China’s Employment Contract Law MNCs Must Know

Within China, rapidly changing demographics, rising incomes, increased consumer spending and an increasingly open business environment have all helped to make the Chinese market increasingly attractive to Western businesses across a variety of industries. Lacking the appropriate knowledge and a broad enough professional network can be a hindering factor that may make it difficult to overcome the barriers encountered when doing business in China.

There are many opportunities that foreign companies can take advantage of, including the large and fast-growing domestic market, an improving institutional environment, various investor-friendly policies in regional and centrally controlled special economic and high-tech development zones, an ever improving quality of human resources and better infrastructure. While it is true that China represents a huge potential market for foreign manufactured goods and services, it is also the case that understanding where these opportunities lie and how to access them can be extremely challenging.

The Development of Labor Law in China

As China moved from a planned economy to a more market-oriented one during the reform era, the government gradually introduced a broad range of legislation to regulate labor relations and stipulate the rights and obligations of both employers and employees. The aim of much of this legislation was to bring China into line with international standards and facilitate the country’s entry into and participation in global economic entities such as the World Trade Organization. China is not an at-will-employment jurisdiction. All China employees must be employed pursuant to a written employment contract and during the term of that contract, it is difficult to terminate them. If an employer wants to terminate an employee before his or her employment term ends, it can do so only for cause and cause must be clearly proven.

China Employment Contract

An employer establishes labor relationship with a worker as of the date of start to use the worker. It shall set up a roll of workers for reference. When hiring the workers, the employer shall faithfully notify them of the job contents, conditions and place, occupational harm, work safety status, remuneration, and other information as required by the workers. The employer is entitled to be aware of the basic information in direct relation to the workers and the labor contracts, and the workers shall provide such information authentically. Remember that employee terminations are usually very difficult in China because the employer must prove that its termination was legally permissible and that is often not an easy task. So, what happens when you wish to terminate an employee who has worked a couple of years but still has a few years left on the employment contract and you do not have any legal grounds for the termination. If an employer forces an employee to work by force, threat or unlawful restriction of personal freedom, or if an employer violates safety regulations to instruct or compel an employee to perform hazardous activities that endanger the employee’s private life the employee may terminate the employment contract immediately without prior notice to the employer.

Chinese employment law provides comprehensive and stringent rules covering everything from hiring to termination, and there is little room for the parties in an employment relationship to create new mechanisms in addition to these statutory mechanisms. Multinational corporations must localize their global employment policies and relevant practices in view of the special requirements of Chinese employment law.

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Legal Procedures Involved in Hiring Persons From Hong Kong, Taiwan & Macau in China

Hiring employees from Hong Kong, Taiwan and Macau in the Chinese mainland requires meeting certain legal procedures and receiving proper government permission. The present Provisions are formulated according to the Labor Law of the People’s Republic of China and other relevant laws and administrative regulations. Here we are categorically discussing the procedures for hiring employees from Hong Kong, Macau and Taiwan in China.

The procedure to employ staffs from Hong Kong in China-

It is important to be aware of the legal formalities involved in the hiring process and to have a clear understanding of the employment legislation for the residents of Hong Kong in mainland China. Hong Kong people are familiar with the Chinese and western culture and are often well versed in international business practices.

Where an employing entity plans to hire persons from Hong Kong the said persons shall meet the following conditions:

  1. They must be aged 18 up to 60 (the age of an investor that directly participates in the business operation or a technical person badly needed in the Mainland may be over 60)
  2. Should be in good health
  3. Must have effective travel permits (including the valid certificates for Hong Kong residents to come and go to the Mainland as issued by the competent organs in the Mainland)
  4. Should have corresponding qualification certificates as prescribed by the State in the case of that the engagement in professional (technical) occupations is prescribed by the State
  5. Must maintain other qualifications as prescribed by laws and regulations

The procedure to employ staffs from Taiwan in China-

Since China embarked on its reform and open-up policies in the late 70s, pragmatism prevailed over animosity in Mainland China and Taiwan. The two countries have grown closer together, especially integrating in economic terms. For cross-border business purposes, China treats Taiwan as it does with Hong Kong and Macau – part of China, but an entity with its own laws.

Where an employing entity plans to hire persons from Taiwan the said persons shall meet the following conditions:

  1. 18 years of age or older and in good health
  2. With professional skills and job experience required for the work of intended employment
  3. With no criminal record
  4. A clearly-defined employer
  5. With valid passport or other international travel document in lieu of the passport (hereinafter referred to as the “Travel Document”)

The procedure to employ staffs from Macau in China-

Macau kept its role as a bridge between East and West. China and Macau both countries have grown closer together, especially integrating in economic terms. For cross-border business purposes. Residents from Macau need to follow the same law and procedures followed by the residents of Hong Kong and Taiwan to get employed in the mainland China.

Along with the above mentioned procedures, employees from these three nations must also provide the following documents:

  1. A letter of intent or a labor contract with the employee
  2. Any applicable professional qualification certificate
  3. A copy of the employer’s business license
  4. A health certificate

The local labor bureau will verify all the documents and if no discrepancy is found, residents will get the required permission within a month or so.

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