By Andrew Salzman
Dezan Shira & Associates
U.S. Liaison Office
The probation period is a feature of Chinese labor law with which many foreign companies may be unfamiliar, but it is a key provision that is employer friendly and allows companies to terminate employees without the onerous requirements set forth for regular employees.
When hiring employees and writing the employment contract, businesses can choose to input a probation period. Probation is a set time at the start of a contract, which allows for employers to evaluate the employee. If the business decides they want to utilize probation periods, it must be written into the official employment contract. If it is not in the employment agreement, the probation period is not valid. For more on the different types of labor contracts that Chinese law provides for, please refer to our China Human Resources and Payroll Guide.
The maximum length of the probation period is set by the duration of the contract term. For example, if the contract term is three months to one year, then the probation period is one month. If the contract term is for three plus years or the employment contract does not have a fixed term, then the maximum probation period is six months.
Probation periods cannot be renewed after the period has been completed, nor can the employer set new ones, for example after a promotion, or in the case of a merger or acquisition of the company. Other unique rules during the probation period: the employer needs to only pay 80 percent of the employee’s salary, so long as that 80 percent is above the local minimum wage.
During the probation period, there are expanded grounds for dismissal of employees, and termination during the probation period is easier and cheaper than after its expiration.
Specifically, employees can be dismissed if the employer determines that they do not meet the job requirements. This is only allowed during the probation period. To help with this reason for termination, an unambiguous job description is needed, with explicit duties and skills listed for the job. The employer needs to provide evidence that the employee has not been able to meet the job requirements, as the burden of proof lies with the company.
In our experience, keeping track of job performance and expected benchmarks during the probation period can provide key evidence if an employee is dismissed and the dismissal is challenged.
Not all provisions of the probation period are employer friendly. Employees receive some protection in that during the probation period, they can resign on three days’ notice, whereas employers must give 30 days notice after probation has expired.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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