On 18 September 2008, the State Council promulgated the
Implementation Regulations of the Labour Contract Law.
The Labour Contract Law was implemented on 1 January 2008.
The regulations clarify several provisions of the Labour
Contract Law, but leave other areas unclear.
1. Execution of labour contract
Under the Labour Contract Law, if a written labour contract is
not executed between a month and a year from the commencement of
work, the employee is entitled to double salary payment. Article 5
of the regulations clarifies that the employer is not required to
provide such compensation when the failure to conclude a contract
is the employee's fault. But the employer must have notified
the employee in writing. In this case, the employer may terminate
the employment through written notice and only owes the employee
their regular salary.
An employer is still obliged to conclude a written contract
after one year, when the employment term will be deemed open ended.
However, any double salary payment is limited to one year.
2. Consolidated calculation of employment period
Article 10 provides that when someone is "arranged" to
work for a new employer, the time spent at the previous employer
will be considered part of the employment period at the new
One result is a higher severance payment, which is calculated
based on the employment period. However, former employment can be
ignored if the previous employer has already made a severance
3. Professional technical training
To balance the interests of employer and employee, the Labour
Contract Law allows an employer who provides professional technical
training to require a minimum service term. An employee who fails
to fulfil the term is obliged to pay liquidated damages based on
the amount spent by the employer on training and the duration of
the unfulfilled service term.
Article 16 clarifies that such training expenses include
training fees, travel expenses and other direct costs spent on
training. Employers should prepare for future claims by retaining
evidence of training expenses.
Article 17 clarifies that if the labour contract term expires
before the service term does, the labour contract term must be
extended until the expiration of service term, unless otherwise
agreed by the employer and the employee.
Article 26 specifies that an employee is entitled to
unilaterally terminate a labour contract with a service term (and
is not liable for liquidated damages) due to an employer's
Article 38 of the Labour Contract Law. But the employee must pay
liquidated damages if the employer unilaterally terminates due to
employee's fault under Article 26.
The regulations state the right to terminate not only open-term
labour contracts, but also fixed-term contracts and contracts that
expire upon completion of a certain job.
According to Article 18, an employee can terminate by giving
30-days' prior notice to the employer. Therefore, it is no
longer possible to bindingly agree on a longer notice period. A
statutory list of reasons that allow either side to terminate
indicates that the parties are not allowed to formulate their
The regulations also cover the following: the basis for
calculating a severance payment, applicable standards when a place
of employment differs from an employer's place of registration
and the requirements concerning full-time time employment of staff
by dispatching companies.
However, they leave several questions unanswered, including the
definition of the requirements of a seconded position (i.e.,
temporary, auxiliary or substitutable) and a specification of the
process for formulating employer's internal rules and
regulations under Article 4 of the Labour Contract Law.
Reliable sources indicate that the Ministry of Human Resources
and Social Security is formulating detailed implementation rules.
It remains to be seen whether these will provide further guidance
on the open issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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