A company should apply to setup a flexible working hours system with the local labor bureau to avoid having to pay overtime to management employees or other employees whose job requires business travel and non-standard work hours.  Here we discuss the flexible working hours rules system as written and as used in practice.

We cover the following topics: 

• What is the flexible work hour regime? 
• What roles are eligible for such regime? 
• What procedures are required for an employer to adopt such regime? 
• Some practical issues concerning the flexible work hour regime. 

First, as you’re probably aware, the PRC labor law is on the whole very favorable to employees and has many statutory regulations that cannot be waived even by an employee agreeing in his or her labor contract. For working hours, the basic principle is that the hours should be reasonable and the employees’ right to a certain amount of rest is to be protected.

Under PRC law, in addition to the baseline “standard work hour regime” (8 hours per day, 5 days per week), there are two special work hour regimes: (1) a flexible work hour regime and (2) a comprehensive work hour regime. Both require approval by the labor bureau before implementation. 

What is the flexible work hour regime? 

The flexible work hour regime is tailored for employees for whom the standard work hour is not practical due to the nature of the work, the special work conditions and the scope of the employee’s duties.  It’s appropriate for salaried employees whose performance is linked with work results more than simply the number of hours worked, for example senior management and salespersons. 

From a practical perspective, under a flexible work hour regime, requests for overtime payment during normal workdays, weekend or public holiday will generally not be supported. Note OT in these situations without a flexible regime would otherwise accrue at 150%, 200%, and 300% per hour respectively.  However, note that notwithstanding the general rule above, in some cities like Shanghai and Shenzhen, employees are still entitled to overtime payment on public holidays (300%). 

The comprehensive work hour system (as opposed to the flexible working hours system) accumulates work hours over a specified cycle (weekly, monthly, quarterly, or yearly). The average number of hours is then determined based on this accumulation period. In other words, hours still have to be meticulously tracked and overtime calculated and paid.  Broadly speaking, this system is most suited to work roles with irregular shifts, including seasonal or project-based work.  

What roles are eligible for such regime? 

According to the regulation Laobufa (1994) No. 503, the company could adopt a flexible work regime if any of the below conditions are met:

(1) Senior managerial personnel, field staff, salespersons, other on-duty personnel, and other employees whose work cannot be measured according to standard working hours in the company; 

(2) Employees engaged in long-distance transport, taxi drivers, railways, ports, or warehouse workers, and employees engaged in mobile work due to the special natures of their jobs in the company; or

(3) Other employees to whom flexible work hours arrangement is applicable due to the particularities of production or special needs of their jobs.

Please note that only the above roles are eligble for a flexible work hour regime. In practice, the difficulty lies in the fact that the local labor bureau has the discretion to decide which role is eligible and grant permission on a case-by-case basis without strictly relying on precedent. For example, how does one define a senior manager, beyond job title？Decisions on this vary even from district to district in the same city. 

What procedures are required for an employer to adopt such regime?

As mentioned above, per the regulations, the company shall apply generally to the local labor bureau before the implementation of any flexible work hour regime. Also, applications must be made for specific positions and it shall be clearly specified in the labor contract with the employee in question that he or she consents to being placed under such flexible work hour regime. 

While in most regions the prior approval is the prerequisite for implementing the flexible work hour regime, a small number of cities have waived such approval requirement like Zhuhai of Guangdong Province. And in Beijing, for executive officers, advanced approval is not necessary to apply a flexible work hour regime. 

To reiterate, two types of permission are generally required:

• General permission - this allows your company to implement the chosen special work hour system; and
• Specific permission - this is required for each relevant employee position which shall work under the special work hour system.

 What is needed to apply?

1. An application for the implementation of a special work hour system (both types) by employers, which must include:

• The functional characteristics of the positions for the special working hours system;
• The proposed working hours and rest periods;
• The number of employees involved; and
• The comprehensive calculation of the working hours under the system;

2. Trade union opinion of the enterprise (i.e. a copy of the “Trade Union Legal Person Qualification Certificate”). If the enterprise has not established a trade union, it shall provide a “staff meeting for the implementation of a special work hour system”, and the attending staff shall sign and confirm it;

3. A copy of the employer’s business license; 

4. Other materials required by relevant laws, regulations, or rules; and 

5. Specific additional requirements which may vary by district.

The labor bureau is expected to decide on the application within 20 business days of acknowledging the completeness of the employer’s application.

Once approved, there will still potentially be some supervisory inspection by the labor bureau of your special work hour system. Any misuse could lead to penalties and more frequent inspections.

One area regulators will be on the lookout for - the lack of overtime provisions for non-fixed employees may tempt certain employers to overwork staff to cut costs and boost production. Employees unhappy about this (in addition to filing a complaint with the labor bureau) can simply start arriving late or leaving their place of work early. Both instances may be difficult to track due to irregular working hours.

Note also that once you have obtained permission to implement a special work hour system, the system can only be implemented for a distinct period of time, usually one or two years depending in part on how convincing your application materials are.  Unfortunately we know that the renewal process can be just as arduous as the initial application, although certainly it’s a good starting point if the position has been previously approved.  

Some practical issues concerning the flexible work hour regime.

(1) While the flexible work hour regime does not have an upper limit on working hours, the company shall still guarantee the right of the employees to rest, and such employees are also entitled to the certain period of paid time off per company policy.

 (2) The approval by the local labor bureau is associated with a certain position, not the individual. Therefore, as long as the approval is valid, the change of staff on this position needs no re-approval.  For example, an employer may obtain permission to employ a senior manager for two years on the non-fixed working hour system, but the senior manager leaves the role early.  A new employee is then recruited to fill the senior manager role. The company does not need to obtain permission for the new employee working under the non-fixed working hour system for the remainder of the two year period.

(3) When the flexible work hour regime is approved, if the company fails to implement it in reality (for example, the employee is also required to clock in at 9 am and clock out at 6pm), the standard work hour regime will apply by default.

(4) Despite (3) above, under a flexible work hour regime, it is still appropriate to apply certain attendance requirements as long as its consistent with a legitimate management need.

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