Employee Termination In China From Employer’s Perspective

When it comes to employee termination in China is it very important to know the applicable laws. This article aims to clarify the current employment termination regulations.

Termination by the employee in China

According to the definition, termination is a “unilateral declaration of intent requiring reception”. This means that the other party to the contract does not have to agree for the dismissal to be effective. It only has to receive the notice of cancellation.

However, it requires a firmly prescribed form. For this reason, you should – regardless of who gives notice to whom – comply with all essential formal requirements and rules when writing a notice of termination and avoid so-called formal errors:

  • Termination must always be in a written form, signed by an authorized representative
  • The employee must give a 30-day notice to the employer before leaving the company
  • During the probation period: 3 days’ notice

Reasons for termination by the employee (Art 38)

According to Art 38 of Labor Contract Law of the People’s Republic of China, a Chinese employee can terminate his employment contract if:

  • The employer does not provide employment protection or working conditions as defined in the employment contract;
  • The employer does not pay the full amount of the remuneration in good time;
  • The employer does not pay social security contributions for employees;
  • The rules and procedures established by the employer are contrary to laws and regulations and affect the rights and interests of employees

If an employer forces an employee to work by force, threat or unlawful restriction of personal freedom, or if an employer violates safety regulations to instruct or compel an employee to perform hazardous activities that endanger the employee’s private life the employee may terminate the employment contract immediately without prior notice to the employer.

Termination by the employer in China

If the employment relationship of an employee in China is to be terminated, both contracting parties must comply with national laws in this respect. This includes certain notice periods, such as the consequences of non-compliance, and special protection against dismissal for certain groups of persons. In order for you to know what rights you have as an employer and what you need to bear in mind in the event of termination, we have listed the most important points for you below:

  • Reasons for termination by the employer
  • Rules and deadlines for termination
  • Protection against the dismissal of certain groups of persons

In principle, termination clauses must be carefully documented in a written employment contract and agreed ex-ante by both parties. An indefinite employment relationship can be terminated by mutual agreement (Art 36) or under certain circumstances.

Reasons for termination by the employer

The following are the most valid reasons why an employer wishes to terminate the employment relationship of its employee. These are subdivided as follows:

  • Termination due to operational reasons
  • Termination due to personal reasons
  • Termination due to behavior

Termination due to operational reasons (Art 41)

Employment law also permits termination of the employment relationship if the termination is for operational reasons. Since this type of termination is not attributable to misconduct on the part of the employee, no prior warning is required.

Reasons for an operational notice are among other things insolvency of the employer and/or a merger of enterprises, a strategy change with resulting job losses.

Termination due to personal reasons (Art 39)

The employer can also terminate the employment contract in the event that certain reasons within the person of the employee himself result in the employee being unable to (no longer) provide the service guaranteed under the employment contract. This is the case, for example, with termination due to disqualification. This is the case if, for example, the employee demonstrably does not fulfill the requirements for the position to be filled by him during his probationary period.

Termination due to behavior (Art 39)

An employment relationship can be terminated if an employee culpably and seriously violates his or her obligations under the employment contract. The following are valid reasons for dismissing an employee for conduct-related reasons:

  • Serious violation of company policy;
  • gross negligence in duties, misappropriation, use of personal benefits at the expense of the employer and the employer has caused serious harm;
  • Simultaneous employment with another employer without the consent of the current employer, which seriously affects the fulfillment of his obligations to the current employer;
  • The employment contract was signed fraudulently or under pressure;
  • The employee has violated laws or regulations and thereby committed a criminal offense

If the employer has sufficient evidence that the employee’s actions fall under one of the above categories of errors or misconduct, the employer may terminate the employment contract with immediate effect without compensation.

In what cases should the employer compensate the employee?

The Dismissal Protection Act states that employers have the option of offering an employee’s severance pay in the letter of dismissal – in the event that the employee does not file an action against the dismissal. In certain situations, this might be helpful in order to avoid labor court proceedings. In general, it is difficult for the employer to terminate unilaterally. Therefore, the most common way for the employer to terminate the employment is to raise the mutual negotiation. If the employee accepts the raised amount of compensation, both parties will sign the employment termination agreement, ending the employment on mutual consent.

In this way, the employer does not have to prove the reason for the termination of the employment, whether with or without the employee’s fault. Further information is given in Art 46 in the Labor Contract Law of the People’s Republic of China.

Rules and deadlines for dismissal (Art 37)

In general, an employer must inform its employee in writing of the termination at least 30 days in advance. Otherwise, they must pay the employee a severance payment equal to one month’s income. This does not apply to the above-mentioned reasons for termination due to conduct. In these cases, according to the Chinese Labor Code, the employment relationship can unilaterally enforce the employment contract by giving notice to the employee with immediate effect.

Protection against the dismissal of certain groups of persons

An employer may not terminate an employment contract pursuant to Article 42 of the Labor Contract Act of the People’s Republic of China if the employee belongs to a certain group of employees or if special circumstances apply. These apply as follows if the employee is a member of a certain group of employees:

  • under medical supervision or under treatment for an occupational disease
  • can prove a loss or partial loss of working capacity due to an occupational disease or an accident at work during employment with the employer
  • has suffered an illness or non-work-related injury and the agreed sick leave has not expired
  • is a woman who’s pregnant, giving birth, or breastfeeding;
  • has worked continuously for the employer for at least 15 years and is less than 5 years from the statutory retirement age

In addition, there are a number of other circumstances in which an employer does not terminate the employment contract in accordance with the laws, regulations, or administrative provisions.

How HROne can be beneficial to your business

HROne has more than 15 years of justify experience in Chinese Labor Law and is committed to ensuring that the highest level of compliance standards for our clients. HROne helps you to safely and legally hire employees in China, where a direct employment contract is not desired or feasible, or where a company does not have a legal entity in China through Employee Leasing/Talent dispatching Service.

In extension to Mainland China, HROne also provides employment services in Taiwan and Hong Kong. HROne fulfills all essential responsibilities as that of a legal employer for employee termination aspects and also provides legal consultation service.

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