Overtime in China is regulated by the Labor Law and the Labor Contract Law, and the regulations are enforced by the labor inspection authorities. A WFOE that doesn’t comply with the overtime rules — the limits on overtime hours, the overtime pay rates, the overtime authorization procedures — is exposed to labor inspection findings, administrative penalties, back-payment orders, and employee complaints that can trigger a broader labor inspection of the entire workplace.
Here’s what the overtime rules require, how labor inspectors enforce them, and what happens when a WFOE is inspected.
The Overtime Rules
The standard working hours are eight hours per day and forty hours per week. Overtime is any work beyond the standard hours. The employer and the employee can agree on a flexible working hours arrangement — where the employee works more hours on some days and fewer hours on others within a defined period — but the arrangement must be approved by the labor bureau, and the approval is not automatic.
The maximum overtime is three hours per day and thirty-six hours per month. The daily limit and the monthly limit are both maximums — the lower of the two applies. An employee who works three hours of overtime on ten days in a month works 30 hours of overtime, which is within the 36-hour monthly limit. An employee who works three hours of overtime on thirteen days works 39 hours, which exceeds the 36-hour limit.
The overtime limits apply to the standard working hours arrangement. A company that has an approved flexible working hours arrangement may have different limits, depending on the terms of the approval. A company that has an approved comprehensive working hours arrangement — where the working hours are averaged over a period rather than calculated weekly — may exceed the standard limits within the averaging period.
The overtime pay rate is 150% of the normal hourly rate for overtime on a normal working day, 200% for overtime on a rest day — a Saturday or a Sunday — that is not offset by a rest day in the same week, and 300% for overtime on a public holiday. The normal hourly rate is the monthly salary divided by 21.75 — the statutory average number of working days per month — divided by eight.
The overtime pay obligation is calculated on the employee’s contractual salary, not on the employee’s total compensation. A company that pays a base salary of 10,000 RMB and a performance bonus of 5,000 RMB calculates overtime pay on the 10,000 RMB base, not on the 15,000 RMB total, unless the employment contract or the company’s rules provide otherwise.
The Overtime Authorization
Overtime must be authorized by the employer. An employee who works overtime without the employer’s authorization is not entitled to overtime pay — the employee is volunteering time, not working authorized overtime. But the employer must be able to prove that the overtime was not authorized, and the proof requires a clear authorization procedure and a record of authorizations.
The authorization procedure should be in writing — the employee requests overtime, the supervisor approves the request, and the approval is recorded. An oral authorization — “stay late and finish this” — is an authorization in law, but it’s hard to prove or disprove in a dispute. A written authorization creates a record that establishes what was authorized and what was not.
The employer’s attendance records are the primary evidence of overtime. An attendance record that shows the employee clocking in at 9:00 AM and clocking out at 9:00 PM is evidence that the employee worked 11 hours — three hours of overtime, assuming a one-hour lunch break. The employer who argues that the three hours were not overtime — that the employee was not working during those hours — bears the burden of explaining why the employee was at the workplace for three extra hours.
An employer that doesn’t maintain attendance records — or that maintains attendance records but doesn’t produce them in a dispute — is at a significant disadvantage. The employee’s claim of overtime hours is supported by the employer’s failure to produce the attendance records, and the labor arbitration tribunal or the court may accept the employee’s evidence as the basis for the overtime calculation.
What Labor Inspectors Check
A labor inspection can be triggered by an employee complaint, by a routine inspection, or by an industry-specific inspection campaign. The labor inspector visits the employer’s premises, inspects the employment records, and interviews employees. The inspection covers the employment documentation — the employment contracts, the social insurance registrations, the work permit records for foreign employees — and the working conditions — the working hours, the overtime, the rest periods, the safety conditions.
The inspector’s overtime check starts with the attendance records. The inspector reviews the records for the inspection period — typically the past 12 months — and calculates the overtime hours per employee. An employee whose attendance records show average overtime of 40 hours per month is exceeding the 36-hour limit, and the employer has a compliance problem for every month that the limit was exceeded.
The inspector’s overtime pay check compares the overtime hours from the attendance records with the overtime pay on the payroll records. The inspector calculates the overtime pay that should have been paid — the normal hourly rate multiplied by the overtime hours multiplied by the applicable rate — and compares it with the overtime pay that was actually paid. An underpayment — the actual payment is less than the calculated payment — is an overtime pay violation.
The inspector also checks whether the overtime was voluntary — the employer forced the employee to work overtime — or involuntary — the employee chose to work overtime for the overtime pay. The distinction matters because forced overtime is a more serious violation. An employer that requires employees to work overtime beyond the legal limits — through explicit instructions, through production quotas that can’t be met within standard hours, or through a workplace culture that penalizes employees who don’t work overtime — is subject to more severe penalties than an employer that allows voluntary overtime that exceeds the limits.
The Consequences of an Inspection
An inspection finding of overtime violations results in a correction order — the labor bureau orders the employer to correct the violations within a specified period. The correction includes paying the unpaid overtime pay, plus a penalty of 50% to 100% of the unpaid amount if the underpayment was intentional or negligent.
A repeat violation or a serious violation can result in administrative penalties — fines. The fines can be per employee or per violation, and the total fine for multiple violations can be significant. The employer’s labor compliance record is affected, and a poor compliance record can affect the employer’s ability to obtain government approvals, to participate in government procurement, and to qualify for government incentives.
A serious overtime violation can also result in criminal liability for the employer’s management if the violation caused serious harm — an employee who suffered a health crisis from excessive overtime, for example. Criminal liability is rare for overtime violations alone, but it’s a possibility in extreme cases.
The most serious consequence of a labor inspection is that it can expand beyond overtime. The labor inspector who finds overtime violations may expand the inspection to other areas — social insurance contributions, employment contracts, work permits for foreign employees — and the expanded inspection may uncover violations that the employer was not prepared for. A company that was confident about its overtime compliance but had undocumented issues in other areas may find that the overtime inspection was the entry point for a broader compliance problem.
The Practical Compliance Measures
The employer should maintain accurate attendance records that reflect the actual working hours of each employee. An attendance system that automatically records the time of clock-in and clock-out — a card reader, a fingerprint scanner, a facial recognition system — generates records that are hard to dispute. A manual attendance record — a sign-in sheet — is easier to challenge and harder to defend.
The employer should enforce the overtime authorization procedure. The procedure should require the employee to request overtime in writing — an email, a form, an electronic system — and the supervisor to approve it in writing before the overtime is worked. The approved overtime hours should be compared with the attendance records to confirm that the overtime worked matches the overtime approved.
The employer should calculate overtime pay accurately and pay it on time. The overtime pay should be a separate line item on the payslip, showing the overtime hours, the overtime rate, and the overtime amount. A payslip that shows a single salary figure without separating the base salary and the overtime pay makes it impossible for the labor inspector to verify the overtime pay, and the ambiguity favors the employee’s claim.
The employer should monitor the monthly overtime hours to confirm that each employee’s overtime is within the 36-hour limit. An employee who is approaching the limit should be notified, and the supervisor should be instructed not to approve further overtime for that employee for the remainder of the month. An employer that knowingly allows an employee to exceed the limit — because the work needs to be done, because the employee wants the overtime pay — is accepting the compliance risk.
The employer should conduct periodic self-audits of overtime compliance. The self-audit should review the attendance records, the overtime authorizations, and the overtime payments for the audit period and identify any discrepancies. A discrepancy that’s identified in a self-audit and corrected voluntarily reduces the risk of an adverse labor inspection finding and demonstrates good faith to the labor bureau if the discrepancy is discovered in a later inspection.
