In China, the interests of the employee are prioritized over those of the employer in legislation and regulations. Even in court and in labor arbitration, the burden of persuasion on the employers is heavier than on the employees.
Employers in China should be aware that any clause in an employment contract that is agreed to by both parties and does not conflict with legal requirements is valid. Therefore, adopting a professional employment contract template is highly advised so that the employer’s interest is safeguarded from the start of the job relationship.
Like every other nation, China has its ownset of rules and regulations for employing people. These regulations must be followed by every employer in China. Failure to comply with this could result in major legal disputes with the government, which would impede the expansion of your company in the nation.
Before determining whether to hire locals or foreigners, it is best for you to be aware of the laws and regulations governing staff employment in China. You should get a local law expert to walk you through each clause and make sure you fully abide by the law.
Contracting Employees without a Legal Entity
China’s Labor Law only allows limited companies to sign employment contracts with employees. Avoid the error of hiring staff directly if you intend to create your presence in the nation through a Representative Office.
You can still hire workers by acting as their employer of record and hiring through a PEO. Companies operating globally, notably in China, can use the global payroll and recruitment services provided by a PEO service provider. Without forming a limited business, they may ensure that your workforce is working for you in accordance with the local labor rules.
Employee termination is one of the most frequent errors made by international firms when recruiting employees in China.
There are four ways to terminate an employment relationship.
Terminating an employee at the end of the first fixed-term contract is much simpler than terminating a live employment contract. If the employer is unsatisfied with the employee, it simply does not need to offer a second contract. If the employer does not renew the contract, however, it must provide severance payment.
Employee unilateral termination:
The employee is required to submit a formal resignation letter to HR and must give at least 30 days notice. During probation period, however, the employee is only required to give 3 days notice.
Employer unilateral termination:
In the following cases, the employer must provide both severance payment and either 30 days’ notice or a full month’s salary. Before terminating the contract, the employer must investigate to ensure that further training would not suffice. If training of some kind would allow the employee to continue to fulfill his/her duties, this is not grounds for termination. It is also recommended that the employer verify that a job transfer would not be an adequate solution before termination. A judge may wish to see that the employer has attempted to transfer the employee to another acceptable position prior to termination.
If the employer and employee mutually agree to terminate the contract, and the employer initiates the termination, the employee is entitled to severance payment. The employer may offer additional payment of any amount, with the intention of obtaining consent from the employee.
From the employer’s perspective, this is a favorable outcome as it prevents the termination from becoming an onerous and costly dispute as well as possibly resulting in intervention from local labor authorities. For the employee, this will probably also be viewed favorably (if the compensation is generous enough) because the compensation amount is guaranteed and there is lengthy dispute anticipated.
Terms and conditions of termination: The employer should formally document and communicate the terms and conditions of the termination. Without written documentation and confirmation of the terms and conditions, the employer will be liable in the future for the same issues clarified in the terms and conditions.
The employer should also be aware of the requirement for convincing proof of an employer-initiated unilateral termination. In order to terminate the work relationship, the employer must demonstrate that the employee was at fault or that there were other factors at play. If there is insufficient evidence to support that, the court or arbitrator may order the employer to pay double damages for the wrongful termination.
Employees in China are entitled to a salary, required benefits, paid vacation days, and legal holidays. It’s crucial to understand how these benefits are determined as well as the average wage for the position in the industry before you extend a job offer. In this approach, you can determine whether or not hiring that staff is feasible within your budget.
You should be aware that depriving employees of such benefits could cause you major troubles because they are legally entitled to them.
If you have any questions in hiring in China, Contact Us now for a free quote!