Representatives of U.S. fast-food chain KFC in northeast China's Shenyang City Thursday signed the company's first collective labor contract on the Chinese mainland, agreeing to raise workers' wages and meeting the demands of a local trade union.

According to the agreement, the company's roughly 2,000 employees will enjoy a minimum monthly wage of 900 yuan (131.7 U.S. dollars) - up from the company's previous offer of 700 yuan per month - and an annual five percent pay raise.

An executive with Yum! Brands Inc. in Shenyang said on the condition of anonymity the agreement is the company's first collective labor contract on the Chinese mainland.

He admitted the company had been under pressure after media reports of the negotiations with the local trade union.

Yum! Brands Inc. in Shenyang manages 57 KFC outlets and 11 Pizza Hut restaurants. The company is known by locals as KFC Shenyang.

The company said in a statement earlier this month most of its employees in Shenyang already have monthly wages of over 900 yuan, and so the signing of the contract "would not necessarily mean workers' pay would immediately rise."

Duan Yang, vice president of the Shenyang Municipal Trade Union, said the inking of the collective labor contract was "significant in that it established a mechanism for negotiations between the employer and workers on wage issues."

"The contract also ensures service-sector workers at the lowest level in fast-food outlets will benefit from an annual pay rise," he added.

Yum! Brands Inc. in Shenyang submitted a draft version of the contract to the union on Feb. 12 this year. But the union regarded it as "favorable to the company and unfair to its employees" and urged the company to define a worker's minimum wage in the contract.

Li Zhongmin, a public relations manager with Yum! Brands Inc. in Shenyang, explained on June 2 the company needed to report matters regarding contract changes to the company's China headquarters, which caused a delay in responding to the union's demands.

Duan Yang said a collective labor contract is important as a base for companies to sign individual labor contracts.

He said companies should set a minimum wage and a specified annual wage increase that reflects their social conscience.

The All China Federation of Trade Unions has been promoting corporate collective labor contracts through the "Rainbow Project." The three-year project aims to have companies sign collective agreements with trade unions by 2012.

Federation statistics show that by September 2009, 1.24 million collective labor agreements had been signed to cover 161.9 million workers.

Retailing-giant Walmart's Shenyang subsidiary, for example, agreed to an 8-percent annual pay rise in a collective labor contract signed in 2008.

Salary disputes have triggered a string of strikes and suicides at overseas-funded plants in China recently, with transnational Japan-based carmaker Honda Motor Co. still dealing a strike.

Chinese Premier Wen Jiabao pledged in March to deepen income redistribution reforms.

Wen said income redistribution is an "important manifestation of social fairness and justice" and a major booster of domestic demand that narrows income gaps.

Since February, a dozen of Chinese provinces and municipalities have lifted their minimum wages.

China's southernmost province, Hainan, became the latest to raise its minimum wage. The provincial government said Thursday that from July 1 the minimum wage in the province will rise 31.7 percent to 830 yuan. About 120,000 people are expected to benefit from the policy.