Hong Kong, Macao, and Taiwan residents employed in the PRC to enjoy Chinese citizens’ benefits

On 3 August 2018, the PRC State Council announced the Decision of the State Council to Cancel a Group of Administrative Licensing Items (State Council Announcement), under which the requirement of work permits for Hong Kong, Macao and Taiwan (HMT) residents who work in Mainland China (PRC) is abolished. This measure is considered a milestone for HMT employees to enjoy Chinese citizens’ benefits in the PRC.

The existing system

Since 2005, the PRC government has implemented the employment pre-approval system, which requires PRC enterprises to register work permits for their HMT staff at the local labour protection administrative authorities. Upon approval of the application for work permits, the employees shall complete the registration of the work permits at the relevant authorities. The validity of the work permits is also subject to annual review. Besides, if an enterprise dismisses HMT staff, it shall apply to the issuing authority for the cancellation of the relevant work permit. The aforementioned procedural requirements are administrative burdens on PRC enterprises who employ HMT personnel.

Implementation of the State Council Announcement

Pursuant to the State Council Announcement, after the abolition of the employment pre-approval system by the PRC State Council, local governments shall announce the ancillary measures within 20 working days after the issuance date (i.e. on or before 30 August) in order to ensure the due implementation of the State Council Announcement. The State Council Announcement does not expressly outline the ancillary measures for the abolition of PRC work permits for HMT personnel. Instead, local governments and relevant authorities may exercise discretion in drawing up the policies and measures applicable in the local context.

After the issuance of the State Council Announcement, the relevant authorities of many provinces and cities have started to put in place various ancillary measures. For example, Beijing and Guangzhou have waived the requirement of PRC work permits for HMT personnel, and Shenzhen and Qingdao no longer accept PRC work permit applications by these personnel.

Impact on PRC enterprises

Positive impact

  • The State Council Announcement abolished the requirement of PRC work permits for HMT residents. This has simplified the employment process and lowered the administrative costs in employing HMT personnel.
  • Under the employment pre-approval system, PRC enterprises may only employ HMT personnel through the “Full-time Labour Relationship” regime or the “Secondee” regime. After the abolition of the pre-approval system, unless the Ministry of Human Resources and Social Security (MOHRSS) has imposed specific restrictions, PRC enterprises may employ HMT personnel through other low-cost regimes (for example, on a part-time basis or by labour dispatch).
  • HMT students in the PRC may participate in internships offered by PRC enterprises without the need for prior administrative approval.

Negative impact

  • Prior to the abolition of the employment pre-approval system, if a HMT employee did not hold a PRC work permit, he or she would not be protected by the PRC Labour Law. In the event of a labour dispute, the HMT employee would not be entitled to statutory rights under the PRC Labour Law (e.g., double pay under a non-written employment contract, non-fixed term employment contract, paid annual leave, statutory severance, etc.)  Accordingly, after the abolition of the employment pre-approval system, HMT personnel will enjoy the benefits of Chinese citizens and the protection under the PRC Labour Law even without a PRC work permit. Therefore, from the perspective of PRC enterprises, there will be an increase in liability costs.
  • Besides, with the abolition of the employment pre-approval system, the implementation of PRC residency system and the takeover of social insurance contribution collection by PRC tax authorities, contributions to social insurance and housing funds for HMT personnel would no longer be optional. In this regard, we foresee that the costs of employing HMT personnel will increase.

Notes to human resources personnel

We recommend that human resources personnel should:

  • Closely monitor the implementation of the State Council Announcement by local governments, especially the transitional arrangements (e.g. whether to cancel the existing PRC work permits and the new standards and threshold for quality immigration).
  • Promptly review the policies regarding HMT personnel, and ensure that relevant policies satisfy the requirements for social insurance, housing funds and pension contributions.
  • Pay close attention to the developments of PRC employment policies on foreigners as the abolition of the requirement for PRC work permits applies only to HMT permanent residents (excluding non-residents with only the permanent right of abode in Hong Kong or Macau).

If there are new developments on this topic, we will keep you updated.