Foreign companies wishing to hire employees in China must overcome many obstacles, including signing employment contracts recognized by China’s strict labor laws.
Most employment relationships are based on formal contracts between employers and employees. These contracts usually provide for continued work during the contract period, unless there are rare circumstances that allow either party to withdraw from the contract early.
These contracts usually require a probation period, during which the employer is free to test the employee’s skills, and if the employee is not suitable, the contract may be terminated.
Foreign employers must understand how labor contracts and probation periods in China work to avoid responsibilities related to non-compliance.
Duration of Employment Contracts in China
In China, there are three durations that may apply:
- Fixed-term employment contract –This type of employment contract establishes a contract for a certain period of time, such as five or ten years.
- Non-fixed-term employment contract – A non-fixed-term employment contract does not contain a specific period.
- Project-based employment contract – This kind of employment contract has a time limit, but the time is related to the time of completion of the project, rather than a specific deadline.
Probation Period in Chinese Labor Contracts
As long as they meet the requirements of the Chinese government, Chinese labor law allows domestic and foreign companies to include probation periods in their labor contracts. The provisions of Chinese Labor Law on the probation period link the maximum period of the probation period with the period of the labor contract. An employee can only have one probation period. If the employer renews the labor contract, there shall not be a new probation period.
For example, the probation period would be as follows:
- For an employment contract for less than three months – no probation period
- For an employment contract with no fixed term – up to 6 month probation period
- For an employment contract for three months to one year – up to 1 month probation period
- For a 2-year labor contract, max 2 months
- For 3-year or indefinite (open-ended contract), max 6 months probationary.
Many employees have a three-month probation period. However, the 3-month probation period or any duration of the probation period is not a mandatory clause that must be included in the Chinese employment contract.
Employers who want to test new employees and want a three-month probationary period must clearly indicate this information in the employment contract. This clause must be discussed and agreed by both parties.
Chinese law prohibits any probation period for certain categories of employees, including:
- Part-time employees
- Temporary employees working less than three months
- Employees who are working on a term of employment based on completing a specific task
Salary Issues During a 3-month Probationary Period
During the probation period, the employer can negotiate to reduce wages. However, this information must be clearly stated in the employment contract.
The salary for the 3-month probation period must follow these guidelines:
- Not less than 80% of the minimum wage for the same position
- Not less than 80% of the normal wage as indicated in the employment contract.
- Not less than the minimum wage for the employer’s location
Probation Period Termination Procedure
Chinese labor law does not allow employers to terminate labor contracts spontaneously. On the contrary, termination is only allowed when certain conditions exist, such as:
- The employee committed a criminal act
- The employee has seriously violated the employer’s disciplinary guidelines or internal rules
- The employee failed to meet the recruitment requirements during the probation period.
- The employee seriously harmed the employer’s interests
- The employee has established a new employment relationship with other employers and refuses to terminate the employment relationship at the request of the current employer
During the probation period, the employee can choose to terminate the contract if he/she gives the employer notice at least three days before his/her leaves.
When the employer dismisses an employee, it must notify any affected union, but it does not require the union’s approval.
Furthermore, the employer must provide the former employee with the proof of termination of the employment contract and documents regarding the last day of work. Both parties should sign these documents.
The employer must also settle any dues and remaining payments. The employer must report the termination to the local social insurance department. Employers are required to keep employment records for at least two years after termination.
Legal Consequences for Violating Rules Regarding the Probation Period in Employment Contracts
The Chinese Labor Contract Law imposes penalties on employers who violate the provisions of the probation period.
If the employee has completed the probation period, the employer will be responsible for paying the employer the amount based on the time beyond the legal probation period with the employee’s monthly salary after the probation period.
China’s regulations on probation periods can be very complicated, and if the employer does not strictly abide by the regulations, it may lead to major liabilities. We can advise you on these rules.
China Payroll as your professional help in all employment issues, we also provide other services as PEO staffing Using our PEO services can save you time and hassle and help you avoid strict bureaucracies.