Jasper Zhang, HR & Admin Manager at PTL Group
We asked our senior HR expert to draw the basics of Chinese HR regulations and she was kind enough to share some extra tips for better HR management practices.
International companies and employment of Chinese personnel
- Pay attention to the Chinese Labor Contract Law and the Compensation & Benefits system. Typically, Chinese employees will expect more than a basic salary, for example, a transportation allowance. So when checking with a Chinese candidate their current income, remember to ask about their other benefits as well.
- International companies need to understand and comply with the Chinese social benefits system and with the Housing Provident Fund system.
- Complying with those laws enables the company to fully assess their employer’s cost of local Chinese employees.
Chinese Labor Contract Law
Launched in 2008, the Labor Contract Law, aimed to improve the labor contract system, is stipulating the rights and obligations of the employees and employers, in order to build and develop harmonious and stable employment relationships. The Chinese Labor Contract Law is very unlike American or European labor laws. Here are some of the differences:
There are 3 types of employment contracts in China:
- Fixed-term contract – after two consecutive fixed-term contracts, the employer is obliged to offer an open-ended contract if the company wants the keep the employee.
- Open-ended contract
- Employment contract for the duration of a certain task/project.
Frequently our international clients ask if they could limit a person’s contract in China for 6 months if the probationary period being the entire employment period. In the table below you’ll find the maximum duration of the probationary period directed by the Labor Contract Law in China.
Read more about HR management and China Employer of Record services (China EOR) in the full HR Regulations Guide for Foreign Companies in China
Make sure to provide a new employee with a job description. This is crucial as it will affect various aspects of your employee management ranging from KPI performance, bonus evaluation and even termination.
In China, the basic annual leave for an employee is from 5 to 15 days, depending on the accumulated work years. International companies generally offer longer annual leave. Therefore the international companies are more attractive to talented candidates.
Other types of leave depend on the specific situation, and may vary between cities:
- Maternity leave, For example, a father can get 10 days paternity leave in Shanghai, whereas in Beijing he may get 15 days leave.
- Marriage leave
- Funeral leave
- Sick leave, etc.
Therefore, it is highly recommended that international employers learn the rules clearly or consult a professional Employer of Record in China (official employer in China) for guidance.
Recruitment in China
Being an employer of record in China, when PTL Group recruits new employees for international companies, we always conduct a reference check and ask candidates to provide documents such as CV, diplomas, relevant documents, and references in order to ensure that the right candidate is hired at a reasonable cost.
Once, a client conducted a satisfactory interview with a candidate send to him by PTL Group. At the interview, the candidate said that his current salary was 15,000 RMB/month plus allowances & bonuses. Based on that information, our client agreed to offer the candidate a 20% increase in his salary. As the recruitment check process by PTL Group continued, we discovered that the candidate’s real salary was 12,000 RMB/month. After reporting this to our client, the company decided not to hire this candidate due to trust issues.
Termination is always a tough process. However, the Labor Contract Law contains terms that protect employees when it comes to termination.
As employers you have three termination options:
- At the end of a contract duration – do not renew the contract
- Include termination conditions and terms as part of the employment contract – from the get-go. You should include both notice period and compensation (if the company initiates the termination). A mutual agreement is the best option that allows the company to avoid arbitration processes or a court procedure.
- In some cases, companies need to dismiss an employee during his contract and without his consent. In those cases, employers need to provide solid documented written proof of the reasons led to termination: violating work regulation, lack of skills after training, etc. unlawful termination could result in the arbitration process, court procedure and compensation payments.
Chinese employees as freelancers for international companies
Since freelancing is not covered by the Labor Contract Law, employees will not be protected when facing conflicts such as salary payment, termination compensation, etc. From the employer’s perspective, control over their employees is limited. This is especially true for companies who want their employees to sign an NDA (non-disclosure agreement). Therefore we recommend international companies to make sure they hire Chinese employees legally – within the realm of the China Labor Contract Law.
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