Labour lawyers can help Chinese companies successfully ‘go global’

At this juncture, when the Chinese economy is facing a major turning point, the outward flow of Chinese factors and the transformation and upgrading of international industry are comprehensively taking place. As Chinese enterprises respond to the Belt and Road Initiative, the cross-border flow of enterprise capital and talent will necessarily follow, and labour law issues, both domestic and foreign, will be unavoidable.

YOURSELF, YOUR COUNTERPARTS

(1) Due diligence on the host country’s legal environment. The legal environment risks of overseas investment projects vary in myriad ways depending on the legal systems of the host countries. An investor needs to carry out, with the assistance of its legal counsel, comprehensive and in-depth due diligence of the host country’s legal environment at the outset of the project. In the course of the foregoing, understanding of the host country’s labour laws, trade union laws, immigration regulations, dispute resolution mechanisms and laws on corporate tax and personal income tax is necessary.

(2) Basic approach to the cross-border personnel arrangement. First, consideration needs to be given to whether the laws of the host country require an investor to establish an entity in the host country and establish employment relationships with its workers. Financial costs and the human resource structure, particularly the tax burden of an individual when he or she provides services on a global scale, are of major concern to both employers and employees.

The major issues that require attention include: (i) the conditions necessary to secure a working permit and right of residence in the host country; (ii) whether the host country has mandatory legal provisions regarding the execution of employment legal documents by an enterprise; (iii) the link with a Chinese employment contract; (iv) whether dual employment is constituted for the employee; (v) the respective domestic and foreign tax filing and payment obligations of the entity and individuals; (vi) assessment of the risks of a local permanent establishment based on the laws of the host country; and (vii) other issues relating to an employment relationship, e.g., whether there is an obligation to establish a labour union in the host country, different legal obligations in respect of the protection of personal information and data, etc.