89 / 127
Human Resources and Payroll in China 2016-2017 (5th Edition) -
89
Terminating an employee in China is more difficult and often more expensive than in many other
countries, as the Chinese Labor Contract Lawoffers a high degree of protection toworkers’job security.
In the remarks below, we will only discuss terminating fixed-term and non-fixed term contracts.
Part-time contracts can be terminated at will by both parties. For job contracts, the same rules for
termination apply as for fixed-term contracts.
Terminating Staff in China - an Overview
Type of Termination
Admissible Grounds
Type of Employee
Severance payment
During probation
• Employee doesn’t meet the job requirements stated in
job description
• Fixed-term
• Non-fixed term
No
Mutual agreement
• Agreed with employee
• Fixed-term
• Non-fixed term
Yes (if the termination is put forward by
the employer )
Immediate
(unilaterally)
• Serious violation of company rules
• Serious loss attributed to employee
• Giving false information to employer
• Criminal offense during employmen
t
• Employee takes up second job, harming first employer
• Fixed-term
• Non-fixed term
No
30 days’ notice
(unilaterally)
• Employee incompetent for position
• Employee unable to work after sickness/injury
• Job cannot be performed due to fundamental change
in objective circumstances
• Fixed-term
• Non-fixed term
Yes
Not renewing
contract
• After one or two fixed-term contracts, differs per city
• Fixed-term
Yes (unless the employee refuse to renew
the contract upon maintaining or raised
provision proposed by the employer)
Mass lay-off
• Company being restructured under the PRC Enterprise
Bankruptcy Law
• Serious difficulties in productions or operations
• Company changes production method, making staff
unnecessary
• Objective economic situation makes employment
impossible
• Fixed-term
• Non-fixed term
Yes
Automatic
termination upon bank-
ruptcy/revoke/dissolu-
tion
• The employer is declared bankrupt pursuant to the law
• The employer’s business license is revoked
• The employer is ordered to close down or revoked by
government bureaus
• The employer has decided to dissolve prematurely
• Fixed-term
• Non-fixed term
Yes
Termination not allowed
(under most situations)
• The employee is suspected of having occupational disease(s) and waiting for diagnosis.
• The employee has completely or partially lost labor capability due to occupational disease(s) or work injury.
• The employee is still in the legal recuperation period for non-work-related illness/ injury.
• The employee is pregnant, on maternity leave or in nursing period.
• The employee has continuously worked for the employer for more than 15 years and is less than five years before retirement.
Note: When unilaterally terminating an employee, the employer needs to notify the labor union if there is one.