Trade Unions and Collective Bargaining in China

How trade unions in China are organised

Trade unions in China operate within a single national structure. Every enterprise union is part of the All-China Federation of Trade Unions (ACFTU) system, and there are no competing independent unions. The legal framework is the Trade Union Law, most recently amended in 2021, together with the Labour Law, the Labour Contract Law and regulations on collective contracts and democratic management. Employees have the right to join and organise unions, and employers may not obstruct them.

For foreign-invested enterprises, the practical picture differs from what many expect. Chinese unions are not primarily adversarial bargaining agents in the Western sense. Their statutory role combines protecting employees' rights, supporting the enterprise's production and development, organising welfare and cultural activities, and acting as a channel between management, employees and the state. In practice, the strength and independence of an enterprise union vary widely, from largely administrative committees to active bodies that negotiate firmly over pay and restructuring.

Unions are established at the enterprise level, usually with the support of the local federation of trade unions. Where an enterprise has 25 or more union members, a union committee is normally formed; smaller workplaces may have a single organiser or join a regional or industry union. Local federations in manufacturing hubs, including Shenzhen and the wider Pearl River Delta, actively encourage union formation in foreign-invested and private enterprises.

Employers with a union must contribute union funds equal to 2 per cent of the total monthly payroll of all employees, under the Trade Union Law. These contributions are often collected together with tax or by the local federation. Failure to pay can lead to demands for arrears and, in some cases, court enforcement. Employers without a union may still face requests for preparatory contributions in some localities, so the local approach should be checked.

The 2021 amendment of the Trade Union Law expressly requires unions to adapt to changes in forms of employment and to protect the right of workers to join and organise unions. This has supported efforts to bring delivery riders, drivers and other platform workers into union structures, a trend relevant to businesses that rely on flexible labour.

Union rights in the workplace

Even where a union is relatively inactive, it holds legal rights that affect day-to-day management. Getting these steps wrong is one of the most common reasons employers lose labour disputes.

Workplace rules. Under Article 4 of the Labour Contract Law, rules and major matters directly affecting employees' vital interests, such as pay, working hours, rest, leave, safety, training, discipline and performance management, must be discussed with the employee representative congress or all employees, settled through equal consultation with the union or employee representatives, and made known to employees. Rules adopted without this democratic procedure may not be relied on when disciplining or dismissing an employee.

Unilateral dismissals. Article 43 of the Labour Contract Law requires an employer to notify the union in advance of any unilateral termination and to consider the union's opinion. Under the SPC's 2020 interpretation on labour disputes, a dismissal without this notice can be treated as unlawful, although the employer may cure the defect by notifying the union before the employee files a lawsuit. Where there is no union, practice varies by locality, and many employers notify the local or industry union.

Mass layoffs. Article 41 of the Labour Contract Law requires an employer reducing 20 or more employees, or fewer than 20 but at least 10 per cent of the workforce, to explain the situation to the union or all employees 30 days in advance, consider their opinions and report the plan to the labour authority. See our layoffs, transfers and restructuring page.

Union officers. Full-time and part-time union officers enjoy protections against retaliation, and their labour contracts are generally extended until the end of their term of office. The SPC's 2025 Interpretation (II) confirms that such an automatic extension does not count as a failure to sign a written contract.

Collective bargaining and collective contracts

Chinese law uses the term collective consultation rather than collective bargaining, and the process is designed to be cooperative. Under the Labour Contract Law and the Provisions on Collective Contracts, the union, or employee representatives where there is no union, may negotiate with the employer on pay, working hours, rest, safety, insurance and welfare, and conclude a collective contract. Specialised agreements on wages, safety or the protection of female employees are also common.

The draft collective contract must be submitted to the employee representative congress or all employees for discussion and approval. Once signed, it is submitted to the local labour administration; if the authority raises no objection within 15 days of receipt, the contract takes effect. A collective contract binds the employer and all employees, and individual labour contracts may not set terms below its standards.

Regional and industry collective contracts also exist and can bind employers in a sector or district. Some provinces have their own detailed rules. Guangdong's regulations on enterprise collective contracts, revised in 2014, set out how employees can request consultation, how representatives are selected and what conduct is expected during negotiations. Employers in Shenzhen and the Pearl River Delta should be familiar with them.

Wage consultation is the most important topic in practice. Many local governments publish annual wage guidelines with a baseline, upper and lower growth figure. These are not binding on private employers, but unions and employees often cite them, and they provide a useful reference point when preparing a pay offer.

Employers should approach wage consultation with data rather than assertions. Unions and employee representatives can reasonably ask for information on the enterprise's financial performance, headcount trends and pay benchmarks, and a refusal to share any information tends to escalate tensions. Agreeing a clear framework, such as a base increase plus a performance-linked element, and a timetable for future reviews, usually produces more stable outcomes than one-off concessions made under pressure.

Collective disputes and work stoppages

Chinese law does not expressly recognise a right to strike, but nor does it prohibit work stoppages in the way many assume. The Trade Union Law provides that where a work stoppage or slowdown occurs, the union should represent employees in negotiating with the employer and help resolve the matter. Collective stoppages typically arise around relocations, closures, unpaid wages, social insurance shortfalls and changes to shift patterns or bonuses.

