The Provisions that you Must Skip in your China Employment Contract

China lawyers always suggest U.S. and European business owners to sign out a China-centric contract while doing business in the mainland China or with China. This approach is highly important especially in case of the employment contracts with the Chinese employees because the entire agreement is highly local in nature.

There are two things that foreign business owners must have if they have someone in China other than a company performing services for them-

  • Foreign company’s own entity in China
  • A China-specific written employment contract

It has been noted by the professional China lawyers that even translating the entire existing employment agreement into Chinese couldn’t manage to reduce the risk. The executives of the American and Australian companies have been seen asking for assistance from the China lawyers regarding the employment agreement that is translated into Chinese.

We’ve set out to put together a solid list of examples that will clarify the differences in employment law in China with the foreign countries (especially U.S.)

In the United States and other countries, employees are hired on an at-will basis that signifies that the employee can be sacked either for good reason or for bad reason or for no reason at all. But it will not work in China. Putting this type of provision in your employment contract in China will be treated as a wrongful termination claim. China lawyer firms suggest their clients not to put this sort of provision in their employment contract.

The provision of making your employee to work whenever required to complete the job is not entirely invalid if certain conditions have been properly met. But the major issue is that, if you are sued by your Chinese employee(s), this provision may go against you in the court. So diligently skip this provision.

There is a misconception among the American companies that making a provision in a contract with a China employee that United States law will apply and all disputes must be resolved in the U.S. territory is a safe approach. This notion is totally wrong and the success of this provision in a contract is almost zero.

In China, if foreign companies wish one of their employees to be bound by a non-compete provision, they must pay them consideration for their not competing during the entire term of the post-termination non-compete period. A non-compete that comes into force after termination of employment and the consideration for this non-compete is the promise of employment works in the USA but not in China.

By removing the above-mentioned provisions from your China employment contract will help you to gain strong position in case you are sued by your employees. The judges will not doubt about your intention and will offer you upper-hand during the entire legal battle.

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Why Employers Need to Think Profoundly Before Amending China Employee Contract

Once a company has signed an employment contract in China, it becomes really difficult to back out or even make any sort of alteration in it. Inserting changes especially in the terms such as the employee’s wages and position is apparently impossible. Making an attempt to alter the employment contract may result in-

  • Arbitration case
  • Prolong legal hassle
  • Financial loss
  • Negative reputation

Until a few years ago China did not have private companies or hardly any international lawyer firm. Over the last couple of years, this country has brought in different types of labor laws that foreign companies find difficult to comprehend and understand. It is really important to have some sort of idea about China labor law.

According to the labor law of China, there should be a written contract between the employer and the full-time employee. The mandatory provisions in the employment contract are-

  • Basic information about the employer and the employee
  • The explicit term/duration of the employment contract
  • A description of the work the employee will be performing
  • The place of work
  • The working hours
  • Rest and leave time
  • Wages
  • Social insurance
  • Applicable labor protections and labor conditions and protection against occupational hazards

The Chinese political system is quite authoritarian and mostly favors the employees. The laws are drafted to safeguard the interest of the employees. According to the China lawyer, there are only limited grounds by which an employer can terminate an employment contract and there is no general right to terminate simply by giving notice or payment in lieu of notice. A specific ground prescribed by law must apply. Comparing to the United States of America, the job descriptions in China must be drafted very carefully Being as specific as possible in the labor contract about your expectations is imperative to establishing good working relationships with your Chinese employees.

According to the Chinese law, an employer may in some circumstances amend an employment contract, but amendment of significant issues such as an employee’s salary or work position should be done through mutual consultation. The law also states that under ordinary circumstances an employee must give 30 days’ written notice for unilateral termination.

To sum up, it is really critical for the foreign employers to think profoundly before taking any sort of unilateral action involving your employees in China.

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