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96

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

4.3 Terminating at the End

of a Fixed-Term Contract

The expiry of a fixed-term contract provides an important opportunity for the employer to evaluate

the contribution of the employee and come to a decision on whether or not to renew it.

It is relatively straightforward for an employer to terminate an employee at this stage. The employer

does not need to give the employee a reason for the company’s decision. However, employers

should bear in mind the following points:

• If the employer does not provide a new contract to the employee by the end of the contract term,

and the employee still works in the company after this point, the labor relationship effectively

continues – the employer shall take liability for absence of the labor contract.

• If the employer decides not to renew the contract at the end of the period, the company must

still pay economic compensation to the employee.

• If the employer offers the employee a renewed contract on equal or better terms to the

expired contract but the employee refuses to accept it, the employer is not required to pay any

compensation to the employee.

The company should have a clear understanding of which employees are approaching the expiry

of their fixed-term contracts. Around two months before the expiration the relevant managers

should come to an agreement on whether or not to retain the employee. Both the performance of

the employee and current and anticipated future business conditions should be considered when

making the decision.

To be noted, upon expiration of the second fixed-term contract, where the employee raises the

request to renew the employment contract, the employer will have no other option but to accept

such a request, unless the circumstances of “immediate termination” or “termination with 30 days’

notice” apply. Under this situation, it’s recommended that the company decides whether to retain

the employee at the end of the first contract. In practice, companies might opt for a longer contract

term for the first contract in order to delay this point.