Chinese employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. Other factors that complicate matters include the differences between regions and an inconsistent approach to adherence to laws in different cities. For example, there are differences between minimum wages and welfare contribution amounts in different cities. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in China.
There are several key areas to be aware of within China’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the Chinese laws and rules for both Chinese employees as well as foreign nationals.
China requires that workers have employment contracts that meet local standards, and companies must have a professional who can draft local employment contracts.
The maximum term of the probationary period depends on the term of the employment contract. Only employment that is based on some fixed assignment cannot have a probationary period. All other probation periods are available from one to six months. For example:
In the case of a first fixedterm employment contract, the employer has the right not to renew the contract upon expiration; however, the employer must pay economic compensation, or severance pay.
In other situations, the two main approaches for termination are:
There are laws that regulate leave periods based on years of service and the type of leave requested, including:
Companies entering China can make a decision whether to use their own resources or to use a Global Employment Organization to handle employment and payroll responsibilities. A GEO solution is particularly beneficial when a company is looking to setup an office quickly with a manageable cost. The complexity of employment regulations in China makes the use of a GEO advisable to ensure full compliance with employment laws, including the drafting of local employment contracts for workers.
The company that is expanding into China contracts with the GEO to employ and payroll their staff on their behalf. The GEO then assumes the legal responsibility for these employees, sponsoring them on work permits if necessary, complying with local employment law and running their monthly payroll. This is especially useful to fulfill all of the specific withholding requirements for pensions and benefits, as well as documenting termination, probation periods and leave requests.