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Chinese Labor Laws - Employment Contracts

The Law of People's Republic of China on Employment Contracts ("Employment Contracts Law" or the "Law"), effective on January 1, 2008, made significant changes from the previous employment laws. The changes in the employment law provide more protection to employees. Companies, both domestic and international, are confused about the effects of those changes. As more and more companies are considering entering into the Chinese market, employment law becomes more relevant internationally. 

Certain fundamental provisions and information must be included in the contract:

- Contract terms

- Employee name, place and number of resident ID card or other valid identity documents

- Work location and job description

- Compensation

- Normal working hours, rest periods and leave

- Social insurance

- Employee protection, expected working conditions and protection from occupational hazards

- Any other specific laws/statutes required

The overall effect of the Employment Contract Law will be to increase individual employee rights as well as strengthen the structures for collective employee representation. While employment contracts signed before the effective date of the Employment Contract Law will continue to be valid and effective, the new requirements in the Employment Contract will prevail in the case of any conflict with the provisions in existing contracts.

Chinese Labor Law - Wages

There is a minimum wage system in China and wages are frequently adjusted and fixed by local governments. 


Chinese Labor Law - Termination

Chinese law does not recognize the concept of "at will" employment and therefore employers may terminate employees only under certain circumstances specified in relevant laws.

In certain instances, an employee may be terminated without notice or severance. These instances include:

- Employee fails to satisfy employment conditions during probation period.

- Egregious violation of company rules and/or regulations.

- Major harm to company's interest due to employee's serious negligence of duty.

- Employee is prosecuted for a criminal offense.

- Employee has established an employment relationship with another employer, therefore hindering completion of tasks with first employer. Or employee declines to fix the situation after situation has been brought to employer's attention. 

- Employee uses deception or coercion to take advantage of employer and cause loss of employment contract, or make amendment that is contrary to employer's real intent. 

There are 3 situations that require an employer to provide severance and 30 day written notice of termination:

- Employee becomes ill or sustains a non-work related injury and, after receiving sufficient medical treatment, is no longer capable of engaging in the original work or any other work requested by the company.

- Employee is incompetent after receiving adequate training or assignment to another position.

- Major change occurs in circumstances upon which employment contract was based, thus making performance of contract impossible after arbitrations between parties fail to produce some agreement. 

Chinese Labor Law - Working Hours

Normal working hours are 8 hours per day and 40 hours per week.

Workers must be paid overtime compensation when work hour limit is exceeded. Nevertheless, certain high-ranking managerial and sales staff may be required by to work more than 40 hours per week without receiving overtime compensation.

Employees must receive at least one rest day during a calendar week. 

Overtime payment rates are:

- 150% of normal wages for overtime on normal workdays

- 200% of normal wages or paid leave for overtime on rest days

- 300% of normal wages for overtime on public holidays

Overtime is offered to employees often and employers must consult employees and local labor union, if applicable, before extending overtime hours. No more than 36 overtime hours can be given to an employee. 

Chinese Labor Law - Worker Rights

Annual leave time permitted is based upon amount of time an employee has been with the organization. 

- Five days of paid annual leave for those who have worked between 1 and 10 years.

- Ten days of paid annual leave for those who have worked at least 10 years but fewer than 20. 

- Fifteen days of paid leave for those who have worked at least 20 years.

Annual leave not used during the applicable year does not carry forward to the following year. When annual leave is not taken, employees must be paid 200% of the average daily wage for each unused leave day.

Beginning 15 days before the projected birth date, female employees are entitled to at least 98 days of maternity leave. 

If the pregnant worker has more than one child during the birth, an additional 15 days is added per child. 

The national retirement ages for men and women are 60 and 55 respectively. 

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