International businesses must comprehend and abide by the Housing Provident Fund and social benefits systems in China.

By abiding by these rules, the business is able to accurately calculate the cost of hiring local Chinese workers.

Law on Chinese Labor Contracts – Employer of Record China

The Labor Contract Law, introduced in 2008 with the goal of enhancing the labor contract system, specifies the rights and duties of workers and employers in order to create and maintain happy and stable working relationships. Chinese labor legislation differs significantly from those of the United States and Europe. Some of the variations are as follows:

Contract formats

In China, there are 3 different kinds of employment contracts:

Fixed-term contract: If an employer wishes to maintain an employee after two straight fixed-term contracts, they must give them an open-ended contract.

Employment agreement with no expiration date for the length of a certain job or project.

introductory phases

When the probationary term is the whole job duration, many of our overseas customers inquire whether they may restrict a person’s contract in China to six months. You may see the maximum probationary term length mandated by Chinese labor contract law in the table below.

Regular Leave

Depending on the total number of years worked, an employee’s basic yearly leave in China ranges from 5 to 15 days. International businesses often provide more annual leave. Therefore, bright people find multinational organizations to be more alluring.

Other sorts of leave are situation-specific and may differ across cities:

pregnancy leave, For instance, a parent may be granted 10 days of paternity leave in Shanghai but 15 days in Beijing.

divorce leave

Leave for funeral

Sick time off, etc.

Therefore, it is strongly advised that foreign employers get familiar with the regulations or seek advice from a qualified Employer of Record in China (official employer in China).

Employing in China through a Global Employer of record 

In order to make sure that the best applicant is employed at a fair price, as an employer of record in China, always conducts a reference check and requests documents from candidates such as CVs, diplomas, pertinent papers, and references.

A customer once performed a successful interview with a candidate INS Global had sent to him. The applicant said during the interview that his current pay, including incentives and perks, was 15,000 RMB/month. Based on such information, our client decided to enhance the candidate’s remuneration by 20%. AS INs Global conducted its recruiting verification procedure, we learned that the candidate’s actual monthly compensation was 12,000 RMB. The business opted not to recruit this individual owing to trust difficulties after hearing about it from our customer.

Termination

Termination is a difficult procedure in general. The Labor Contract Law does, however, provide provisions that give workers protection when their employment is terminated.

Employers have three ways to terminate employees:

Do not extend a contract after its term has expired.

Include termination terms and conditions in the employment contract from the beginning. Both the notice time and the compensation should be included (if the company initiates the termination). The greatest alternative for the business to stay out of court or arbitration proceedings is a mutual agreement.

Companies may need to terminate an employee’s employment while it is still in effect and without his agreement. Employers must then provide convincing written documentation of the factors that led to the employee’s termination, including violations of workplace policies, a lack of skills after training, etc. Arbitration, legal action, and compensation payments might follow a wrongful termination.

Chinese workers working as independent contractors for foreign businesses

Since the Labor Contract Law does not apply to freelancing, workers are not protected when dealing with issues like wage payment, termination benefits, etc. Employers only have a limited amount of influence over their workforce. This is particularly true for businesses that demand NDAs from their workers (non-disclosure agreement). As a result, we advise multinational corporations to recruit Chinese workers in accordance with the China Labor Contract Law.

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