4
- Human Resources and Payroll in 2015 (4th Edition)
“
While the overall
process for hiring
people in China
does not differ much
from elsewhere in
the world, there are
a number of points
that require special
attention.
”
Human Resources & Payroll
in China at a Glance
• Mandatory written contracts:
All employees must be given a written contract within one
month of hiring; if not, the employee is entitled to double salary.
• Probation period:
The range of legimitate grounds for dismissing an employee is considerably
wider during his or her probation period. The employer may also pay only 80 percent of the
employee’s contractual salary during this time.
• Regional variation:
National laws are often intentionally broad and vague, leaving a lot of
room for local interpretation or additional legislation. Regulations and practices differ per
city on issues such as minimum wage, work visa policy, social security contributions and
maternity leave.
• Representative offices:
The simplest of foreign investment vehicles in China, the representative
office (RO), is not permitted to directly hire staff in China; instead, they need to use dispatch
agencies, the largest being the Foreign Enterprise Service Corporation (FESCO).
• Leave during the first year of employment:
Employees are not entitled to any minimum
number of leave days during their first year of employment, except those during major
holidays such as Chinese New Year around February, and the National Day celebrations in
early October.
• No at-will termination:
Terminating employees in China is both difficult and expensive.
Employees may resign under 30 days’ notice, but for employers, there are limited grounds
for terminating an employee before his or her contract has come to an end.
• Contracts can only be extended a maximum of two times:
After an employee finishes his
or her second contract with your company, he/she must be offered a lifetime contract as the
third. Such non-fixed term contract can only be terminated if there is grounds for dismissal.
• Severance payments mandated by law:
In practice, severance payments are even higher
than what the law prescribes, and can comprise a large part of HR costs.
Adam Livermore Partner Dezan Shira & Associates Dalian Office