How to handle China’s employee probation maze
With China’s economy slowing, our clients with employees in China are focusing even more on hiring and firing flexibility. One of the best ways to maintain employee flexibility (at least for at time) is to take advantage of a probation period to evaluate an employee’s performance. If the employee does not work out, you generally may terminate the employee before the probation period ends. But China’s probation laws (like pretty much all of China’s employment laws) are not without their complications and far too often foreign companies contact me after they have already botched probation for one or more of their employees.
China’s employment laws permit employers to unilaterally terminate employees that do not satisfy the conditions of employment during the probation period without having to pay severance. But to do this correctly, the employer must maintain a set of conditions of employment and provide such conditions to the employee beforehand. The employer generally must be able to prove that the employee failed to satisfy the employer’s conditions of employment. The conditions of employment should be in writing and may be set out in the relevant job ad, job description, labor contract and/or the employer’s rules and regulations, which should be provided to the employee for review and sign off before the employment relationship commences. A mere description of the relevant job requirements on the employer’s website will rarely be sufficient to prove an employee failed to meet employer expectations. Employers should keep clear records (in Chinese) of every instance where the employee fails to perform.
When an employer in China terminates an employee before his or her probation period has expired, the employer must provide an explanation for the termination. We usually advise our clients provide a written termination notice to the terminated employee, setting forth the specific grounds for termination. This is very different from how employee terminations are usually handled in the United States, where the most common advice is not to reveal to a terminated employee the reason for the termination at all.
A couple of “quick” yet important things to note about the probation period. First, the probation period is part of the employment period for purposes of China’s labor laws, so you must have a written labor contract with the employee, even though the employee is on probation. Second, the probation period is not a “free period” where you can use free labor; you must pay probationary employees wages. For more on this, go here. Third, during the probation period, employees in China are free to walk away from their employment with three days notice, without need for giving any cause. For this reason, if you are uncertain whether an employee will be a good fit for your company, it often makes sense to delay providing that employee with expensive training until he or she begins working under a standard employment term.