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Terminating Employees in China

The Chinese Labor Contract Law offers significant job security to employees, making termination challenging and costly. Below are key points and tables detailing the process and conditions for terminating employees in China.

Types of Termination and Conditions:

Type of Termination

Admissible Grounds

Type of Employee

Severance Payment

During Probation

Employee doesn't meet job requirements, serious rule violations, fraud, criminal offence, etc.

Fixed-term, Non-fixed

No

Mutual Agreement

Agreed with employee

Fixed-term, Non-fixed

Yes (if initiated by employer)

Immediate (unilateral)

Serious violations, causing company loss, fraud, criminal offence, second job harming employer

Fixed-term, Non-fixed

No

30 Days' Notice

Incompetence, inability to work after sickness/injury, fundamental change in job circumstances

Fixed-term, Non-fixed

Yes

Not Renewing Contracts

After one/two fixed-term contracts, varies by city

Fixed-term

Yes (unless refused by employee)

Mass Layoff

Company restructuring, serious production difficulties, changes in production method

Fixed-term, Non-fixed

Yes

Automatic Termination

Bankruptcy, business license revoked, government-ordered closure

Fixed-term, Non-fixed

Yes

Key Points

  • During probation, employers can terminate without severance if grounds are valid.

  • Post-probation, termination requires one month's notice or mutual agreement.

  • Immediate termination is possible for severe violations but must involve the labor union.

  • 30 days' notice is required for unilateral termination with severance for specific reasons.

  • Mass layoffs have stringent conditions and procedures.

Termination During Probation Employees can resign with three days’ notice, while employers can terminate only on valid grounds like job incompetence, rule violations, or criminal offenses. No severance is required for admissible grounds.

Termination for Fixed-term/Non-fixed Term Contracts Termination can occur via mutual agreement, unilateral notice, mass layoff, or automatic termination due to company closure or bankruptcy.

Immediate Termination for Misconduct Employers can terminate immediately for misconduct without severance but must inform the labor union.

30 Days' Notice Termination Allowed for specific reasons with severance, requires labor union notification.

Mass Layoff Defined as reducing 20 or more employees or 10% of the workforce, allowed under specific conditions like company restructuring or economic difficulties.

Can Woodburn help you?

 

Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.


Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

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