Chinese lawyers are often asked by their clients to shift their employees from the third party hiring company to a newly formed and sometimes, even an existing Wholly Foreign-Owned Enterprise (WFOE). So much problem arises due to the fact that, China has convoluted rules regarding hiring employees from third party employment agencies. China has several restrictions on hiring from third party agencies and these pose dangers, threats and impediments to the WFOEs in China. Such kind of agencies are also referred to as FESCOs or staffing agencies. Since, the Chinese rules regarding these are quite complicated, the WFOEs generally need the consultancy of China business lawyers.
The Procedure of Moving Employee from Third Party
There is an elaborate process for shifting personnel from third party agencies to WFOE. The usual process for moving an employee from a third party staffing agency to a WFOE is as follows:
- Terminate the contracts with the staffing agency. Moreover, end the contract between the staffing agency and the referred company and also end the contract established between the agency and the employee.
- As soon as the employee resigns, he/she will be immediately hired by the WFOE pursuant to the standard employment agreements. There should not be any time lag.
- Usually, the third parties are willing to terminate the contract as long as the employee willingly resigns from the organization; you sign the agreement freeing the third party staffing agency of any liability involving the employee and also you pay all sorts of fees to the third party agency for the employee. In a majority of cases, the WFOEs want to continue using services from the third party staffing agency. The companies generally leverage of their services like taking care of administrative duties, payment of salary, payment of employee taxes and benefits. These services are generally used as outsourced services by the companies. Now, the third party agencies are usually thrilled to terminate the employment agent relationship at the cost of outsourced services benefit relationship. This arrangement is totally fine for them.
Usually, on the part of the employee, this happens to be a better arrangement. The employee seldom denies signing the termination agreement as he/she is generally happy to move from being a third party employee to becoming a permanent employee of the WFOE. However, there could be 2 issues for the employee if we assume he/she has been employed for a considerable time:
- The employee will definitely not want to lose his/her seniority in the employment relationship.
- The employee will not aspire to be placed on a probationary period rule because she/he is already a senior.
These are 2 very important issues that arise out of this situation. However, in majority of times, the second issue is seen resolved in favor of the employee as it makes little sense to put a good long-term employee under probation. This is not preferred by the employers. The first issue, that is the one regarding seniority is clear and is subject to negotiation. Both these issues are usually solved before starting the changeover process so that the employer and employee do not face any hassles later on.