Hiring in China just got a lot harder – for employers, that is. No, it’s not a personnel crunch that’s at the root of the problem. It’s the new Labor Contract Law (LCL). Adopted on June 29, 2007, the LCL will dramatically change the relationship between employer and employee in China when it comes into effect on January 1, 2008. No matter how few employees a company has, it still must ensure that its employment practices comply with the new law.

The LCL makes the following important changes to prior employment practice in China:
All labor contracts must be in writing. The LCL imposes significant penalties on the employer for failure to enter into a written employment contract.

All employers must maintain a written employee handbook setting out the basic rules and regulations of employment. This requirement applies to all companies regardless of size and number of employees. The failure to maintain an employee handbook means that an employer will eff ...

... penalties and damages in the local employment arbitration bureau or in the local courts. The LCL has been actively publicized and employees are well informed about their rights under the new law. Growing numbers of Chinese attorneys are taking a strong interest in representing employees under the LCL in filing group claims against employers. It is this sort of employee “self help,” rather than administrative sanction, that is likely to be the greatest threat to employers under the new law.