Guangzhou government authorities have further clarified legal procedures to be followed by employers implementing economic downsizing.
The permitted circumstances were issued in a policy update, the Opinions on Issues Relating to Employers’ Workforce Reductions, issued by the Guangzhou Municipal Human Resources and Social Security Bureau on 30
December 2021.
The update reiterates and emphasises provisions of the Employment Contract Law on preconditions for economic downsizing – including circumstances in which it is permitted, employees that may not be downsized, employees to be retained on a priority basis, severance payment and rates, and legal liability for illegal dismissal.
KEY POINTS
- Employers should explain the situation to the labour union or all employees at least 30 days in advance, listen to their opinions and keep a written record of such communication and explanations.
- Employers should put forward a workforce reduction plan. The update specifies that this should include: a clear statutory basis for the reduction; positions to be downsized; number and percentage of employees to be dismissed; downsizing criteria; a list of employees to be dismissed; timing of the reduction; steps in which it will be implemented; details of employment contract expirations and terminations; severance rates and payment methods; and a plan for payment of salaries and social insurance premiums owed.
- Employers should solicit the opinion of the labour union or all employees on the reduction plan – and revise and improve it based on feedback.
- Employers should report in writing to the local administrative authority for human resources and social insurance on the course of its preparations for the workforce reduction and the finalised workforce reduction plan. The report should include: reasons for the reduction; basic information on employees to be dismissed; a statement as to whether the employer has explained the situation to the labour union or all employees, and listened to their opinions; and the name and contact details of the person in charge. The workforce reduction plan and relevant supporting documents (such as the minutes of the meetings in which the reduction is explained to the union or all the employees) should be attached to the report. This step implies the human resources and social security authority’s procedure for substantive examination of downsizing matters. If the authority has comments or proposals concerning the plan, the employer must resolve each issue and report back in writing, making revisions in line with the authority’s comments, and finalise the plan.
- Finally, on approval, the employer should formally announce the workforce reduction plan, carry out employment contract termination procedures with the employees to be dismissed, pay severance to those employees in accordance with relevant regulations, and pay salaries and social insurance premiums, and other such fees owed.
KEY TAKEAWAYS
The update continues to apply provisions of the Employment Contract Law and the Implementing Regulations for the Employment Contract Law concerning the circumstances in which downsizing is permitted, without any further explanation or elaboration of such circumstances.
However, it does specify procedural requirements for workforce reductions by employers – such as the reporting process and content of documentation. It also empowers the authorities to become directly involved in the downsizing process, and co-ordinate the process and resolve relevant issues.
This further clarification of workforce reduction procedures may signal standardisation of how such procedures will be handled by local Guangzhou authorities in the future.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice.
You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at howard.wu@bakermckenzie.com
