International Business Law – Regulation of Labour in Asia
INTERNATIONAL BUSINESS LAW – REGULATION OF LABOUR IN ASIA
Many of Judicate Lawyers’ clients are setting up service and manufacturing businesses in the emerging Asian economies of China, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
Many of these new businesses operate with less than complete knowledge of the local laws that govern employment and workers’ rights. For instance:
Is there any legal distinction between different types of workers? What protections are there for typical workers?
Is there a minimum wage? What protections are there for temporary or agency workers? What protections are there for employees when services are out-sourced?
This article will address how these key issues are controlled in the key Asian economies in which Australian business is increasingly operating.
Look at the following jurisdictions:
China – Workers fall into different categories being normal employees, despatched employees, part-time employees and service providers. Service providers are those who are retired and freelancers. Such services are not governed by employment laws and service providers are not entitled to severance pay, overtime, paid holiday, limits on working hours and other employment related rights and benefits unless provided by national or local regulations. The duration and termination of employment contracts is governed by Chinese law. However, the duration and termination of a contract for services can be agreed between the parties under normal contract law provisions. In relation to a minimum wage, each regional government sets a local minimum wage which is updated annually. Temporary employees generally enjoy the same rights and protection as normal employees unless they are working part-time. Despatched employees are entitled to equal work for equal pay and receive the same overtime, labour protection and salary adjustment as directly hired employees. There is also a general trend amongst the All China Federation of Trade Unions to increase union coverage in China.
Indonesia – Indonesian law (13 of 2003) divides workers into permanent workers and temporary workers. Permanent workers can be engaged for all types of work. Temporary workers, however, can only be engaged for certain work such as work that can be completed within a certain time. Indonesian law also provides protection to all types of workers such as the right to a rest hour, the right to be enrolled in the security program, the right to be paid a wage equal to or greater than the minimum wage. Indonesian law also prohibits an employer from paying wages which are less than the minimum wage which is set by the provincial or district decree. Under Indonesian law, agency workers can be out-sourced or assigned to a third party. The out-sourcing can be divided into two types: a labour supply scheme and a contractor scheme.
Malaysia – Malaysian law distinguishes between employees and independent contractors. The work performed by an employee is contractually based and is performed under a contract of service. The independent contractor is hired to do a defined task under a contract and performs work pursuant to a contract for service. This is similar to common law jurisdictions like in Britain, Canada, India, Australia, United States and New Zealand. There is a minimum wage in Malaysia as provided by the Minimum Wages Order 2012. In terms of protection, temporary workers are not defined under Malaysian law. People employed under contracts of employment whether fixed term or fixed project, do receive statutory employment protection. There is no specific legal coverage relating to the out-sourcing of employees. Where this occurs, protection will depend upon whether the new employer absorbs the out-sourced employee into the new organisation. If this does not occur, Malaysian law will assume that the out-sourced employee will still be employed by the out-sourcing employer rather than the recipient employer.
Philippines – Philippino law distinguishes employees from independent contractors. The distinction between the two depends upon the outcome of a four stage test: selection and engagement of the employee; payment of wages; power of dismissal; and the employer’s power to control the employee with respect to the means and methods by which work is performed and accomplished. With employees, the control test is the most important. There are four kinds of employees: regular, project, seasonal and casual. The regular employee enjoys greater security of tenure than the other categories who only receive job security for the specific project or activity. Managerial level employees are not permitted to join or form labour unions. Part-time or fixed-time workers may be regarded as project employees. Regular employees are granted security of tenure and may only be terminated on a just or authorized cause. The minimum wage in the Philippines is determined by the National Wages and Productivity Commission together with the Regional Tripartite Wages and Productivity Boards in all regions of the country. Minimum wage rates, however, vary from region to region.
Singapore – Singaporean law distinguishes employees from independent contractors commonly known as casual, temporary or contract workers. Singaporean law distinguishes between the two by considering various factors including day-to-day control, mutuality of obligation, regular working hours, leave and other benefits, disciplinary actions and provision of tools and job training. There is no Singaporean legislative protection for independent contractors. Singaporean law defines part-time employees as anyone working less than 35 hours per week. There is also no minimum wage in Singapore. Singaporean law also provides no protection for temporary workers or agency workers. This gives rise to questions as to whether or not agency workers are employed by the employment agency or by the employer end-user. Nevertheless, the rights of out-sourced or hired-out employees will be protected. Singaporean law is also encouraging the re-employment of older employees to address the changing needs of the Singaporean workforce which requires the experience and expertise of mature workers.
South Korea – Korean law uses the term “workers” to refer to individuals who are referred to as employees. Korean law does not define workers by the type of work or by the type of employment agreement by which the worker is bound. The worker is categorized as an individual who provides labour to an employer. This somewhat feudal definition of worker is used to refer to workers of the working class. Korean law does recognize protections for workers whether fixed term, part-time, working within a probationary period and a temporary agency worker. As with other jurisdictions, fixed term, part-time, probationary and temporary agency workers are all defined. Korean law also recognizes the minimum wage which applies to any worker regardless of the type of occupation. In a worker despatch scheme, a licensed manpower agency hires the workers and sends them to the service recipient company. The agency may exercise direct supervision and control over the despatched workers. Subcontracting is permissible only if the service recipient company does not directly supervise or control the subcontractor’s employees. Korean law also recognizes non-regular employees. This is a political and social term used to describe a group of workers who are paid lower wages, given less benefits and who may be more easily dismissed by employers.
Thailand – Worker is not legally defined under Thai labour laws. These laws only define the term “employee” as a person who agrees to work for an employer in return for wages irrespective of the nature of the relationship. Thai business, in practice, recognizes different types and employees according to their business objectives like probationary employees, shift-work employees, daily employees, office employees, consultants, managers, directors and the like. There is a minimum in Thailand which is fixed throughout the country. Conditions of employment are not easily amended under Thai law. The process requires negotiation and a conciliated settlement if agreement cannot be reached between management and labour. Labour unions may submit demands upon behalf of their members and a collective agreement approved by members exceeding two-thirds of the total number of employees will be recognized under Thai law and be binding upon employers and employees alike.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
For any further information concerning this article, please contact Michael Pickering, Principal, Judicate Lawyers – Barristers and Solicitors of Unit 11 / 233 Cardigan Street, Carlton, Victoria, 3053. His contact details are as follows: