Chinese employment law
China, as one of the fastest-growing economies and most populous countries, plays a critical role in business, industry and politics. However, many outsiders encounter significant difficulty understanding Chinese labour law and findthemselves in challenging and uncomfortable situations. This may be due to the law’s specificity and scope, which forms a labyrinth of interconnected regulations and rules governing minutia ranging from severance to trade unions. Routine tasks in other jurisdictions can be much more dramatic affairs in China.
Labour law generally refers to the rules and regulations governing employment relationships and other social relationships that are closely connected with employment relationships. Chinese labour law applies to all businesses, individual economic organisations, private non-profitentities, etc. in the People’s Republic of China (the “PRC”) and the individuals who have employment relationships with such entities and organisations. Employment relationships between government offices, public institutions and social groups and their employees are also governed by Chinese labour law. Employers and employees (except part-time employees) are required to establish employment relationships by entering into written employment contracts. However, evenif the parties fail to execute valid written employment contracts, an employmentrelationship can still be deemed to exist if the parties act as if they are bound by such a contract.
- Employers must sign the employment contract with full-time employees or the employer shall pay double the monthly wage to the employees, for at least 11 to 12 months.
- Probation periods shall not be longer than what is permitted by law and one employee can only have one probation period, otherwise the employer shall pay compensation to the employee for the exceeded probation period or the second probation period performed by the employee.
- Amending an employment contract (e.g. job title) must be agreed by both employer and employee in written form.
- Internal rules which may affect employees’ personal interests must fulfill the consultation process, or they will not take effect (e.g. they will not apply to the employees). an alliance of employers’ counsel worldwide
- In China, termination must be based on the grounds permitted by law. Otherwise, the labour relationship may be reinstated, even after termination (e.g. employers may be forced to re-hire terminated employees or pay double severance).
- Chinese severance pay practices are unique, in that a highly paid employee’s severance is capped, which can result in a senior manager’s severance being lower than that of a junior employee.
- Chinese employers cannot require employees to pay liquidated damages, except in limited situations involving non-competition and service period duties.
- Employees are not entitled to organise labour strikes under Chinese law. However, employees will still engage in self-organised strikes; these strikes are not legally supported by trade unions.