Electronic labor contracts are biding in China and more efficient

Electronic labor contracts are not only more economic but help reduce paperwork and increase efficiency. In China, since March 2020, when the COVID-19 pandemic forced people to minimize interaction and made it difficult to sign a paper contract, the Chinese government confirmed the legitimacy of these type of documents.

Since then, the authorities issued guidelines on the signing of electronic employment contracts which encourages the electronic signature of contracts via designated platforms.

The platforms could be those set up by the government or by third party organizations. However, it is encouraged that the parties utilize the government sponsored platform, and use a government issued employment contract template.

An electronic labor contract in China is a legally binding document, created through an electronic form with signature technology to make sure the identity of the signatory is legitimate, and the content cannot be changed. 

Thanks to this technology, the paperwork involved with the hiring process is considerably reduced. It also lowers the cost associated with processing electronic contracts between countries. 

A standard electronic labor contract requires information such as date of birth, work experience, skills, and contact information. Some contracts may also need previous education verification, such as university or college course.

Under the terms of the electronic-form contract, the contracting parties shall perform all tasks necessary for the implementation of the agreement. The employer must ensure compliance with all of China’s labor laws, as well as complying with applicable local procedures regarding worker compensation. 

There are some differences between an electronic labor contract and a paper one. The electronic form is processed much faster because it contains no room for error. Also, the electronic form is compliant with the law and can be processed with little or no delays. If the document contains an error, the party has the option to fix it before it becomes binding. 

The electronic signature also decreases the chances of identity theft. Paper contracts are difficult to monitor, making them susceptible to stolen identities. On the contrary, electronic contracts can be tracked more easily.

The information to be included in the electronic labor contract is similar to that in the paper contract. Employee and employer information, remuneration, employment period, working hours and leaves, social insurance, and responsibilities are all elements that must be included.

Choosing which platform to use for the electronic labor contract is crucial. It is recommended that employers first consider a platform provided by the local government or a platform that meets the requirements and is recognized by the local judicial authorities.

The chosen platform can be self-built, purchased from a third party, or provided by the government. However, it must enable users to sign, access, store, and use the electronic labor contract by providing effective means of modern information technology.

It should also be able to verify the identity of the parties to the contract, apply the electronic signature, confirm the willingness of the parties, ensure the security of contract data and support multiple methods for online negotiation and modifications.

One of the most important aspects is to define and confirm the identities of the contract’s parties. An inbuilt identity registration and verification system is a key function to look for when selecting a contract management platform. 

Facial recognition, cell phone authentication, bank card verification, security questions, and username/password verification are the most common forms of verification.

Following the agreement on the basic content of the contract, both parties can begin negotiating the contract’s terms in compliance with the labor law in China.

 

The contract becomes biding when both the employer and the employee have signed or sealed the labor contract. This can be achieved with an electronic signature or an electronic chop for electronic contracts.

 

Before concluding the electronic labor contract, the employer bears the obligation of explicitly informing the employee of the procedures, operating methods, precautions, and channels to view and download the complete text of the labor contract and should not charge fee from the employee.

After completing the electronic contract, an auxiliary audit of the full text of the contract should be performed to ensure that it was not tampered with before being signed. 

Employers may use a range of tools, such as auxiliary encryption or private technological features such as QR codes, time stamps, watermarks, and SMS alerts.

Once the electronic labor contract is signed, the employer should notify the employee by mobile text message notification, WeChat, e-mail, or APP message prompt, or other means.

The employer should also remind and assist the employee to timely download and safely keep the text of the electronic employment contract. The employee should be ensured to view, download, and print out the complete contents of the electronic employment contract at any time and free of charge.

 

Rules on electronic labor contract disputes may vary depending on the city or province. Businesses should follow the new compliance standards and regulations on electronic labor contracts and pay attention to how particular operational changes like digitization can impact their business process management, cybersecurity compliance, as well as legal compliance.  


To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at kristina@woodburnglobal.com.

DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.