Limited labor and social security protections towards the persons in

Transcription

1 Limited labor and social security protections towards the persons in informal employment in China Ai-Qing ZHENG 1 Introduction: concept of informal employment and its emergence Informal employment is not a term usually used officially or academically in China. Since 2001, Chinese government prefers to use flexible employment (ling huo jiu ye) instead of informal employment. About the meaning and the scope of the two terms, some experts don t see differences between the two concepts 2 ; while others believe that flexible employment has larger meanings than informal employment, it includes all kinds of informal job and some formal job executed in flexible way 3. Absence of this consciousness on the understanding of the concept has negative impacts on the adoption of policy or law in the field, and this also makes it impossible to have an exact statistic on the scale of informal employment 4. To reveal the substantial problem, here we adopt the second understanding on the term of informal employment or flexible employment, to indicate not only the persons in informal activities (like the street business), but also those involved in formal activities but in flexible manner (for instance, the part-timer). The emergence of informal employment is especially due to three principal circumstances linked with reform policy, market- direction development and urbanization. The first background is the implementation of the reform and opening-up policy of 1978 which began to permit multiple type of property. Private sector began to be legitimized. The first groups of persons who are engaged in 1 Associate Professor of Law School of Renmin University of China. 2 SHI Meixia (2007), The research on labor relations of informal employment, China Labor and Social Security publishing house, p. 11. HE Ping and HUA Yingfang (2008), Research on social security of informal employment employees, China Labor and Social Security publishing house,. p.2. 3 REN Yuan, PENG Xizhe (2007), Report of informal employment in China in 2006, Chong Qing Publishing house, p.7. 4 There are different figures about its percentage: some think 40%, others 46%, still others 51% in 2011.

2 informal employment are some young people after returned form the countryside to city at the beginning of the decade of 1980s. Victim of a policy Maoist to learn from peasants after high school in 1970s, they were confronted to big difficulties to find a job after the return to city in the context of already serious situation of unemployment in urban area caused by the planned economy. Many of them began to work as self-employed in informal activities. The second circumstance is the massif laid-off (xia gang) from mi-1990s to 2002 which provoked unemployment to nearly 30 millions workers employed in State-Owned enterprises during the planned economy. To deepen the reform of the State-Owned enterprises by restructuring them into modern company model, the redundant workers were necessarily laid off. The majority of them were later reemployed in informal sectors. The third background is the accelerate urbanization since the end of 1990s which attracts a big fluid of rural population to city every year. The National statistic administration revealed that there are more than 260 millions migrants in cities up to According to estimation, 90% of them are involved in informal employment in cities 5. Generally speaking, the informal employment is not a voluntary choice for Chinese people. They are obliged by different kinds of institutional obstacles or policy. This is evident for migrant people in cities. This is also true for old generations with urban household. For instance, the massively dismissed workers in the decade of 1990s, were obliged to engage in all kind of odd jobs for survival. Traditionally, Chinese people have a strong sense of collectivity, and they are likely to work in formal work units for full-time. There were discriminatory views on the migrant workers in cities or on the persons in odd jobs in urban society during a long time. Even some self-employed persons regarded themselves as second-class in society. Even the government seemed not incentive for informal employment. Many economists advanced that tax, finance measures are not enough encouraging for the 5 REN Yuan, PENG Xizhe (2007), Report of informal employment in China in 2006, Chong Qing Publishing house, p.71

