By Helen Kong, Human Resources Manager
A firm understanding of China’s laws and regulations relating to human resources and payroll management is essential for foreign investors who want to establish or are already running foreign-invested entities in China.
In China, there are a wide range of government institutions involved in HR processes, and while key laws are drafted by the central government – such as the Labor Contract Law – numerous bylaws and regulations are instituted at the local level.
Nevertheless, many HR laws and principles are fairly universal across China. Here, we offer eight quick tips to handle the fundamentals of employing staff in China.
1. Mandatory written contracts: All employees must be given a written contract within one month of hiring; if not, the employee is entitled to double salary.
2. Probation period: The range of legitimate grounds for dismissing an employee is considerably wider during his or her probation period. The employer may also pay only 80 percent of the employee’s contractual salary during this time.
3. Regional variation: National laws are often intentionally broad and vague, leaving a lot of room for local interpretation or additional legislation. Regulations and practices differ per city on issues such as minimum wage, work visa policy, social security contributions, and maternity leave.
4. Representative offices: The simplest of foreign investment vehicles in China, the representative office (RO) is not permitted to directly hire staff in China; instead, they need to use dispatch agencies, the agencies must hold a government issued special license that allow them to hire employees on behalf of their clients (e.g. Dezan Shira & Associates has dispatch licenses).
5. Leave during the first year of employment: Employees are not entitled to any mandatory minimum number of leave days during their first year of employment, except those during major holidays such as Chinese New Year around February, and the National Day celebrations in early October.
6. No at-will termination: Terminating employees in China is both difficult and expensive. Employees may resign with 30 days’ notice, but for employers, there are limited grounds for terminating an employee before his or her contract has come to an end.
7. Non-fixed term contract after two fixed term contracts: After an employee finishes his or her second contract with your company, he or she generally shall be offered a lifetime contract as the third unless he or she wants another fixed term contract instead. Such non-fixed term contract can only be terminated if there are grounds for dismissal. Notably, some regions, such as Shanghai, offer more flexibility on this rule.
8. Severance payments mandated by law: In practice, severance payments are even higher than the law prescribes, and can comprise a significant part of overall HR costs.
China Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Asia, including ASEAN, India, Indonesia, Russia, the Silk Road, and Vietnam. For editorial matters please contact us here, and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates is a full service practice in China, providing business intelligence, due diligence, legal, tax, accounting, IT, HR, payroll, and advisory services throughout the China and Asian region. For assistance with China business issues or investments into China, please contact us at email@example.com or visit us at www.dezshira.com
Dezan Shira & Associates´ brochure offers a comprehensive overview of the services provided by the firm. With its team of lawyers, tax experts, auditors and consultants, it is Dezan Shira´s mission to guide investors through Asia´s complex regulatory environment and assist with all aspects of establishing, maintaini..
Doing Business in China 2017 is designed to introduce the fundamentals of investing in China. Compiled by the professionals at Dezan Shira & Associates in January 2017, this comprehensive guide is ideal not only for businesses looking to enter the Chinese market, but also for companies who already have a presence here ..
While cross border e-commerce (CBEC) is an attractive channel for foreign businesses to sell to China, misunderstandings over how CBEC in China works frequently end in costly disappointments and retreats from the market. In this issue of China Briefing magazine, we offer foreign investors a practical guide to selling t..