China employment contract is necessary to establish an employment relationship. Under China’s labor laws, China-based employers are required to have written employment contracts with all of their full-time employees. However, a part-time employee, who works no more than 24 cumulative hours per week and four average hours per day, is subject to different requirements and may be employed under an oral contract.
In China, an employee may unilaterally terminate his or her employment contract by giving a written notice 30 days in advance or 3 days in advance during the probationary period. On the other hand, an employer may unilaterally terminate an employment contract by giving a written notice 30 days in advance or providing one month’s salary in lieu of notice in certain situations.
Major Contents in An Employment Contract
China’s Labor Contract Law requires that companies operating in the country provide workers with an employment contract. These contracts are generally comprehensive and formal, and outline whether workers will be hired on a fixed-term, open-term or variable-term basis. By law, there are several employment stipulations that must be included in the contract, and are as follows:
(1) Name, domicile and legal representative or main person in-charge of the employer;
(2) Name, residential address and number of the resident ID card or other valid identity document number of the worker;
(3) Term of the labor contract;
(4) Scope of work and place of work;
(5) Working hours, rest and leave;
(6) Labor compensation;
(7) Social insurance;
(8) Labor protection, working conditions and protection against occupational hazards;
(9) Other issues required by laws and regulations to be included in the labor contract.
Usually, the contents of an employment contract can only be modified in writing after both parties have reached a consensus through mutual negotiation.
Types of Contract Terms
Employment contracts in China can have three different types of terms: fixed, open-ended or terms that expire upon completion of an assignment.
Under the Labor Contract Law, if an employer opts to enter into a fixed-term contract with an employee, after the completion of two fixed terms, that employer must offer the employee an open-ended contract. Since open-ended contracts are inherently difficult to terminate, employers may want to use fixed-term contracts for new hires.
Penalties and Legal Liabilities
Many of the penalties and legal liabilities are generalized. For example, employers must pay damages if workers are harmed as a result of the employers inability to discharge its obligations as spelled out in the employment contracts. But the extent of these damages is not clear, and will be determined by local labor bureaus.
In cases of unlawful dismissal, the employer must pay two months salary for every year of service. This severance may be calculated by the local labor bureau, which can choose to apply salary standards for the industry or geographical location, rather than the actual salary itself.
Advice on Employment Contracts
While having clearly written contracts is important, many practitioners agree that it is sometimes difficult to have separate contracts that cover all the bases. Hence, many foreign firms in China resort to standard employment contracts stating the key terms of employment. But for some foreign firms, a two-version employment contract system is preferred.
Many practitioners also point out that, although important, the employment contract is only one component of managing Chinese employees. Managing employees expectations, having a structured training program and career path, and in the case of companies that are unionized, a good working relationship with the unions, are all equally important.
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