3 sound development of informal economy 6. The small or micro enterprises were often under heavy tax charge. Recently and had big difficulties in borrowing money from banks. Since recent years, with a better administrative and financial context, and also accompanied by the widely spread of Internet and the deep social transition, more and more young generation engage voluntary in informal job. The informal employment will certainly develop as Chinese society is becoming more and more open, and people are able to make their own choice on their profession and work in liberty. Neverthless, both the central government and local governments are not yet ready to provide them necessary protections, especially the protections of labor and social security law. A. Informal employment: less regulated and lowly covered by labor law Although Chinese labor legislation has remarkably developed since a decade, but it still provides very limited protections to the persons involved in informal employment, and still leaves the majority of them outside of it. After the efforts of more than a decade, since the end of 1990s, the labor law and social security systems for formal employment are relatively set up. Just under this circumstance, the people in marginalization, especially persons in informal employment, begun to be seriously considered by the central government. Compared with its appearance already in the decade of 1980s, legal considerations arrived effectively too late. Besides several documents especially on the massively dismissed employees at the end of 1990s, the first national regulation concerning the flexible employment was issued in 2001 by the Labor Ministry about the establishment of retirement insurance 6 HU Angang and YANG Yunxin, Change of employment model: from formal to informal, in Word Management, 2/2001; GUO Zhengtao and ZHAO Yuandu, Research on informal employment, in Tax and Economy, 4/2007.

4 for self-employed persons in business. The second regulation, published in 2003, is about retirement insurance of part-time jobbers. The third regulation, also adopted in the year of 2003, provides illness insurance for all persons in flexible employment. Till now, there are no other national regulations about the issue of flexible employment, but there are a great number of local regulations on it. Every province or city provides different and precise regulations on social security for persons in flexible employment. So, local regulations are more useful and accessible for them. As there is not unified concept on the comprehension of informal employment, here we adopt the common view of many Chinese authors 7 ; we consider three types of employment as informal employment 8. First, it includes some employees in formal sector with the conclusion of employment contract, covered by labor law, but legally less protected, such as the part-time jobbers. Second, it means the persons work for the residential communities, for families, for micro enterprise, or for individual commerce operations. At last, it indicates the self-employed persons in all kinds of free profession. The last two kinds of employment are not yet covered by labor law. This very narrow coverage of Chinese labor law can be mainly explained by the priority of Chinese labor law to formal employment relationship. With the implementation of socialist market economy since 1993, under the context of more and more conflictable of employment relationship, Chinese labor law begins to develop by setting up precise protections for traditional formal employment relationship in order to meet the needs of keeping employer-employees power balance. For this reason, labor legislations, designed only for the traditional formal employment relationship (full-time job, with an employment contract in formal 7 SHI Meixia (2007), The research on labor relations of informal employment, China Labor and Social Security publishing house,. p. 11. HE Ping and HUA Yingfang (2008), Research on social security of informal employment employees, China Labor and Social Security publishing house. p.2. 8 We exclude the dispatched workers (agency workers for other countries) from informal employment, because their relationship with the dispatching-enterprise is defined as employment contract relationship by the Employment Contract Act of According to this Act, their employment contract should be concluded for at least two years and it is prohibited that the user-enterprise and the dispatching-enterprise discriminate them regarding their labor and social security treatments. This Act provides also other protections for them. So they are legally regarded as normal employees of the dispatching-enterprise, this means they are in formal employment.

5 section), just cover formal employment relationship. According to our statistics of 2004, Chinese Labor Law covered only 36% of the urban active population. Actually, about this rate, we could have an estimation of 40-45%. This rate rest at low level, explains well the persons employed in informal economic are formally excluded from the scope of labor law protection. B. Informal employment: marginalized situations In informal employment, migrant workers, domestic workers and self-employed persons are situated since quite a long time in a kind of marginalized position in Chinese society. The number of migrant workers in cities increases annually with the progressive urbanization. They constitute the majority of persons with informal job but within the formal sector. Although the central government has the determinations, especially since 2004, to provide equal protections to them in cities as citizen-employees, but in practice, different kinds of obstacles incur them from enjoying legal labor and social benefits. Theoretically, they are considered as an important part of working class and expressly covered by labor law, but they are still the victims of salary delay or refuse 9, of professional illness, of accidents and especially the very low coverage of social security, beside the daily problem of discrimination in access to local school for their children. The lasted sociologic research shows the growing precariousness of their job in cities In the construction sector, where is concentrated with migrant workers, delay or refuse of pay by individual sub-contractor is a common phenomena. During one decade from the end of 1990s, this problem was so seriously detrimental to the migrant workers that a specific crime is added into Chinese criminal law to accuse the vicious employer. This legislative action is proved not enough to eliminate this thorny problem. It is still easy to find this kind of news on website every January. And during this period, just before the coming of Chinese New Year (Spring Festival), the central government should urge all local governments to adopt all kinds of measures in order to guarantee the pay to migrant workers, who are desirable to take their salary to home at this special moment. 10 A study of sociology department of Tsinghua University (2014), Study on the trend of shorten job of migrants, Tsinghua Sociological Review, No.6, p Social Science Academic Press (China).

