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Don’t Get Lazy With Your China Employment Contracts

China law mandates written employment contracts with all (Chinese and expat) full-time employees. Those employment contracts must include the following provisions:

•Basic information about the employer and the employee, including place of work
•Duration of the contract
•A description of the work the employee will be performing
•Working hours and rest and leave time
•Wages and social insurance
•Applicable labor protections and labor conditions and protection against occupational hazards
•“Other matters required by relevant laws and regulations.”

If an employer goes more than a month without a valid written employment contract with an employee, the employer will be required to pay that employee double the employee’s monthly wage. If a second one-month period passes without a valid written employment contract (even if the employee refuses to enter into a written contract), the employer must pay applicable economic compensation upon terminating that employee. In addition to the double wages that the employer must pay to its employee, most local authorities also fine the employer (sometimes quite substantially) for having violated the rules on written contracts.

If an employer goes more than a year without a written employment contract with an employee, the employee lacking the written employment contract will be deemed to have entered into an open-term labor contract the employer, which essentially means there is no definitive end date to the labor relationship. If this happens, it becomes nearly impossible to terminate the employee without having to pay multiple years of wages.

It is important to note that therules apply both to Chinese and to foreign employees working in China. It is also important to note that some Chinese labor arbitration commissions and some Chinese courts do not recognize anything other than Chinese language agreements as valid written employment contracts.

Now consider this common situation about which our China lawyers are often contacted. The employer and an employee execute a fixed-term written employment agreement. After that contract expires, the employer and the employee do not renew the contract, but the employee continues working for the employer. The employer just assumes that its previous written contract is in effect and that it and the employee have merely orally agreed to continue it. But can the employer be penalized for not having a written labor contract with the employee? None of China’s national employment rules provide clear guidance on this issue and so (like so many China employment law issues) the answer depends on the employer’s location.
Elite Stage is a platform that provides One-stop business Solution for start-ups and foreign enterprises, founded by Venture Capital and Elite Stage Consulting Company, individual Lawyer Partners and Deloitte Auditors. For over 8 years, Elite Stage successfully assisted more than 800 companies from all over the world with their China market entry.