3 January, 2018
Recently, the MOHRSS and Social Security decided to abolish several measures, including the "Measures on Economic Remedies for Breach and Termination of Employment Contracts" (MHRSS [1994] No. 481, which was referred to within the industry as "Document No. 481").
Document No.481's repeal has a number of important consequences:
- The provision concerning economic compensation for violating and terminating labour contracts without reasonable cause is now invalid. Previously, the work unit was supposed to pay an additional 25% or 50% (as stipulated in the document) on top of base salary to employees in certain situations. Now, however, the amount of economic compensation shall be determined by Article 85 of the Labour Contract Law of the People's Republic of China. Accordingly, employees could now receive an additional 50%-100% on top of their salary if the work unit breaches or terminates their employment contract without reasonable cause.
- The current status of the medical subsidy system is unclear. Document No. 481 stipulates that when the employment contract is terminated, any employee who is ill or is suffering from non-work related injuries shall benefit from medical subsidies. Such medical subsidy shall not be less than 6 months' salary, rising to not less than 9 months' salary in the case of serious illness and not less than 12 months' salary for terminally ill employees. Since Document No. 481 has been abolished and the Labour Contract Law does not mention the subsidy system, disputes on whether the medical subsidy system is still valid may arise. Although Document No. 481 has been repealed, there are still some enforceable documents which include provisions requiring payment of the medical subsidy, such as Notice on Several Issues in Implementing the Labour Contract System (1996). This point requires further clarification from the government.
For further information, please contact:
Ying Wang, Partner, Bird & Bird
ying.wang@twobirds.com
