Why it is important to understand the details of Chinese labor contract law.

Suing a Chinese Company

Labor contracts are an essential part of recruitment in China. The labor relationship between an employer and an employee in China is based on the Chinese Labor Contract law. The Labor Contract Law in China provides a comprehensive list of scenarios in which employers can terminate an employment contract.

Foreign businesses that are trying to enter China have to deal with different aspects related to how to set up a company, taxes, and sooner or later they will have to hire employees. The challenge for many foreign companies is understanding the China labor law and the differences between this one and other countries’ labor laws.

 

Labor contracts are an essential part of recruitment in China. The labor relationship between an employer and an employee in China is based on the Chinese Labor Contract law. It covers and addresses a large number of topics, and for the most part, seeks to protect the employee. Subsequently, it is illegal for a company to hire a full / part time employee (local or foreign), without an updated and valid labor contract.

 

Article 2 of the Labor Contract Law stipulates that if an employer within the territory of China establishes, carries out, alters, removes or ends a labor contract with an employee, the relevant law may be applied. If a foreigner holding an employment certificate is employed wholly within the territory of China and establishes labor relations with domestic employers, the labor contract law shall be fully applicable.

 

 

Like other countries, the Chinese labor contract must include several clauses, such as:

 

  • Employment term and probation period term
  • Job description
  • Definition of working hours, rest hours and vacation days
  • Severance packages for overtime work and termination of employment
  • Safety at work conditions
  • Social benefits
  • General information: Employee name, ID, company name and address, etc.

 

 

The Labor Contract Law in China provides a comprehensive list of scenarios in which employers can terminate an employment contract. Even where such terms are not included in an employment contract, the employer can still rely on these statutory clauses in order to terminate the contract. Employment contracts, social insurance, wages, are some of the aspects that companies have to understand in order to be compliant in China.

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