Any employer should be well versed in the the labor law (because your employee certainly will be), including employee terminations. The key thing that trips up some foreign employers here, especially US companies, is that China is not an at-will employment system. In the US, an employee can be terminated for no reason at all, but in China, there must be cause to terminate that fits into one of the narrow paths allowed under the Labor Contract Law.

Types of Termination

There are two types of termination procedures for employee termination in China: 

1) The expiration of a fixed-term labor contract:

Companies operating in China can terminate their employees without giving any reason at the end of the contract period if they have been recruited with a fix-term labor contract. Termination with a fixed-term employment contract does not prevent the employee from receiving the severance pay they deserve during employment. 

Important points about term contracts:

· Thirty days before the employment contract expires, the employer must notify the employee in writing that the contract will end without renewal.

· Necessary formalities for the termination of the employment contract must be fulfilled within a certain period of time before the employment contract expires.

· The employment contract between the employer and the employee ends at the end of the period specified in the contract. It is accepted that both parties who signed the contract accepted this at the signing stage.

· If the employer wants to renew the employment contract, he must convey this request in writing to the employee before the employment contract expires. 

2) Early termination

If a fixed-term employment contract has been signed, the employment contract between the employer and the employee is valid until the end of the period specified in the contract. The employer cannot terminate the employee's employment contract early unless the justified conditions defined in Chinese labor laws are met before the period covered by the employment contract expires.

There are three types of early termination: 

a) Termination through mutual agreement:

If the employment contract ends with the mutual consent of the employee and the employer, this is the fastest and most problem-free termination of the employment contract. This request may come from the employer as a termination proposal to the employee, provided that he/she is given all legal rights, including severance pay. Or the employee may convey this mutual agreement request to the employer himself. In either case, termination must occur in a process consistent with legal procedures, especially if the employee is affiliated with a trade union.

b) Unilateral termination:

If this request comes from the employer, it must fulfill the conditions of unilateral termination of the employment contract in accordance with the current legal requirements. Depending on the reason for termination, unilateral termination can occur in two different ways: 

(1) Termination for cause (Immediate Termination) :

· Suppose a probationary period is specified in the employment contract. Before the end of this period, in that case, the employer may terminate the employment contract by stating in writing that the employee does not meet its expectations.

· Violating workplace rules and disciplinary violations.

· Has harmed the workplace, business, or employer interests

· If the employee has been involved in any crime and has been convicted

· Established a business relationship with another company or employer 

(2) Termination without cause (Ordinary Termination) :

Ordinary termination is a situation that occurs when the employee does not have a fault but cannot do the current job due to changing conditions. For example, suppose the employee has a health problem (other than occupational diseases) or cannot do the job he is expected to do after training. In that case, the employer can use his ordinary right of termination. After the employer communicates the ordinary termination to the employee, the employee must be employed for another 30 days, or the equivalent 30 day notice period compensation must be paid. 

3) Wrongful termination:

In short, although there is in practice almost no easy legal reason for termination according to Chinese labor laws, wrongful termination occurs if the employer wants to terminate the employee's employment contract. Generally, companies try to settle with the employee when this type of situation occurs. Otherwise, lengthy and costly legal procedures can occur, and Chinese labor laws, as written and applied in practice, are basically designed to protect employee rights against the employer.

If an employer thinks that an employee cannot be productive for various reasons, does not comply with work discipline rules, does not do his job, he must prove this, the employee should be given official warnings stating the violations and non-compliance, to be kept in the employee's personnel file. 

Otherwise, after an unjustified termination of employment, the employer may have to both pay compensation and accept the reinstatement of the dismissed worker. Chinese labor law can legally demand the reinstatement of employees who have been unfairly dismissed.

Even if a company has justified grounds, if it terminates the employee without informing the employee in the legally proper way, it may be subject to challenge.

Expand into China without setting up a company, by employing or relocating key staff to take a first step in exploring the market. A professional employer organization (PEO) service can act as the official employer of record (EOR) for your staff in China while you expand your business. With the support of our trusted partner network, we can facilitate local hiring and employment without the time and cost of setting up a legal entity in country.

Contact us for more information at inquiries@ChinaLawSolutions.com