Owing to different employee protection laws which came into
effect in 2008, HR managers in the People's Republic of China
face new challenges. These new laws are to have a lasting impact on
personnel work. Not only are the labor contracts required to be in
line with the legal provisions, but also a dedicated contract
management within the HR department is required.
Equal Opportunities Recruitment
The Employment Promotion Law safeguards employees' equality.
Discrimination, especially on the grounds of ethnic background,
race, gender or religion, is prohibited. There are restrictions,
particularly for the recruitment, but also during the further time
of employment. For instance, it is illegal to reject an applicant
simply because she is a woman or to discriminate against female
employees who choose to get married or have children.
The law also protects ethnic minorities, people with
disabilities, people who carry contagious diseases and farm
Assessment of Old-Contracts
Beginning 1/1/2008, labor contracts between Chinese employers
and their staff have to meet the standards of the labor contract
law and its implementation regulations. These laws cover not only
contracts with Chinese employees, but also local contracts with
It is important to conclude the labor contracts in a written
form. Although the law provides a one month time limit, it is
recommended to conclude the contract immediately, in order to avoid
any subsequent disputes. If the employer fails to conclude a
written contract within a month, the law stipulates a double salary
entitlement as sanction for the employer; such lasts as long as the
agreement is not concluded for a maximum period of one year from
the beginning of employment. After one year, the labor contract is
deemed to be open ended.
Surveillance of Fixed-Term Contracts
Fixed term labor contracts have to be paid special attention to.
In certain cases it is compulsory to conclude an open ended
contract. In particular, it is important to be careful while
extending an already existing employment relationship. If the
period of an employee's labor contract was restricted twice
after the 1/1/2008, the employee is entitled to get a non fixed
term contract. The company can not refuse the extension if the
employee requests such. Therefore, already when granting the first
renewal, the employer has to decide whether he is willing to risk
an unlimited employment relationship.
If the company misses the end of a fixed term contract and does
not provide a new written or permanent labor contract despite such
entitlement, the employee can demand double payment of salary.
Possibly the local regulation will bring further requirements, such
as a duty of information before the expiration of a fixed term
Use of Probation
With each employee there may only be one probation period. The
allowed duration depends on the agreed term of the employment
contract and it amounts to a maximum of six months. In general, the
salary cannot be less than 80 percent of the agreed later salary.
During the probation period it is recommended to control the
employee and see whether he is suitable for the job requirements.
If not, this leads to a special reason for termination during the
probation period, but meets high requirements when being claimed
Termination of work contracts
The unilateral termination of an employee is only possible upon
existence of reasons stipulated by law. Therefore, misbehavior or
mistakes of the employee and the respective measures taken need to
be documented accurately. Before termination information and
involvement requirements towards employees, unions and public
authorities have to be obeyed.
When the employer initiates the termination of an employment
contract, in general the employee is entitled to a severance
payment. Not only dismissals, but also termination agreements
suggested by the employer and the expiration of fixed-term
contracts lead to a compensation entitlement, basically amounting
to one monthly salary for each year of employment but being subject
to various caps.
Although the legislation of the last year increased the
protection of employees and provide for significant sanctions in
case of infringements by the employer, with a professional HR
organization and training of employees in charge of personnel
issues as well as a profound contract management the risk can be
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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