Calculating Overtime Payments in China
Doling out overtime payments can be expensive for employers. With regards to paying overtime in China, employees are grouped into three categories working under different systems – the standard work hour system, the comprehensive work hour system, and the non-fixed work hour system.
The standard work hour system requires that an employee’s normal working day should not exceed eight hours, that the normal working week not exceed 40 hours, and that each employee should be guaranteed at least one rest day. Most white-collar workers in China now operate under a five-day working week, although some domestic companies still utilize a six-day working week model. The comprehensive work hour system does not refer to one week as the key factor in regulating working hours. Instead it takes a set period (typically one month) as the base to calculate the number of working hours. Although the distribution of hours worked during this period may be quite irregular, the average number of working hours per day and per week should roughly correspond to the levels set out in the standard work hour system. Please note that before a company can implement this system it must submit its plan to the local labor bureau and receive approval. This system is normally used for blue-collar workers or other workers that require irregular shifts.
Under the non-fixed work hour system employees do not generally receive overtime payments because measurement of the time spent working is considered to be impractical. A company implementing this system for some of their employees should receive prior approval from the local labor bureau.
Let’s take a look at how overtime is calculated for the two types of workers eligible to receive it:
Overtime under the standard work hour system
Overtime for office workers with set working hours each weekday is calculated as follows:
■Extra hours worked on weekdays: 150 percent of basic hourly salary ■Hours worked on weekends: 200 percent of basic hourly salary ■Hours worked on public holidays: 300 percent of basic hourly salary The basic hourly salary is calculated by taking the basic monthly pay of the employee and dividing it by 174 (average number of working hours in the month).
These are the mandatory minimum percentages paid to employees for the overtime they work, although some companies offer their employees higher rates than the statutory minimums.
Overtime under the comprehensive work hour system
Overtime for shift workers is calculated as follows:
■Extra hours worked outside of normal shift: 150 percent of basic salary ■Extra hours worked on public holidays: 300 percent of basic hourly salary There are also some restrictions on the amount of overtime an employer may ask an employee to do:
■A maximum of three hours in any one weekday ■A maximum of 36 hours in any one month Assuming a company stipulates an eight hour work day, then on average in a month a worker shall work 174 hours. Adding this maximum 36 hour period of overtime means that (for an average-length month) an employer cannot legally require an employee to work for more than 210 hours during that month