In China, there are three types of work hour systems: the standard work hour system, the comprehensive work hour system and the flexible work hour system.
The latter two are referred to as “special work hour systems”. The working hours, rest days and overtime for employees are defined by different work hour systems. It’s vital for HR and payroll professionals to understand the differences between these systems in order to identify the suitable systems for their employees and accurately calculate salary.
This article explains the working hours and overtime pay for employees under different work hour systems, and addresses some frequently asked questions from companies.
The standard work hour system
According to Article 3 of the Regulations of the State Council on the Working Hours of Employees, the standard working hours in China are eight hours per working day and 40 hours per average working week.
The overtime pay calculation formula is as follows:
- Overtime pay for working days = monthly basic salary/21.75 ÷ 8 hours × overtime hours × 150%
- Overtime pay for rest days = monthly basic salary/21.75 ÷ 8 hours × overtime hours × 200%
- Overtime pay for public holidays = monthly basic salary/21.75 ÷ 8 hours × overtime hours × 300%
Q: If employees who work on rest days request to be paid overtime fees instead of taking compensation leave, should their request be granted?
A: It is up to employers to decide whether to offer compensation leave or overtime pay. Employers can offer time off in lieu as a form of compensation. If employees wish to receive overtime pay instead of compensation leave, they must obtain approval from the employers. Legally, employers must arrange either compensation leave, or pay for overtime; they cannot offer nothing.
The comprehensive work hour system
The comprehensive work hour system is typically used in industries and work roles where the standard work hour system is not feasible due to the unique nature of the work, such as the retail and hospitality sectors. In other words, this system is applied to the work roles and industries that require employees to work continuously, or are subject to seasonal or natural constraints. Before implementing this system, employers must first submit their plan to the local authority for approval.
Under this system, the employees’ working hours are calculated over a comprehensive calculation period, which can be weekly, monthly, quarterly, or yearly. The total working hours accumulated in the calculation period will be in line with the standard working hours as per labour law. This means that employees may work more than eight hours a day or 40 hours a week, as long as the total working hours worked within the comprehensive calculation period does not exceed the statutory standard working hours. Additional hours worked beyond the standard hours per cycle will be considered overtime and must be paid by employers in accordance with labour law.
Q: Should employers pay overtime fees if employees under the comprehensive work hour system work on their rest days?
A: Employees on the comprehensive work hour system are only considered to be working overtime in two scenarios: when they work overtime on working days, or on statutory holidays. Working on rest days is not considered overtime.
The flexible work hour system
As per Article 4 of the Notice on Issuing the Measures for the Examination and Approval of Flexible Working Hours Arrangement and Comprehensive Working Hours Scheme Adopted by Enterprises, employers can implement the flexible work hour system for employees who meet any of the following criteria:
- Senior management, field staff, salespeople, some on-duty personnel and others whose working hours cannot be measured by standard working hours due to their job nature.
- Employees engaged in long-distance transportation, taxi drivers, some stevedores in railways, ports or warehouses, and employees who need to work flexible hours due to their job nature.
- Other employees whose jobs have production-related characteristics, special work requirements or work scope that make them more suitable for the flexible work hour system.
Q: Do employees using flexible work hour system have overtime pay?
A: The provisions of the laws and regulations on overtime pay for working days and rest days are not applicable to employees using the flexible work hour system. It is generally accepted that the additional hours they work on these days are not considered overtime.
The regulations on whether or not to pay for overtime to employees under the flexible work hour system vary from region to region in China. For instance, employers in Shanghai will pay for overtime worked on public holidays for flexible work hour employees. In other regions, such as Beijing and Tianjin, flexible work hour employees are not entitled to overtime pay for hours worked on public holidays.
Q: Can employers and employees use a special work hour system in the employment contract based on mutual agreement only?
A: Before implementing a special work hour system, the employer must obtain approval from the Human Resources and Social Security Bureau at the district and county level, or at the municipal level of the region where its business is registered. Without such approval, the agreement on a special work hour system (comprehensive work hour system and flexible work hour system) in the employment contract has no legal effect.
For your reference, below is the 2024 calendar of public holidays in China and the corresponding overtime pay rates.
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