Guides - Human Resources & Payroll in China 2016 - 2017 (5th

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Human Resources and Payroll in China 2016-2017 (5th Edition) - 93
Termination with 30 Days’ Notice and Compensation Payment
Under the following three circumstances, an employer is allowed to terminate an employee
unilaterally with 30 days’ notice or an additional month’s salary. Besides, according to Article 46(3)
of PRC Labor Contract Law, the employees being terminated are entitled with severance payment.
1. The employee can no longer work after becoming sick or injured.
These grounds can be used for an employee who meets the following three conditions:
• He/she has been absent from work due to sickness or an injury unrelated to work.
• After returning to work from the prescribed time for medical treatment (read more about
recuperation period in section 3.4), he/she is no longer able to perform the original work.
• He/she is unable to perform other work provided by the employer.
• If these three conditions are met, the employee can be terminated, but the company needs
to pay severance payment together with an additional medical care subsidy of no less than six
months’ wages.
2. The employee is incompetent for the position, even after training or a job transfer.
3. Change in circumstances.
The objective situation on which the employment was originally based has changed considerably.
As a result, the employment contract can no longer be fulfilled. The employer is required to first
attempt to negotiate with the employee regarding changes to the content of the contract.
Termination upon Bankruptcy/License Revoking/Permanent
Dissolution of the Company
Upon the following circumstances, the employment relationship shall be terminated automatically,
and the employer is required to pay severance payment to the affected employees:
• The employer is declared bankrupt pursuant to the law.
• The employer’s business license is revoked.
• The employer is ordered to close down or revoke by government bureaus.
• The employer has decided to dissolve prematurely.
Mass Lay-off
Under any of the following circumstances, where an employer needs to reduce 20 or more employees
or where the number of employees to be reduced is less than 20 but comprises 10 percent or more
of the total number of employees, it is considered a mass lay-off. In this case, the employer should
explain the situation to the labor union or all staff 30 days in advance and seek their opinion. Upon
approval of the mass lay-off scheme from the labor administrative bureaus, the employer may carry
out the mass lay-off exercise and provide severance payment to the reduced employees.