Terminating an Employee in China Upon Expiration of Fixed Contract
By Fanny Zhang, Dezan Shira & Associates Beijing Office
The expiration of a fixed-term labor contract is one of the legitimate grounds to terminate an employee as stipulated in Article 44 of the Labor Contract Law of the PRC (“LCL”).
However, the LCL, the Implementation Regulations for the Labor Contract Law, and related judicial interpretations do not provide further stipulations on the procedures of terminating an employee upon expiration. As a result, some employers wrongly believe that the labor contract will terminate automatically without any procedural requirements, and there is no need to notify the employee when it expires. This is not always true.
After researching and looking into the local regulations, normative documents, and local judicial practices of 31 provinces, municipalities, autonomous regions and Xinjiang Construction Corps, we found that several provinces have made clear provisions on the notice time and other formalities on termination of labor contract upon expiration. Improper practices, such as overdue notice, will lead to wrongful termination and trigger legal liabilities.
Procedural requirements of termination upon expiration
In this article, we summarize the relevant provisions on procedural requirements of termination upon expiration into the following situations:
1. 30-days’ notice in advance before the expiration of the labor contract
Beijing, Liaoning, Heilongjiang, Jilin, Ningxia, and Xinjiang Construction Corps stipulate that the employer should notify the employee in writing to terminate the labor contract 30 days in advance before the expiration of the labor contract.
Although the Tibet Autonomous Region has no regulations on the matter as a whole, Lhasa City stipulates that employers should notify employees 30 days in advance before the expiration of the labor contract.
2. Terminating the labor contract within a certain period before the expiration of the labor contract
This situation requires the employer to conduct the formalities for terminating the labor contract within a certain period before the labor contract expires.
For example, according to Fujian regulations, upon the expiration of the first fixed-term labor contract signed by the employer and the employee, if the employer does not intend to renew the labor relationship or the employee does not agree to renew after soliciting opinions, they are required to initiate the termination procedures within three days before the expiration of the labor contract.
3. The labor contract shall terminate at once upon expiration
Shanxi, Zhejiang, and Tianjin all stipulate that the labor contract shall be terminated as soon as the labor contract expires. No additional procedures and formalities are required to be conducted by the employers.
4. Notifying the employee within a certain period after the expiration of the labor contract
According to the regulations of Xinjiang Autonomous Region, where the employer maintains or improves the stipulated conditions of the labor contract and informs the employee in writing to renew the labor contract, but the employee refuses, the employer can notify the employee about the termination within one month after the expiration of the labor contract.
According to the regulations of Guangzhou City, the employer shall notify the employee about the termination 30 days in advance within one month after the expiration of the labor contract.
5. Notifying in advance to renew the labor contract before the expiration of the labor contract
Although there are no specific provisions on the termination procedures of labor contracts upon expiration in some provinces, it is often clearly stipulated that employers are required to notify the employee in advance prior to the expiration to renew labor contract.
For example, according to the regulations of Jiangsu Province, when the employee meets the conditions for obtaining an open-term labor contract, the employer shall inform the employee 30 days before the expiration of the fixed-term labor contract about that.
Liabilities of failing to conform with the procedural requirements
The legal liability for failing to comply with the procedural requirements where there are clear regulations – varies from one city to another.
For example, in Beijing, the employer shall pay the compensation of daily wage for each day’s notice delay. In Ningxia, the labor administrative department shall order corrections, and if causing any economic losses to employees, the employer shall be liable for compensation in accordance with the law.
When the labor contract of the employee expires, the employer shall pay attention to the relevant local regulations, evaluate and go through the procedures for terminating the labor contract in accordance with the law to prevent legal risks of illegal operations. Especially for foreign businesses, which maintain operations in different cities, their HR departments are suggested to examine the specific provisions of local regulatory documents and the judicial judgments on the matter to keep compliance.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, Thailand, United States, and Italy, in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.
- Previous Article Managing Risks Within Joint Ventures in China
- Next Article Chinese Accounting Standards for Business Enterprises: Prepare for Changes in 2021