Learn about the requirements for employment contracts in China, including the types of contracts allowed, mandatory and optional clauses, and probationary periods. Discover the conditions for termination by employers and employees, as well as the rules for foreign companies employing workers in China.
Chinese labor law stipulates that the establishment of an employment relationship between an employer and a full-time employee is reliant on the signing of a written contract within a month of employment commencement.
Types of Employment Contracts
The Labor Contract Law of 2008 recognizes three varieties of admissible employment contracts: fixed-term, non-fixed-term, and specific-task labor contracts that terminate upon completion of agreed-upon tasks.
Consequences of Failing to Sign a Written Contract
Neglecting to sign a written employment contract may result in punitive actions such as the imposition of a double monthly wage penalty. On the other hand, part-time employees may enter into verbal agreements but should be compensated on an hourly basis and must work for a maximum of four hours daily and 24 hours weekly.
Compulsory Clauses in Employment Contracts
In order to meet the legal requirements, a written contract must be prepared that enumerates every aspect of employment terms. The contract should contain the name, address, and identity card number of the employee, the name, address, and legal representative, or the key person-in-charge of the employer, remuneration, the term of employment, working hours and probationary period, job duties and work premises, social security, labor protection, working conditions, and occupational hazard prevention and protection. These compulsory clauses are mandated by the 2013 Judicial Interpretation on Applicable Laws in Terms of Trial and on Labor Disputes Cases.
Additional Clauses in Employment Contracts
In addition, the employment contract may include additional clauses such as training procedures, confidentiality rules, supplementary insurance, employee welfare, and incentives. The contract must be signed within a month of employment, and ideally, any amendments should be made in writing and upon mutual agreement.
Limitations on Probationary Periods
While full-time employment contracts allow for probationary periods, there are limitations on the number and duration of these periods. Employers may stipulate only one probationary period for the same employee, and during the probationary period, an employee’s salary must not be less than 80% of the lowest wage rate for the same position with the employer or less than 80% of the wage agreed in the labor contract. Furthermore, it must not be less than the local minimum wage rate where the employer is located.
Conditions for Termination by Employers
Termination by an employer is permissible under Chinese labor law provided certain requirements are met. If an employee fails to meet the employment criteria provided during the probationary period, the employer may terminate the employment relationship. Conversely, the employee may resign as long as they give the employer a three-day written notice during the probationary period.
Labour Law in China
Chinese labor laws prescribe statutory employment terms and conditions that employers must observe, including minimum salary standards, working hour stipulations, overtime pay standards, time limits, statutory paid leave, social insurance, and housing funds. Employers must report and withhold relevant taxes before salaries and remuneration are paid to employees and contribute to employees’ social insurance, including employee pensions, medical insurance, unemployment insurance, maternity insurance, and work-related injury insurance. They must also contribute to housing funds for all employees.