Employment Procedures

An Expert's View about Business Administration in China

Last updated: 22 Feb 2011

7.2 Employment Procedures


7.2.1 Signing of Labour Contract
The new Labour Contract Law sets out stricter stipulations on the signing of labour contracts between employing units and employees. The new law specifies that an employing unit must sign a written labour contract with its employee within one month after the commencement of service by the employee. If an employing unit fails to sign a written labour contract with an employee who has worked for the employing unit for more than one month but less than one year, it should pay the employee double his wage each month. Any employing unit failing to sign a non-fixed term labour contract with an employee in violation of the Labour Contract Law should pay the employee double his wage each month starting from the date on which the non-fixed term labour contract should have been signed.

In hiring an employee, an employing unit should truthfully inform the employee of the job duties, conditions of work, place of work, occupational hazards, safe production conditions, remunerations and other matters that the employee wishes to know. Meanwhile, the employing unit has the right to know the basic information about the employee which directly relates to the labour contract, and the employee should truthfully provide the same.

On probation, the new Labour Contract Law sets out the following provisions:

For a labour contract with a term of more than three months but less than one year, the probation period may not exceed one month; for a labour contract with a term of more than one year but less than three years, the probation period may not exceed two months; and for a fixed-term labour contract of more than three years or a non-fixed-term labour contract, the probation period may not exceed six months. The same employing unit and the same employee may agree on only one probation period. For a labour contract with a term on project basis or a labour contract with a term of less than three months, no probation period is required. The probation period must fall within the term of the labour contract. If the term of a labour contract covers the probation period only, such probation period is deemed invalid and the term will be the term of the labour contract.

On termination of contract, the new Labour Contract Law provides that an employing unit may unilaterally terminate a labour contract if an employee:

(1) is proved to be not meeting the requirements for employment during the probation period;

(2) seriously violates the employing unit's rules and regulations;

(3) commits serious dereliction of duty or practices graft, causing substantial damage to the employing unit;

(4) has simultaneously established a labour relationship with another employing unit which seriously affects the completion of his tasks with the original employing unit, or refuses to rectify the matter after the same is brought to his attention by the employing unit;

(5) causes the labour contract to be invalid due to the circumstances1 specified in item (1) in the first paragraph of Article 26 of the Labour Contract Law;

(6) has his criminal liability pursued in accordance with the law.

On staff layoff, it is provided that:

According to the Labour Law, staff layoff for economic reasons was only allowed if the employing unit was on the brink of bankruptcy or its production or operation had run into great difficulties. Under the new Labour Contract Law, the scope of staff layoff for economic reasons has been expanded:

If, under any of the following circumstances, an employing unit has to reduce its workforce by 20 persons or more or by less than 20 persons but the number accounts for more than 10 percent of its total workforce, the employing unit may only lay off its staff after it has explained the situation to the labour union or to all its employees 30 days in advance, has considered the opinions of the labour union or the employees, and has subsequently submitted the staff layoff plan to the labour department:

(1) restructuring pursuant to the Enterprise Bankruptcy Law;

(2) serious difficulties in production and operation;

(3) changes in production, major technological innovations or adjustments in the operation mode of the enterprise have made it necessary to reduce workforce even after changes have been made in the labour contract;

(4) the economic circumstances at the time of the signing of the labour contract have undergone major changes which have rendered it impossible to execute the contract.

In retaining staff in the course of carrying out layoffs, priority should be given to the following staff:
(1) those who have signed a fixed-term labour contract with a relatively long term with the employing unit;

(2) those who have signed a non-fixed-term labour contract with the employing unit;

(3) those who are the sole wage earner in their families and have to support elders or minors at home.

If an employing unit that has laid off its staff in accordance with the rules recruits staff again within six months, the laid off staff should be notified and should be given priority in employment under the same conditions.

The new Labour Contract Law and the relevant regulations clearly state the mandatory terms and conditions to be included in a labour contract, such as the term of the contract, changes in the contract, dissolving or terminating the contract, as well as compensations in the event of dissolving the contract. The Labour Handbook provided by the local labour department should be used as reference by enterprises in formulating their labour contracts.


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Posted: 19 February 2011, last updated 22 February 2011

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