Termination by Mutual Agreement

Last updated: Jan 2021
The HR Regulations Guide for Foreign Companies in China

Employment termination laws are rather complex, both in China and elsewhere. Employee dismissal procedures should be overseen by professionals who specialize in this particular field of expertise.

Among our many fields of expertise, PTL Group specializes in HR solutions in China. We’d like to share our important knowledge with you. The following article discusses employment termination by mutual agreement.

Read more about PTL Group’s HR services in China.

Termination by Mutual Agreement

According to Chinese law, employers are not allowed to dismiss their employees unilaterally and without a substantial reason. Therefore, we recommend that employers carefully examine the grounds for termination before notifying employees of their dismissal. The termination’s legitimacy will be determined by its reason. This will also establish the grounds for severance and the amount of severance pay. If the grounds for dismissal are deemed unreasonable, we recommend that the two parties settle on termination by mutual agreement.

Termination by mutual agreement is always the ideal solution. Mutual agreement saves both the employer and the employee precious time and resources. This is true in China, as well as in many countries around the world.

According to Chinese law, the settlement agreement between the parties must be written in Chinese and include the date of the employment termination and the amount of compensation (if the termination is by the employer).

In addition, the agreement will explicitly mention that the employer releases the employee from any future obligation.

Last updated: January 2021

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