As the New Year draws near, certain enterprises in Guangzhou are masterminding plans to terminate labor contracts with their employees, in an apparent move to dodge the new labor contract law that goes into effect on January 1, 2008.

However, a notice that was issued by the local government over the weekend is blocking their crafty calculations. It requires them to renew labor contracts with their employees by December 31, and includes all businesses except those on the verge of bankruptcy or trapped in an operational crisis.

According to the new labor contract law, any employee who has worked for a company for more than 10 years is entitled to sign an open-ended labor contract. The same applies to anyone who renews his labor contract after working for two fixed terms consecutively.

In addition the new law guarantees economic compensation in some cases of contract termination; it also has clauses regarding social insurance for employees.

Worrying that labor costs would rise from the labor law and that it would become difficult to sack employees holding open-ended contracts, enterprises began to force their employees who have completed a decade-long services to resign now in order to sidestep the new law.

In some other cases, enterprises have forced their employees to enter into employment contracts with a staffing firm and then accepted them as workers under the staffing firms' placement arrangements.

The local government aims to put snuff out such illegal layoffs exercised by a small number of enterprises, said Chen Jianlong, vice director of Guangzhou municipal labor and social security bureau.

A large number of labor contracts will expire at the end of the year. The local government's notice comes at a timely fashion in order to protect employees who are approximately 40 years of age and have worked for about ten years from being dismissed. This governmental protection would also avoid potential complaints and labor disputes that could create dangerous situations harming social stability.

However, the notice does not target normal layoffs. Enterprises are allowed to discharge their employees in large numbers in case of pre-bankruptcy restructuring and consolidation or if the municipal government classifies them as having serious operational problems.

Employers have to submit written reports to the labor and social security department if the number of laid-off employees exceeds 20 or accounts for over 10 percent of the total staff number from December 14 to 31.The labor department will give a reply within 15 days, according to Chen.

Agencies that manage social insurance are also told not to stop insurance payments upon demand by employers. "As long as social insurance is not suspended, labor relations will exist," said Chen.

Trade unions are also given the right to point out illegal practices by enterprises. They may ask them to rectify the problems. They are also supposed to offer support and aid to employees in arbitration and litigation.

(China.org.cn by Yuan Fang December 18, 2007)