6 The domestic workers, who work for the families in all kinds of housework, in helping the olds or disabilities, are becoming more and more indispensible for urban families. But they are not covered by Labor Law. Without any kind of social security, especially without professional accident insurance, their health and life remain uncertain; without legal minimum wage, their remuneration depends effectively on the demand on labor market. The casualty in work is determined according to the Tort Law which is not favorite for the workers. Only a mall part of domestic workers pays for a commercial accident insurance which is optional. According to some reports 11, the number of domestic workers is more than 20 millions, 95% of them are women migrant. Their right to remuneration, to social security, to health, even the right of dignity is increasingly worrying. The unique local regulation on the domestic work, Regulation on domestic work in Shenzhen special economic zone in Guangdong province, with express provisions on domestic workers labor and social security rights, are not well implemented. According to the unique national regulation on part-time job of Labor Ministry of 2003, the domestic-work company should first sign an employment contract with the domestic worker, and then dispatch him to work for families. So, in this case, the domestic workers have the status of employees of this company, therefore, covered by labor law. But in practice, unfortunately, this situation concerns just a very small number of domestic workers, while the majority is introduced by the company to work for families under a kind of civil contract law. Self-employed persons in small business in cities by selling meals or some small articles and products besides the streets, especially in the evening, are much more marginalized. The majority are migrants or urban residents without formal job. Generally, they do it in the evening because their daily odd jobs are not enough for their living. But for the lack of legal registration and negative impacts to the cleanliness of the urban area, the local government always wants to wipe it out. They are considered as trouble-makers for many local governments. The quarrels or 11 Legality Journal, Law should protect the social security rights of domestic workers

7 conflicts occur frequently between these persons and cheng guan (local governmental officials in charge of city s order) 12. Nevertheless, it is still enduring, since it is quite convenient for local people s life. It really constitutes a thorny issue for all local governments. These self-employed people are completely excluded from any kind of labor and social benefits. C. Part-timer: being legally treated differently from full-timer Employment Contract Act of 2007 (herein after ECA), entered into force since 2008, considered as more protective to employees than other labor legislations, begins to set up some labor protections for part-time employees. The most important protection of this Act towards part-time employee is the guarantee of minimum wage and the duration of payment of wage. The employer should pay them according to local minimum wage and the payment of wage should be within 15 days. These provisions prove well that part-time jobs are regarded as a kind of flexible employment. It is obvious to confirm that the ECA adopts different altitudes towards full-time employees and part-time employees. In one hand, the conditions of conclusion and termination of employment contract in regards to full-time or part-time are quite different. The provisions are comparatively lax towards part-time contract. For a full-time employment contract, it is obliged to conclude a written contract, as for a part-time employment contract, oral contract is permitted. The dismissal of full-timer employment contract should be legally justified and with a notice in advance, accompanied with dismissal compensations under some situations. While for the dismissal of part-time contract by the employer, it can be done at any moment without any justification and without any compensation. In other hand, concerning the social security of part-time jobbers, it is also differently arranged compared to full-time employees. For full-time employees, the enterprise should contribute monthly a 12 Many conflicts even accompanied with violence are reported since recent years. For instance, the conflict of 1.9 Guangzhou in 2012, 5.30 Yan an in 2013, 4.19 Wenzhou in 2014, etc. are the events during which the local governmental officials beat les persons.

