Designing a Labor Contract in China

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Labor-Employment-Contract-SigningAug. 29 – Once a conclusion has been reached concerning the issue of what kind of contract a company wishes to enter into for a particular employee role (direct employment, secondment or outsourcing), the next step will be the drafting of the contract. Normally, employment agencies and outsourcing companies will have their own template for the services they provide, but the company will need to design a labor contract template for its directly hired staff. As the majority of employees are employed on fixed-term labor contracts, this article will concentrate on this type of contract in the explanation below.

The first condition that should be met when employing Chinese employees is for a written labor contract to be completed within one month of the commencement of the employment relationship. If this condition is not observed, under the terms of the Labor Contract Law, an employee may claim double salary for each of the months worked without a written labor contract after the first month. If the situation persists for a period of more than one year, the company is deemed to have provided the employee with an open-term contract.

Secondly, when employing Chinese employees the contract should be drafted in the Chinese language. It is acceptable to include an English translation along with the Chinese text, but note that the Chinese version will take priority in case of any dispute. Therefore, it is advisable that contracts are either drafted in Chinese using a legally-trained professional before translating into English, or drafted in English and then translated into Chinese by a legally-trained professional.

Every local Labor Bureau has a template for a standard labor contract, but it is in Chinese only. It is possible to use this template for all the contracts you enter into, however we would not recommend this in every circumstance. A template designed with specific corporate requirements will offer more protection. We would suggest combining a standard template with a labor contract used in other countries where your company has large operations.

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