comparing the actual hours worked for the calculation period and taking the difference of the maximum non-overtime hours that can be worked under the standard plan. Overtime hours worked are paid at 1.5x, but hours falling on a holiday ate plaid 3x.
The fluctuating work hours plan is also subject to the labor law restriction that overtime hours worked cannot exceed 36 in a month.
Employees on the plan with one or more year of service are also entitled to annual paid vacation under the Paid Vacation Administrative Regulations, which means that fluctuating work hour employees are also entitled to paid annual vacation
Conclusion
China’s statutory overtime calculation methods are generally considered outdated by its labor law bar, and as we have seen, many of the rules still in effect date to the mid-90s. Nonetheless, it mostly conforms to international employment management best practices. In the past decade, interest in alternative work plans in China has surged, along with trends like quiet quitting, and conditions in certain industries such as tech mean that entire professions are non-compliant with China labor law. The fluctuating work hour plan authorized by China seems like a possible solution to allow flexible working, but note that a large number of regulatory hoops must be jumped through to obtain approval.
FURTHER READING
Get authoritative insights about this topic from a official government guidance translated by CBL:
For a general overview of this topic, see also CBL’s China Employment Law FAQ.