8 percentage to the social security funds for employees for five kinds of social assurance (retirement assurance, illness assurance, unemployment assurance, professional accident assurance and maternity assurance), at the same time, the employee also contribute a percentage for three kinds of social insurance (retirement, illness and unemployment), which is legally and monthly deducted by his enterprise and paid to the social security funds. While for part-time employees, the employer doest pay for their social security, and they are demanded to pay themselves according to a different percentage to the social security funds. For instance, for the retirement, the full-time jobbers in Beijing pays monthly 8% of his salary and his employer pays 20% monthly for him; while the part-time jobber pays monthly 20% of his salary for the retirement. Does this kind of difference constitute a kind of discrimination towards the part-time jobber? D. Social security issue for informal employment: in weaker or neglected considerations Although since 2005, some local governments began to provide subsidies for the persons engaged in informal employment to help them to pay their social security, the coverage rate of every kind of social security for them remains still very lower or no existed, compared with employees in formal employment for which the coverage rate is quite high or nearly 100% 13. Just a proportion of persons in informal employment are covered for retirement insurance and illness insurance. They are almost completly excluded from professional injury insurance, unemployment insurance and maternity insurance. According to some academic studies, in 2011, for the persons in informal employment, the coverage rate of retirement insurance is around 10%, and the coverage rate of 13 It is a obligation for employer pays social security for employee engaged in formal employment. Many disputes show the infringement of employer to this obligation. The statutory obligation and the dispute system can guarantee the high coverage of social security for these employees. c

9 illness insurance is about 30% 14. The main reasons for this lower lever of coverage by retirement insurance and illness insurance for persons in informal employment are the followings. First, the payment rate for them is too high compared to their remuneration. The payment rate is fixed to a percentage of local average salary which is calculated on the base of formal employment, excluding the informal employment. Second, there is a lack of consciousness to register into retirement or illness insurance for them. They prefer to put their money in bank in stand of pay for these insurance. At last, if they register and pay for these insurance, there is still a problem to transfer their registration from one place to another place if they change their jobs. So it is obvious that the retirement insurance and illness insurance system are not suitably set up for them. Many authors pointed out that the unsuitable contribution rate for social security is the main reason for the low coverage or absence of social security; therefore, they suggest setting up flexible rate for informal employment 15. For professional injury insurance, only 28% of migrant workers are covered by it, and all the other persons in informal employment are excluded from it. As unemployment insurance and maternity insurance, we can just find a few cities or provinces which have adopted special policies for them. Concerning the unemployment insurance, there are even controversy opinions about if it is necessary to include the persons of informal employment into the unemployment insurance, if it is yes, the question is how to decide the protection level to them. In regarding to the absence of maternity insurance for them, it deed reveals a total negligence of government to them. Conclusion From the limited regulations on informal employment, we are likely to observe that 14 ZHAO Chongping and TAN Yong (2014), Research on the social security system for persons in flexible employment, edition Guang Ming Daily, p.196, p HE Ping and HUA Yingfang (2008), Research on social security of informal employment employees, China Labor and Social Security publishing house. p.28. XIA Linlin, Research on the retirement insurance of groups in informal employment, in Urban Economy of China, 2/2011, p221. ZHU Ze and XIE Zhanfeng, Reflections on the reasons of the low registration of people in flexible employment to retirement insurance and suggestions, in World of Labor and Security, 10/2011, p.6.

10 the position towards the informal employment by the central government is to gradually normalize it with different speeds in different provinces rather than to formalize it nationally. The statistics available on the increasing coverage rate of different types of social security in urban area, from the official website of Labor Ministry, indicate the increase of number of employees or workers covered by the social security. This increase can indirectly and partly confirm that the number of persons in informal employment covered by social security is increasing. But this does mean a long way to achieve.