eNewsletter

Foreign-invested enterprises (FIEs) in China are being increasingly pressured to form labor unions.  More than ever, the central government, the All-China Federation of Trade Unions (ACFTU), and local governments are working to encourage unionization.

The ACFTU recently announced its goal of forming labor unions in 65% of foreign-invested enterprises (FIEs) by the end of 2011.  Future goals include increasing unionization to 78% by 2012 and 90% by 2013.  It is difficult to determine the current percentage of unionized FIEs in China as the numbers are often exaggerated. 

Under China’s Trade Union Law, employers have no legal obligation to create labor unions.  However, companies who reject attempts to unionize may face difficulties from the central government.  There have been reports of union-less FIEs receiving notices from China’s Tax Authority to submit forms to allow collection of Trade Union preparatory fees.  These companies also face increased chance of investigation by labor and customs authorities.

Local Chinese governments have also begun pressuring companies to set up labor unions.  Beijing is planning to charge union-less companies 2% of total labor costs.  This amount is equal to the total union contribution of a unionized company.  As China’s capital city, Beijing’s move to unionize companies is likely to influence other cities to adopt the measure as well.  Greater establishment of unions is expected to increase minimum wage as labor unions have a greater say in wage negotiations.