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Taxi Companies Clash with Drivers Over Paid Leave
Summary:A Beijing taxi driver recently won a lawsuit against his taxi company over unpaid annual leave. However the company has refused to pay up. Exactly how annual leave should be calculated is a source of great controversy in the industry. Li’s case could set a most unwelcome precedent for taxi companies.

By Yu Han(
Issue 593, Nov 05, 2012
Policy, page 2-3
Translated by Ji Menghui
Original article:

Taxi driver Li Pingheng (李平恒) was pleasantly surprised when he won a lawsuit against the taxi company he worked for. However, that pleasant feeling was short-lived.

When he went to collect, he was rebuked and told he was actually being sued back. It was a stark reminder that Li’s case goes beyond his own situation and has implications that have spooked the entire taxi industry.

For the past three months, Li has been fighting for his rightful “paid annual leave,” which is a luxury for many Beijing taxi drivers. Despite the fact that most drivers sign labor contracts making them full time employees, they also sign separate agreements that make them more like contractors. This system has prompted taxi companies to skimp on payouts for the paid annual leave required by law.

Odd wages

Li recalled what happened at arbitration on Oct. 17.

On that afternoon, he and two administrators from the company sat opposite, both with differing calculations on the unpaid annual leave wages from January 2008 to October 2011 that Li was entitled to. The figure Li came up with was 19,393 yuan, while the company claimed it should be just 2,885 yuan.

"Implementation Measures for Paid Annual Leave for Employees of Enterprises” provides that annual leave compensation should be calculated based on the average monthly wage. The huge gap in the two parties’ calculations was caused by differing takes on what constituted “average monthly wage.”

According to the contracts signed by both parties, a taxi driver's income is divided into two parts: Base salary/fuel subsidies and operating income derived from customers’ fares. The sum of the two parts minus maintenance, operating and fuel costs makes a taxi driver’s monthly income.

Li figured that the average monthly income when considering all these things is 3,700 yuan, and thus, that should be the standard when calculating paid leave. However, the company claimed that the base salary of 545 yuan contracted by government regulations is the standard. The company opted not to take the driver’s operating income into account.

This is only one of the controversies surrounding paid annual leave. The dispute regarding whether compensation should be offered for voluntarily giving up annual leave is far more heated.

The taxi company showed operational data collected from a capture card installed in the taxi. The data indicated that Li had worked 358 days in 2008 and 349 days in 2009. Therefore, the company believed that Li had not only given up annual leave, but also official holidays. “In this case, we believe that he asks for the right to annual leave while still making money in the process,” the company said.

However, Li thinks if he works just eight hours per day and rests on Sundays, Spring Festival and National Day, then he’s not even able to pay the contract fees to the company; much less make any money for himself.

The taxi’s record showed that Li worked 27 days in August 2009, making nearly 9,000 yuan in fares on top of roughly 1,000 yuan in fuel subsides and his 545 yuan base salary. When subtracting the 5,175 yuan contracting fee owed to the company and fuel costs of 100 yuan per day, his net income that month was about 3,000 yuan. This was with only four days’ rest.

According to the “Implementation Measures for Paid Annual Leave for Employees of Enterprises,” an employer should give annual leave to its employees. If it fails to do so, it should pay 300 percent of the worker’s daily wage for each unused vacation day. However, if an employee gives a written notice to forgo annual leave on his own will, then the employer can pay the employee’s regular wage while he works through his vacation days.

After mediation failed, the Beijing Arbitration Commission of Xicheng District ruled that the company should compensate Li for the unused annual leave wages for 21,133 yuan. However, when Li came to the company to collect his compensation, he was denied. In fact, the company was preparing to initiate further legal proceedings.

Two contracts

Li and the taxi company had actually signed two contracts.

They first signed a labor contract, which requires the company to pay social insurance for drivers and give them a base salary of 545 yuan per month. The company, assisted by the government, also gives a fuel subsidy.

That labor contract is then supplemented with another contract, which says that drivers should pay a deposit and monthly “rent” during the contract period. This “rent” is the 5,175 yuan fee Li paid. This fee fluctuates based on negotiation between the two sides. If a dispute occurs between the two contracts, the resolution will be in accordance with the provisions of the labor contract.

The new "Labor Contract Law" explicitly states that workers have the right to enjoy paid annual leave. But according to the contract, during the period of paid annual leave and sick leave, drivers should return the vehicles to the taxi company. The company then subtracts the taxi driver’s corresponding fee and arranges a replacement driver. “But in fact, if you are sick and want to give the car back, they’ll say there are no drivers available for substitution,” Li said.

When Li asked for sick leave, the captain managing drivers said it wouldn’t work. And since Li was under contract, he just paid the fee and rested with his taxi sitting at home.


Taxi companies indeed often can’t provide substitute drivers. Price controls on taxi fares, which have fluctuated little over the past decade, have seen the margins drivers can earn shrink ever thinner. This has made driving taxis a far less attractive proposition than in the past.

According to statistics from the Beijing Municipal Traffic Commission, the Beijing taxi industry had around 67,000 taxis and 90,000 employees in 2011. Zhou Yong (周勇), deputy director of the examination center of Beijing Municipal Transportation, explained that there have been only 7,000 to 8,000 people applying for the taxi driver’s license each year over the past 3-4 years. Previously, there were about 15,000 each year.

But many think that saying there are no substitute drivers is just an excuse for taxi companies to dodge paying out leave benefits. “Taxi companies and drivers don’t have a company-employee relationship,” said Guo Yushan (郭玉闪), director of Transition Institution. He says that a taxi company’s revenue mainly comes from the “rental fee.”

"Shall pilots pay rent to the airline?” Guo asks. “Shall train conductors pay rent to the Ministry of Railways? We pay rent when renting a bicycle because it’s a market transaction. But the nature of the taxi industry is that drivers rent the company's license.”

The total number of licenses to operate a taxi are limited by the government. Because of the scarcity of these licenses, they’re actually worth more than the car themselves, putting the companies that hold them in a powerful position.

In 2000, the Beijing municipal government issued a notice to bring the number of taxi companies in the city down to 200 with the objective of building up taxi brands. Qualified enterprises were encouraged to expand their business scale through asset restructuring, mergers and acquisitions.

Some large companies bought up small business while accumulating debt. In the process, thousands of taxi companies merged or were bought and dwindled to around the desired 200 company target.

"These companies then owned lots of licenses and they’re still paying off the loans’” said Guo Yushan. “[The taxi companies] Jin Jian (金建) and Yin Jian (银建) each had merging and restructuring costs of 500 million yuan in 2006.”

With a contracting (or “rental”) fee of 4,000 yuan per month, a company with 2,000 operating taxis can bank nearly 100 million yuan per year. Apart from paying taxes, management salaries and rent, the revenue is also used for paying off outstanding loans.

Although the amount of compensation claimed by Li is small, if awarded, it would set dangerous precedent from the point of view of taxi companies. An administrator from the company said that they would not pay Li. “This is not a personal problem,” the administrator said. “It involves the entire Beijing taxi industry.”

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