HR Guide to Employment Contract in China

August 14, 20201:55 pm568 views
HR Guide to Employment Contract in China
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Under China Labor Contract Law, a written employment contract is necessary to establish an employment relationship. However, a part-time employee, who works no more than 24 cumulative hours per week and four average hours per day, is subject to different requirements and might be employed under an oral contract. The law gives a one-month grace period to employers that commences upon the employee’s first day of work. The employer must execute a written employment contract within this grace period or else it will owe double wages to the employee for each month of employment after this grace period without a written contract. If an employer fails to execute a written employment contract with a full-time employee for over a year, the employer and the employee shall be deemed to have executed an open-ended employment contract.

The Labor Contract Law requires an employment contract to include the following items:

  • name, domicile and legal representative or person in charge of the employer,
  • name, domicile and ID card number or number of another valid identification document of the employee,
  • contract term,
  • job content and place of work,
  • working hours, rest and leave,
  • Compensation,
  • social insurance,
  • workplace protection, workplace conditions and protective measures against occupational hazards, and 
  • other matters required by laws and administrative regulations.

In addition, an employer and an employee might agree on matters such as probation, training, confidentiality, supplementary insurance, welfare, other incentives and other matters in the employment contract. Usually, the contents of an employment contract can only be modified in writing after both parties have reached a consensus through mutual negotiation. However, a verbal modification of an employment contract might also be valid if the modification has actually been performed for longer than one month and does not violate any law, administrative regulation, state policy, public order or good morals.

See also: Guide to Construct Better Employment Contract

Fixed-term contract rules 

Employment contracts in China can have three different types of terms: fixed, open-ended or terms that expire upon completion of an assignment. Under the Labor Contract Law, if an employer opts to enter into a fixed-term contract with an employee, after the completion of two fixed terms, that employer must offer the employee an open-ended contract. Since open-ended contracts are inherently difficult to terminate, employers might want to use fixed-term contracts for new hires. This would give the employer a chance to evaluate its new employees. If the employee’s performance is poor, a fixed-term contract provides the employer with the option of discontinuing the employment relationship at the end of the term.

Trial period for employment contract 

In China, the employee trial period is also known as the probationary period. A probationary period is commonly included in employment contracts. However, Chinese labor law contains restrictions on the length of the probationary period. Probationary periods must conform to the following parameters:

  • where the term of an employment contract is between three months and one year, the probationary period might not exceed one month, 
  • where the term of an employment contract is between one and three years, the probationary period might not exceed two months, and 
  • where the term of an employment contract is three years or more, or where the term is open ended, the probationary period might not exceed six months. 

Probationary periods are not permitted for employment contracts that expire upon completion of an assignment or those with terms shorter than three months.

Ending employment contract (notice period) 

In China, an employee might unilaterally terminate his or her employment contract by giving a written notice 30 days in advance or 3 days in advance during the probationary period. On the other hand, an employer might unilaterally terminate an employment contract by giving a written notice 30 days in advance or providing one month’s salary in lieu of notice in certain circumstances:

  • the employee, after undergoing a legally prescribed period of medical treatment for an illness or non-work-related injury, can perform neither his or her original work nor other work arranged for him or her by the employer, 
  • the employee is incompetent in performing the duties of his or her position and remains so after undergoing training or an adjustment of his or her position, 
  • a major change in the objective circumstances relied upon at the time of conclusion of the employment contract renders the contract non-performable and, after consultations, the employer and the employee are unable to reach an agreement on amending the employment contract.

In addition, if the employer intends to reduce its workforce by 20 persons or more or by a number that is less than 20 but accounts for 10 percent or more of the total number of its employees, the employer must explain the situation to the trade union or all employees 30 days in advance and provide relevant information regarding the employer’s production and operation status.

Read also: Employment in the Age of Contracting and Temp Work