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What are the main changes being introduced by the Draft Labour Contract Law?

The draft differs from the previous labour laws and regulations in the following:

(1) its scope is much wider than the 1995 Labour Law and the most obvious one is the addition of collective non-enterprise units. The Labour Law promulgated in 1995 does not have clear stipulations regarding cases where no labour contracts are signed, but the draft clearly states that if the employer does not sign a written labour contract with the employee but there is a real labour relationship, it is deemed that the employer has a non-fixed term labour contract with the employee and shall promptly complete written contract formalities, unless the employee makes a different declaration of will clearly. This aims to encourage employers to sign contracts with their employees.

(2) the 1996 Labour Law is silent on the problem of secondment but Article 12 and 24 of the draft requires the seconding unit not only to sign a labour contract with the employees, but also to sign a secondment agreement with the recipient unit to solve the liability sharing problem.

(3) regarding training and the term of service, the draft provides that only when the employer provides training expenses for the employees and the employees accept off-job professional technical training lasting more than 6 months, the employer and the employee may agree on the term of service and if the employee violates the agreement he should pay the employer damages.

(4) regarding competitive prohibition, the draft stipulates that the term shall not be more than 2 years and the employer shall give the employee compensation amounting to "not less than the employee's annual income in that enterprise". If the employee violates the competitive prohibition provision, it shall pay damages of no "more than 3 times of the compensation the employer pays to the employee in violation of its competitive prohibition obligation".

(5) regarding probation, to prevent employers from prolonging the probation period to save costs, the draft provides that probation shall apply to labour contracts with terms longer than 3 months. The draft has different provisions for probations for non-technological positions, technological positions and highly skilled technological positions.

(6) the draft clearly states that the employer shall not require the employee to provide any guaranty or obtain from the employee property as guarantee, nor shall it distrain the employee's ID card or other certificates. The draft also provides for the liability of violators.

(7) the 30 day notice of contract termination is basically the same with the provisions of the 1995 Labour Law, but the draft additionally provides that in this case the employer may pay an amount equal to one month's salary to terminate a non-fixed term labour contract.

(8) the draft imposed more restrictions on redundancies - if the employees involved are over 50, the employer must explain the circumstances to the trade unions or the workers and seek their consultation, in contrast to the previous rules which required the employer's simple explanation.

(9) regarding economic compensation, the biggest change is the rule that after the labour contract expires, the employer shall also pay economic compensation to the employee.

(10) additionally, the draft stipulates that if the employee promptly terminates his labour contract, the employer does not have to pay social insurance for the employee.

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