Guides - Human Resources & Payroll in China 2016

- Human Resources and Payroll in China 2016-2017 (5th Edition)

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 the law prescribes, and can comprise a significant part of overall HR costs.