Depending on where you work, this could be a nonissue or a nerve-racking, monthly ordeal. Due to various circumstances, some companies in China are not able to/won’t pay their employees on time. Having personally experienced this before and knowing many people who have gone through the same situation, it can be a frustrating situation for all involved. Of course, not every company is guilty of this, but I’ve heard enough anecdotal evidence to warrant a deeper dig. I personally have never had a human resources or accounting position, so I asked a Chinese friend of mine, who specializes in payroll distribution in a large multi-national corporation, to help with the research of this topic. She wishes to remain anonymous.
I understand not everything is done exactly by the book here in China, but what the book says is a good place to start. The actual law that governs this particular issue – among other things overtime wages – is the 85th article of the Labor Contract Law of the PRC. To quote:
“…if the payment is not made within the time limit, the Employer shall be ordered to pay extra damages to the employee at a rate of not less than 50% and not more than 100% of the amount payable.”
So, if the employee does not receive the salary on the date declared on the contract, then the employer is supposed to pay at least 50% of the salary to the employee. However, I wouldn’t be writing this article if that was the case every time, so I asked my friend what seemed to be the problem.
First, she said for large multi-national corporations (MNCs), not paying on time is more trouble than it’s worth due to the increased risk of legal action. Typically, in MNCs there are many employees and more than a fair share of these receive significant salaries. Therefore, for some, it is worthwhile to take the employer to court if they renege on their contractual agreement. Many huge corporations have dedicated teams of accountants to make sure that people are paid on time to mitigate the risk of legal action.
What about smaller/newer companies/not-exactly-legal companies then? Well, the most obvious reason seems to be that many people don’t want to go through the headache of the Chinese legal system for a couple thousand RMB. For the employee, there is no practical recourse for the breach of contract. So, on the small business owner side it seems that there is no “real” penalty for delaying the payment date a couple days other than having some annoyed employees.
Reasons for falling behind
Of course, business owners aren’t usually actively trying to annoy their employees so that can’t be the only answer to this problem. My friend mentioned several possible reasons why a payment might be delayed in many smaller companies. The first could simply be that the company is facing a cash flow problem. Anyone who has to deal with accounts receivable will know that getting paid by other companies on time can be a frustrating endeavor under the best of circumstances. Also, in many start-up companies liquid cash is usually reinvested back into the business to help the company grow so things can be tight whenever pay day rolls around.
Whenever the cash does arrive, the employees can be pretty far down the list in regards to who needs to be paid; rent and debt payments and other pressing issues outside the company often take precedence over the employees’ salary. So, the combination of short liquid cash supplies and lack of practical legal recourse is perhaps the major cause of late employee payments.
My friend pointed out another, more sinister, reason for delaying payments to employees. Bosses occasionally will deliberately withhold wages to leverage more work out of the employees. Think of the stories – always around Spring Festival time – where Chinese construction workers have to forcibly confront their supervisors in order to get paid their back wages. In one particularly clever example, a group of media-savvy construction workers danced the Gangnam style dance to publicly shame their employer for not paying several months worth of wages after the project had been completed. Though it is oftentimes very difficult to say definitively that exploitation is the case, anecdotal evidence like the above example abounds and employers taking advantage of workers, especially rural migrants – who, generally speaking, are less well-informed on legal issues - remains a serious issue in many of the larger cities in the country.
What can you do?
This was a particularly difficult one to answer for my HR friend. She mentioned that people are generally unaware of the actual law regarding back wages and overtime pay, so it is often a case of information asymmetry between the employees and the employers. The problem still lies in the perception of the effectiveness of legal action. Whether it’s true or not, many people, Chinese and foreign, believe that they most likely won’t get a fair trial and the trouble involved in organizing a legal case makes the whole endeavor simply not worth it.
If your employer consistently doesn’t pay on time, then you should catalogue each late payment – using your bank transaction record – as evidence for any future legal action you may take. Of course this will be impossible if you are working illegally, even part-time, and if the employer takes your money and runs, your means of recompense are virtually nil.
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Keywords: not paying on time in China companies in China
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poorly written. he/she tried, but would be better off working for a state organ. one of the BIGGEST points is that they by law would have to pay 50% MORE (that is what that funny little word 'extra' means). not 50% of what is owed. lay of the baiju...
Sep 23, 2013 20:51 Report Abuse
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