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Assuming that the employer chooses to go forward with the mass layoff, it must then submit a workforce reduction plan (Plan) to the labor authorities. The Plan should include, at a minimum, the applicable information to demonstrate the legal basis for the mass layoff; the number of employees affected; the schedule... show more Assuming that the employer chooses to go forward with the mass layoff, it must then submit a workforce reduction plan (Plan) to the labor authorities. The Plan should include, at a minimum, the applicable information to demonstrate the legal basis for the mass layoff; the number of employees affected; the schedule for the layoffs; details of the severance payments; and consideration of the union or employees’ input. Although the ECL is ambiguous with respect to whether approval of the Plan from the labor authorities is required, in practice, an employer will find it difficult to proceed without receiving that approval
What if the company does not meet the definition of a mass layoff or does not want to proceed with a mass layoff, but still wants to reduce headcount or labor costs?
Given the bureaucratic hurdles in connecton with mass layoffs, companies should consider whether immediate layoffs make the most economic sense, in light of high costs of separation packages and future recruitment and retraining costs. As unemployment rates continus to rise and present a challenge for China this year, the PRC government is actively encouraging employers to consider and implement other remedial measures that fall short of redundancies, such as reduced hours, shortened workweeks, wage reductions, and furloughs or forced shutdowns.
Employers may also consider approaching individual employees under Article 36 of the ECL which provides that an employer and employee may terminate the employment contract upon mutual agreement. Using this approach, employers must consult with individual employees, which may be more time-consuming, but which also may result in the execution of signed settlement agreements and releases and does not require government reporting. Employers should anticipate meeting some resistance from the employees and the need for employees in the PRC to negotiate their separation packages.
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