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The law, which would take effect on January 1 next year, won 145 of the 146 votes of the Standing Committee of the National People's Congress (NPC). One vote was not cast.

The new law is considered the most significant change in the country's labor rules in more than a decade. It establishes standards for labor contracts, use of temporary workers and severance pay.

It makes mandatory the use of written contracts and strongly discourages fixed-term contracts. According to the law, severance should be paid if a fixed-term contract expires but is not renewed without an appropriate reason.

It is also stipulated that employers must submit proposed workplace rules or changes concerning pay, work allotment, hours, insurance, safety and holidays to the workers' congress for discussion.

After the recent exposure of forced labor in brick kilns in Central and North China, the final draft added stipulations that government officials guilty of abuse of office and dereliction of duty would face administrative penalties or criminal prosecution.

Xin Chunying, deputy chairperson of the NPC Law Committee, said the law is not intended to replace the current Labor Law but rather, to further standardize labor contracts in favor of employees.

Li Yuan, one of the legislators in charge of drafting the law, said the law targeted bosses and officials who exploited workers.

The draft law was first proposed in 2005 amid complaints that companies were mistreating workers by withholding pay, requiring unpaid overtime or failing to provide written contracts. Many workers were also becoming trapped in short-term contracts.

Last March, the draft was made public for consultation, and legislators received about 192,000 public responses in a month. Only the Constitution, drafted in 1954, received more.

However, business lobbies are worried that stricter contract requirements could raise costs and give them less flexibility to hire and fire employees.

Both the European Union Chamber of Commerce in China and the American Chamber of Commerce in Shanghai (AmCham Shanghai) had made submissions to the NPC, suggesting the law might exert negative influence on foreign investment in China.

In a letter to the NPC last year, Serge Janssens de Varebeke, then-president of the European Union chamber, warned the "strict" regulations could force foreign companies to "reconsider new investments or continuing their activities in China" because of possible cost increases.

But Xin said there wouldn't be a substantial cost increase for companies that strictly follow the existing Labor Law.

"All the principles have been included in the current law. The new law just details the provisions to facilitate implementation," she said.