When a collective incident occurs, local government, the labour bureau, the local union federation and sometimes the police become involved quickly. The authorities' priority is stability and the protection of wages and social insurance. Employers that have prepared a communication plan, can show compliance with consultation requirements and offer a fair package are better placed to resolve matters quickly.

Collective labour disputes that cannot be resolved by consultation may go to labour arbitration. Where ten or more employees share a common claim, they may appoint representatives, and arbitration commissions often prioritise these cases. Our labour arbitration and litigation page explains the procedure.

Trade unions in China in restructuring and M&A

Restructurings bring the role of trade unions in China into sharp focus. Mass layoffs require the 30-day explanation to the union or all employees. Changes to rules, pay structures or shift patterns that affect employees' vital interests require democratic procedures. Relocations often amount to a material change in the circumstances on which the labour contract was based, triggering consultation and potential severance. Unions can slow a process that has not been properly prepared, and support one that has.

In share acquisitions, the employer does not change, so existing union arrangements, collective contracts and rules remain in place. In asset deals and business transfers, employees usually need to agree to move, and the buyer must decide whether to recognise existing collective terms. Buyers should check union registration, fund payment status, any collective contract and its expiry, records of democratic procedures and the history of collective disputes. Our employment investigations and due diligence page lists the key documents.

Post-closing integration often involves harmonising handbooks and pay policies across several entities. Each change that affects vital interests must go through democratic procedures in each employing entity. Groups that try to roll out a single global policy by email frequently find that it cannot be relied on in later disputes.

Democratic management and employee representative congresses

Alongside trade unions in China sits a second channel of employee voice: democratic management. The Provisions on Enterprise Democratic Management, issued in 2012 by several central bodies including the ACFTU, encourage enterprises to establish an employee representative congress, or a general assembly of all employees in smaller enterprises, and to disclose matters such as business plans, pay systems and safety arrangements to employees. State-owned enterprises must operate these structures; for private and foreign-invested enterprises, the rules are implemented with varying intensity across localities.

The union usually acts as the working body of the employee representative congress, organising elections of representatives and preparing meetings. For an employer, this means the congress and the union are closely linked, and a well-run congress can provide a robust record that democratic procedures were followed when rules or major decisions were adopted. Representatives should be genuinely elected, meetings minuted and votes recorded.

Smaller foreign-invested enterprises without a congress often rely on consultation with all employees, using signed acknowledgements, online consultation tools and published notices. This can work, but evidence matters. Arbitration commissions look for proof that employees had a real opportunity to comment and that the final rule was made known to them, not merely that a policy was uploaded to an intranet.

Common mistakes

• Treating a global policy announcement as sufficient for a Chinese entity without local democratic procedures.
• Dismissing employees without written notice to the union and evidence that the union's view was considered.
• Ignoring union fund contributions until the local federation demands several years of arrears.
• Announcing relocations or closures before engaging with the union and local authorities.
• Assuming that trade unions in China will behave like Western unions, or alternatively that they can be ignored.

Cross-border perspective on employee representation

Multinationals often manage employee representation from a global template built around European works councils or US labour relations. Neither maps neatly onto trade unions in China. EU rules require information and consultation of employee representatives on significant decisions, and companies with sufficient workforce in several member states may need a European Works Council. In the United States, union recognition and bargaining are adversarial and governed by federal labour relations law. Hong Kong has no statutory collective bargaining framework, and union activity is generally limited.

A sensible global approach recognises these differences. Restructuring timetables should allow for China's 30-day layoff explanation, democratic procedures and union notice requirements alongside European consultation obligations, and global communications should be sequenced so that Chinese employees do not learn of decisions from international media first. Global framework agreements with international unions, where they exist, should be checked for commitments that extend to China operations.

Supply chain scrutiny adds another dimension. Customers and investors increasingly ask about freedom of association and worker voice in Chinese facilities, particularly under European due diligence regimes. Employers should be able to explain clearly how employee representation works in their Chinese operations. See our supply chain due diligence page.

A practical checklist for employers

1. Confirm whether each Chinese entity has a union, its registration with the local federation and the status of union fund contributions.
2. Keep a record of democratic procedures for each rule or policy affecting employees' vital interests.
3. Build union notification into every unilateral termination workflow, with evidence of delivery.
4. Track collective contracts, their expiry dates and renewal steps.
5. Prepare a collective incident protocol covering communication, authorities and escalation.
6. Plan restructurings with a timetable that allows for union consultation and the 30-day layoff explanation.
7. Align global employee representation policies with local requirements, and see our employment contracts and policies page for handbook design.

How TRW & Co helps with trade unions in China

We help multinational and Chinese employers work constructively with trade unions in China and with employee representatives elsewhere. We review union and democratic procedure compliance, design consultation plans and communications for restructurings, relocations and pay reforms, and align China timetables with European works council and US labour obligations. In transactions, we review union and collective contract issues and build them into integration planning. As a foreign law firm representative office, we do not issue PRC legal opinions or act in PRC arbitration or courts; where PRC legal advice or representation is needed, we work with licensed PRC law firms and coordinate the overall approach. Contact us to discuss your needs.