1. A Quick Guide to China Labor Law
When the Opening Up process first began in China some three decades ago, the country had very
little legislation on the books regarding employment standards for private industry. As the
country’s economy moved further and further away from reliance on state-sponsored jobs and
the old concept of “the iron rice bowl” (whereby every worker’s financial security – meager as it
was – was guaranteed by the government) a clear need for labor laws emerged.
The most recent labor laws came into force in 2008. In this newsletter, we present some of the
key provisions of those laws.
Hiring
Generally speaking, employees are hired on the basis of a contract between themselves and the
employer which must stipulate job responsibilities, job location, working time, rest and leave,
pay, and working conditions, and will often also stipulate a probationary period, what training is
to be provided, confidentiality obligations, as well as social and supplementary insurance.
Contracts can be for a fixed term (most common), an indefinite term, or until a specified project
is completed. Should an employee work for a year in the absence of a contract, then by law, it is
understood that a contract of indefinite term is in effect.
Probationary periods are generally a function of the contract term:
Term Maximum Probationary Period
< 3 months N/A
3 – 12 months 1 month
1 – 3 years 2 months
> 3 years, or indefinite 6 months
Note that employers may pay employees a maximum of 20% less than their contract pay during
the probationary period. Moreover, if an employer pays fees for employee training then the
employee must generally work for the full agreed-upon term. Otherwise, the employer may seek
repayment of those fees.
Upon executing an employment contract, the employer must go to an official job centre to report
the employment formalities, buy social security for the employee from the Social Security
Bureau; and open a public accumulation fund account for the employee.
Firing
Employment contracts can be terminated in several ways:
Mutual consent: terminate at any time without compensation
Termination for cause: