The termination of employment laws is particularly complicated, and employee dismissal procedures usually require expert involvement and advice. According to Chinese law, employees cannot be dismissed unilaterally and without a cause. Therefore, before notifying employees of their dismissal, the employment termination background should be carefully examined. You should also prepare yourself with valid arguments. The official ground for dismissal will determine the legitimacy of the termination, if severance is required and of what amount. If the dismissal ground is decided as unreasonable, it is better to attempt to reach a settlement agreement.
Among our many fields of expertise, PTL Group specializes in HR services in China. We’d like to share our important knowledge with you. The following article discusses termination by the employer.
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Termination by the Employer
First and foremost, keep in mind that there are special circumstances under which it is illegal to terminate an employee contract, such as:
- If the employee has been exposed to occupational hazards and has not undergone a medical check-up
- If the employee is absent from work due to sick leave or work-injury leave
- A female employee who is pregnant, during her maternity leave or nursing period
- If the employee has been working for the same employer for 15 years and is less than 5 years from retirement (men: 60 years and women: 50 or 55 years)
- Any other laws or regulations that do not permit the employer to terminate the employee’s employment contract
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Termination with immediate effect (no notice) and no severance payments
- When the employer observes during the probation period that the employee does not meet the set conditions required for employment
- When the employee has criminal liability pursued in accordance with the law
- When the employee materially breaches the employer’s rules and regulations
- When the employee causes substantial damage to the employer by neglecting his or her duties or acting inappropriately
- When the employee has simultaneously established an employment relationship with other employers (dual employment), which affects the completion of his or her tasks
- When the employee uses means of deception or coercion to force the employer to make an amendment in the contract
This is the official regulation. But from our experience, the last four conditions, even if proven, will not convince an arbitrator or judge to allow termination without an early notice and a severance payment.
- Remember that the employer has to provide supporting evidence to substantiate the termination decision
Termination with 30 days prior notice (or one-month salary) and severance payments
- If the employee remains incompetent after training or adjustment of his or her position
- If a major change in the objective circumstances relied on at the time the employment contract was entered into, rendering it non-performable and, after consultations, the employer and the employee are unable to reach agreement on amending the employment contract
- If the employee has contracted an illness or sustained a non-work-related injury, and after the expiration of the legally required sick leave, the employee is still unable to return to his or her original job or engage in other work arranged by the employer
- If the cause of dismissal is re-organization / bankruptcy / business license expiration / liquidation
- If the contractual employment period is finished and the employer chooses not to renew the contract, or renews the contract but does not change / improve its terms
Please note: A terminated employee, even if a signed a document declaring that he or she is accepting the severance payments as stipulated by law, is still given the right the sue the employer for illegal termination. Yet, both employers and employees should remember that signed agreements can be used as proofs against them if they decide to take legal actions.
The calculation of severance payment is based on the accumulated years of service with a certain employer.
The general rule: One-month salary for each full year worked, for any period of service before 2008 (monthly salary refers to the employee’s average salary during the 12 months prior to the termination of contract).
Since 2008, the monthly salary cannot exceed 3 times the local average monthly salary, and for a maximum period of 12 years of service.
- Less than 6 months of work: ½ month’s salary
- Between 6 – 12 months of work: 1-month salary
Last updated: April 2021
Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.