Act Wisely While Terminating a Female Employee in China

Firing a pregnant female employee unilaterally in China will automatically lead to legal action. You might destroy any positive work you’ve done toward building trust and creating an outstanding company culture. Although there are provisions to sack a pregnant female employee without paying severance, but the process is long, complicated and uncertain. In reality, your right to fire is becoming more and more restricted because the legal process for terminating an employee in China is much more employee-friendly than in some other jurisdictions like the United States.

The onus is on the employer to make their points. Terminated employees can threaten to turn on their employer and report the employee to the tax authorities, the local labor commission or some other government agency. In China, no woman employee can be dismissed on account of her pregnancy. It is the right of the employee to get medical benefits since such grant of maternity benefit is according to the mandate of the law.

But that doesn’t mean you cannot fire a woman employee, there are certain procedures you need to follow-

  • Don’t Fire a Female Employee in China Unless You Are Meeting Face-to-Face

It is advised by the China lawyers not to fire a female employee without having a face-to-face meeting with her. In this way, you may place your case in an easy way, and if she is willing to cooperate, you don’t need to get involved in a lengthy and expensive court case. Do not fire an employee using any electronic method—no emails, IMs, voicemails, or phone calls. They deserve a face-to-face meeting. Nothing else works.

  • Offer Severance Package

The legal problem arrives at the time of terminating China female employee when the foreign employers try to avoid paying severance package. According to the China business lawyers, sometimes employers think they can easily get away without giving severance package. The biggest mistake is, they fail to realize that the cost of legal battle is much more than the amount of severance package. While there is no absolute way to prevent a terminated employee from filing a complaint to the court, employers can mitigate the risk of involving in a long legal battle by simply offering the severance package to the female employee.

  • Know the Employee Termination Act of China-

It is always good to have a proper knowledge of the employee termination law of China. Remember, China is an employee-friendly nation, getting the wrong side of the law can be really painful for you. Do not take any action without consulting China lawyers.

Don’t Fire an Employee Without a Checklist in Hand

An employment termination checklist can keep you organized and on-track when you need to fire an employee. Take a look at the contents of the Employment Termination Checklist-

>> Official Notice to Human Resources

>> Permissions / Access Termination

>> Return of Property

>> Confidentiality and Non-compete Agreements

Final Thoughts

Sometimes terminations of the female employees in China are swift and bereft of any legal hassle. But other times, there might be a long legal battle awaits for you. It all depends on how you want to handle the entire matter.

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China’s Tax System for the Foreign Nationals & Firms

The process of taxation for the overseas firms in China is quite straightforward especially if they have experienced China lawyers to assist them. Over the last five to ten years, China opened its door for the foreign investments and this reform has gone to such an extent that now foreign companies can enjoy huge tax incentives for the projects initiated in China. The only thing they need to do is to properly comply with the regulations for taxation.

As a foreign national, you are required to register with the State Administration of Taxation (SAT) as soon as you are eligible for taxation in China. According to the Greenback Expat Tax Services, income from employment is taxed monthly at a progressive tax rate that caps at 45%.

China Tax Rates 2018

>> The tax on an individual’s income is progressive. As at 2017, an individual’s income is taxed progressively at 3% – 45%.

>> The 2018 corporate tax rate for domestic and foreign companies is 25%.

>> Small companies pay 20% corporate tax in certain cases.

>> Companies pay 10% corporate tax in certain regions.

>> Hi-tech companies pay 15% corporate tax.

The tax rates from China’s State Administration of Taxation (SAT) for 2018 are as follows:

Earnings in RMBRate Applicable to Income Level (%)
0 – 1,500 3%
1,501 – 4,500 10%
4,501 – 9,000 20%
9,001 – 35,000 25%
35,001 – 55,000 30%
55,001 – 80,000 35%
80,001 and above 45%

Note that there is a monthly standard deduction for foreign nationals of RMB 4,800.

What is the tax year-end?

31 December.

Income Tax Benefits Foreign Companies can Enjoy in China

>> All enterprises (except sole proprietorships and partnerships), including all organizations that generate income in China, are subject to CIT.

>> CIT payable is calculated using the below formula:

>> CIT payable = CIT taxable income x CIT rate Tax exemptions or reductions based on tax incentives

According to the China lawyers, the corporate income tax (“CIT”) – standard tax rate is 25%, but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the China government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises). Tax holiday is also offered to enterprises engaged in encouraged industries. Other CIT incentives are also available for tax resident enterprises in China.

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