on December 13 | in Global Information | by Maxxelli | with No Comments

With the Chinese economy as the world’s fastest-growing major economy with growth rates averaging 10% over the past 30 years, increasingly more companies are opening offices in, or relocating to, China. Concerning Labor Law China has two main laws that underpin Chinese hiring practices knowledge of these is therefore essential. This blogpost will provide a summary of the rules that foreign companies should be aware of when recruiting in China.

Hiring Employees in China

 

 

 

 

 

 

The options  for foreign companies for hiring employees in China depend on their scope of business and legal status in China. If the branch in China is a  representative office of the foreign company it is not allowed to directly hire Chinese employees. Instead it must use a recruitment agency that will employ people on behalf of the representative office, for a period of at least two years. Chinese companies, wholly foreign owned enterprises and Joint-Ventures can directly hire Chinese and foreign staff.

There are few restrictions on potential employees. According to labor law China forbids the hiring of employees under the age of 16. Requesting an identification document (e.g. passport) is a way to verify a candidate’s age. Hiring an employee currently under contract with another company is not illegal. However, the employer would then become jointly liable with the employee to compensate the financial loss of the former employer.

Hiring foreign employees for your company is possible, however, there are certain conditions attached. A company’s ability to hire foreigners is linked to that company’s registered capital. Essentially, the higher your registered capital; the more foreigners you’re able to hire.

Conditions may vary from city to city but the conditions that generally need to be met are as follows:

•         Your business should have been in operation for over a year.
•         It must have a registered capital of over one million yuan.
•         If your company is a Limited Liability Company (LLC), your registered capital should be more than five million yuan.

Signing a Chinese employment contract 

It is possible for an employee to start working on the basis of an oral agreement with the employer. However, a written contract must be signed with the employee within one month of the day the employee started working. If this does not happen the employee is entitled to twice the agreed on monthly salary until a contract is signed. The same goes for renewing expired contracts. Therefore it is best to make sure the contract is signed before the employee starts working, so as to avoid the employee stalling negotiations to receive the double salary.

Also, if an employee signs a second renewal of a fixed-term contract or has worked for the same employer for a consecutive period of 10 years, it is obligatory for the employer to offer the employee an open-term contract.

Chinese Labor Contracts

It is a legal requirement for employers to draft a strong employment contract in China, spelling out the job responsibilities, compensation, benefit entitlement and termination requirements. We recommend that employers clearly state an employee’s monthly salary, how many months it will be paid, and the total annual salary when issuing an offer letter. The contract should be available in English or Chinese, in order to avoid problems, make sure that there is on version that prevails over the other in the case of a conflict.

These are some of the issues you should keep in mind when drafting a contract.

1. Minimum wage

China has a minimum wage requirements that differ by region. We recommend that you research the minimum wage and average wage in your region. It is however important to note that foreign employers are expected to pay roughly double or more, than the minimum wage.

2. Standard Working Hours and Overtime

In China the normal working day is eight hours and the normal working week should not exceed 40 hours. In the labor law China forbids an employer to require an employee to work overtime exceeding three hours in any one weekday or 36 hours in any one month.

3. Probation

The 2008 Labor Contract Law stipulates the maximum length of a probation period. The probation period depends on the length of the fixed term contract detailed as below:

Maximum Length of a Probation Period
Term of the Contract	Probation
3 months – 1 year	one month
1 year – 3 years	2 months
>3 years	6 months
Open-term contract	6 months

4. Annual leave

While most foreign companies provide 15-25 days of annual paid leave per year to employees,the amount of annual paid leave in China depends on the time an employee has worked so far. An employee who has worked between 1 to 10 years is entitled to 5 days of paid annual leave. An employee who has worked between 10 to 20 years is entitled to receive 10 days. An employee who has worked for the company for more than 20 years is entitled to 15 days of annual  paid leave.

5. Insurance

Since 2011 foreign nationals are required to contribute to all five kinds of insurance at the same rate as the Chinese nationals, including pension, medical insurance, occupational injury insurance, unemployment insurance and maternity insurance. Both employers and employees are required to make contributions in accordance with local regulations. These are administered by local labour and social security bureaus.

 

In conclusion, when hiring employees in China make sure to know all relevant regulations, this will not only help make the process easier, but will also help give you a better position when negotiating employment contracts. For employment laws and labor law China regularly adds new clauses and updates, therefore stay updated on the latest developments. Furthermore differences exist between hiring practices for foreign companies and Chinese companies, as well as for foreign employees and Chinese employees, take these differences into account when hiring new employees.

related posts

« Chongqing Metro, Moving the City into the Future Samui Island Tour »