Chinese labor law regulates how an employment contract is formed, how it is terminated, and the mutual responsibilities of the employee and employer under this employment contract. When you terminate an employee, you should specifically do everything according to all labor law rules. Otherwise, even in cases where the employer is one hundred percent in the right, it may cause a termination of employment to be unlawful without taking appropriate steps. Which may result in a legal process that results in compensation or even reinstatement to the employee. 

One key thing to remember. Businesses need to maintain an employee handbook that is supported by basic operating rules and covers all phases, including the hiring process, employment process, and termination process. This type of handbook contributes to the employer in the processes of making more efficient use of the employee, increasing the workplace performance of the employees and workplace safety, as well as ensuring the communication to be established with the employee in accordance with the law. 

But to be honest, one of its most important uses is as a means to terminate employees later on.

What Is a Handbook?

The employee handbook is a guide that regulates the company culture, the rules to be followed within the company, the working order, workplace regulations, procedures, duties, responsibilities, and rights of the employees. A written contract between employer and employee is required in China, but there is no obligation to prepare a handbook. As the benefits it provides are understood, the number of companies that prepare handbooks and include them in their HR processes increases rapidly. Basically, an employee handbook is necessary to protect employers from employment disputes with employees. 

It is seen that companies that prepare handbooks in China have problems with their employees that turn into fewer legal disputes.

Here's how the employee can explain the benefits of the handbook:

a) In terms of employees

Employees become familiar with the business culture by reading the work handbook given to them immediately after the employment contract. They learn the rules that they have to follow during work, their general duties and the rights they have. In this way, mistakes caused by lack of information and unwanted conflicts are prevented. 

b) From the employer's point of view

Thanks to the employee handbook, employers notify the employee of the workplace and working rules together with the employment contract in writing. When a legal dispute arises between the employee and the workplace, the employee cannot claim that he does not know any rule written in the handbook. A company without a manual, on the other hand, will have to prove the notices and warnings made to the employee when it wants to terminate an employee's contract for violation of company rules. Otherwise, it will have to pay severance pay or even reinstate the employee to his/her original position. 

Employee Termination, Employment Contract, and Handbook

Chinese Labor Law outlines the duration of employment contracts, the modification and termination of the contract, and the compensation and other legal sanctions that will occur in case of termination of the contract. The content of the contracts to be signed between the employer and the employee in China has similar characteristics to the employment contracts applied in the USA and Europe and is prepared within the basic framework that determines the employment contract in general terms. It would be more appropriate, both procedural and legal, to prepare a separate employee handbook for the rules, responsibilities, business culture, and similar issues that the worker must comply with within the workplace. 

The handbook is not a contract, but in case of a dispute, the information in it is deemed to have been notified to the employee by the employer; that is, it is binding in a potential legal dispute.

The basic idea is, to terminate an employee you need to show cause. One of the best ways to show cause is to say the employee broke a rule (time to show up, rules on side deals or not disclosing conflicts of interest). But if you don't have clear written rules (as in a company handbook), it makes your case much harder.

Which Companies Should Have an Employee Handbook?

Until recently, HR consulting companies recommended preparing HR manuals and employee handbooks for companies with more than 50 employees. However, the employee handbook is now recommended for smaller companies as well. 

Companies with a small number of employees sometimes have more influence over personnel. In short, managers can control a small number of employees more efficiently. However, many companies have an employee handbook prepared in order to protect themselves, due to cases such as forgetting the written warning when employees violate the company rules and fail to fulfill their responsibilities at the workplace. The employer also has to get the employee signed information or warning papers and keep these files as proof of past infractions. 

What Should Be in an Employee Handbook?

Chinese labor laws do not require an employee handbook, and there is no regulation on what should be included in its content. In short, the content of the employee handbook is determined by the company that prepared it. It is essential that the handbook's content is in compliance with Chinese business laws, objective and simple, and does not cause ambiguities and conflicts.

Generally, the following topics are expected to be addressed in an Employee Handbook:

· Company culture

· General company behavior policies

· Company standards of conduct and disciplinary procedures

· Workplace security

· Employee Performance Assessment

· Working hours and overtime

· Remuneration standards

· Confidentiality & Non-Compete

· Termination policies

· Public holidays, leaves, and vacations

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