With respect to your company’s inquiry of issues concerning the treatment of the human resource problems involved in company merging, after our preliminary investigations with the Social and Labor Security Bureau of Minhang District, the General Trade Union of Minhang District and the Shanghai Municipal Foreign Economic Relations and Trade Commission, we hereby report the results of the investigations as follows for your reference.

As to the issue that the employees employed by AAAAA Company (hereinafter referred to as the “old company”) next year will still sign labor contract with the old company, we think that as before the completion of the merging, the two companies are still independent legal persons and are both entitled to sign labor contracts with their employees on the basis of reaching consensus. If the company needs to recruit new employees or renew labor contracts, the old company may sign labor contracts with employees, and after the completion of the merging, the new company will continue to execute the labor contracts, and the new company does not have to renew labor contracts with the employees. The above operation is feasible in theory. 

However, what should be noted is that according to the related merging scheme provided to your company in the last investigation, your company plans to transfer the assets to the new company and let it carry out production and operation by the end of 2008. Therefore, quite a number of working posts will not be provided by the old company but the old company will dispatch employees to work in the new company. In consideration of the above conditions, if new employees are employed next year and the old company signs labor contracts with the new employees, it is suggested that special stipulations should be made on employees’ working post in the labor contracts to be signed. For example, the employees’ posts will be determined according to the contents of the service agreements or temporary transfer agreements signed by and between the new company and the old company, and the employees’ working place should be where the new company is located.

The issue as to whether labor contracts renewed or signed with the new company should be presented for processing employee removal and recruitment formalities, and social security transfer formalities and so on after the merging of the companies and when the new company receives employees from the old company.

We called the Shanghai Municipal Labor and Social Security Bureau and the related working personnel replied that under normal conditions no labor contract should be provided for going through the above formalities. However, as what we inquire of is special, they suggest that we should contact the district employment promotion center for their opinions.

We called the Shanghai Municipal Labor and Social Security Bureau and the related working personnel replied that no labor contracts signed by and between the employees and the new company should be provided for going through the above formalities. However, as for merging, though labor contracts continue to be executed d by the new company, as the company in which employees work is not the same as the one in the past and the company name has also been altered, the cancelled old company is still required to have the existing new company process recruitment formalities. After the employment filing formalities are completed, it will do to go to the social security center to transfer the employees’ social security individual accounts. 

2. Consultation of laws, regulations and policies

According to the provisions of the “Opinion on Further Strengthening Labor Employment Filing” (Hu Lao Nao Jiu Fa [2007] No. 25) and the “Supplementary Opinion o Further Managing Well the Labor Employment Filing Formalities” (Hu Jiu Zi [2007] No. 25), as well as the guidelines for handling business released on the website of the Shanghai Municipal Labor and Social Security Bureau: processing of the employee removal and recruitment formalities can be settled within one work day. If an employer holds the “password for online business handling”, the recruitment registration filing procedure can be gone through online (website: www.12333sh.gov.cn), and it is not necessary to go through them in the employment promotion center.

According to the guidelines on business handling released on the website of the Shanghai Municipal Labor and Social Security Bureau, employees’ signature or cooperation is not required for the transfer of employees’ social security accounts, which can be handled by clerks of the employers, and the related formalities can be settled on the site. But in one of the following cases, employees should provide their employers with certain information before the transfer is handled: ① employees participating in social insurance holding the “Shanghai Residence Permit” for imported personnel should carry a photocopy of the “Shanghai Residence Permit” and the “Notice on Handling the “Shanghai Residence Permit”; ② if employees whose land has been requisitioned and who make payment of premiums at one time select to only pay premiums for unemployment, fertility and work injury insurance, they should present a copy of the labor manual affixed with a confirmation seal of the labor administration department indicating that “15-year premiums have been made at once for land requisition已经完成征地一次性15年缴费”. The copies of the above materials should be affixed with the employer’s official seal.

According to the above opinions, after the new company and the old company complete merging, the new company does not have to renew or change labor contracts with its employees, but the old company should go through the formalities for employment removal, and the new company should go through the formalities on employment, and then the related formalities for the transfer of the employees’ social security accounts to the new company should be gone through. Generally the above formalities can be settled within one work day.