A new labour law which has raised widespread concern amongst companies in China is expected to have a significant impact on companies when it comes into effect on January 1 2008.

Passed on June 29, the main emphasis of the contract law is to protect employees’ interests and standardise employer rules by expressly putting in place the rights and obligations of both parties. According to Watson Wyatt, the law strengthens collective rights through unions, employee representative congresses and collective contracts. The changes are said to have a significant impact on the current employment practices of many companies in China.

Some of the changes arising from the new law include promoting long-term employment relationships by discouraging successive fixed-term contracts and allowing employers to use agency workers only for filling auxiliary, substitute or temporary positions, and strengthens the right of agency workers.