If you want to be a well-protected employer in China, you need a well-written China employment contract and a China-centric set of Rules and Regulations, no matter your company size. Your employer Rules and Regulations should, at minimum, address your employees’ important rights and obligations and labor disciplines. No matter how comprehensive your employment contracts, those cannot serve as a replacement for Rules and Regulations.
My law firm’s China employment lawyers are often asked whether a foreign employer with a tiny China workforce (say 1-19 employees) needs to have rules and regulations document. The emphatic answer is yes. Rules and regulations are in most places in China a flat-out requirement. And in those few places where they are not required (mostly in places foreign companies never go), they are still a necessity. But the main reason why you need rules and regulations no matter how small your China operations is because for 99% of all things employer-employee in China, China does not make any distinctions between large and small companies. So just because you are small, it does not mean you are exempt from the requirement to have a set of employer rules and regulations. This is different from the U.S. and most of Europe where small employers generally enjoy a de minimis exception.
I would even argue that having a good set of rules and regulations is even more important for a small company than for a big one and simply because not having one is so risky and small companies are usually less able to take risks. If you are a massive multinational and ten of your employees each win USD$100,000 against you because you had no rules and regulations, you will easily survive. But if you are a small business having to all of a sudden cough up a million dollars could lead to your business failing.
The reality is that China’s employment authorities may cut some slack for Chinese-owned companies but they do NOT cut slack for foreign-owned businesses no matter their size. So to the extent your China advisors or employees are telling you that they see certain companies get away with certain improper employment practices, there is a very high chance those companies that got away with such practices are Chinese companies. If you are a foreign employer, you are virtually always under stricter scrutiny and this means both that the Chinese government is more likely to go after you on employment issues and your own employees will be a lot more likely to pursue litigation against you because you are foreign company.
We understand why our clients are irritated with the need for rules and regulations (especially those who are China start-ups with 1-3 employees) and want to do whatever they can to keep their costs down. Unfortunately, there is not much we can do. Rules and regulations are absolutely necessary and for them to be effective they must be tailored to suit the specific industry and type of business and location of each employer. And this sometimes means the rules and regulations for a ten-employee company can be longer and more complicated than the rules and regulations for a 1,000 person company.
No matter your size, as a China employer you need employer rules and regulations and the complexity and length of those will be based on more than just your size.