China employment contracts: the questions we get
With the end of the year fast approaching, our China employment lawyers have been handling an onslaught of China Employer Audits and with those audits comes an onslaught of China employment law questions. The below are some of the questions we we most commonly get about China employment contracts, with short answers to each of them.
1. I have an English version of the employee agreements our parent company uses around the world. Can I put that into Chinese and send it to our China employees to sign?
Not a good idea. When it comes to China employee agreements, localization is key and I have yet to see a single non-Chinese style employment agreement that does not contain provisions that are completely unenforceable under Chinese law. You need a China-centric contract because that sends a strong signal to your China employees and to China’s labor authorities and arbitrators/courts that you understand how China’s employment laws work and you have made the effort to comply with those laws. Using China-centric employment contracts will greatly decrease the odds of your having China employment law problems and greatly increase the odds of your prevailing in any China employment law dispute.
2. The labor authorities in my locale provided me with an employment contract template. Is it okay for us to just use that?
Not a good idea. First off, these templates are often outdated and often fail to keep up with national (and even local) law changes. Second, they completely fail to account for your specific situation and goals or for the situation of your employees. Third, they virtually always fail to sufficiently protect the employer.
3. Our China employment contracts are just in Chinese. That’s okay, right?
Not really. Legally, this makes complete sense in that you must have all of your China employment contracts in Chinese. But virtually all foreign companies in China should also have all of their China employment contracts in English as well so anyone in the company who might be making what even looks like an employment decision can know the pathway they must follow. We always draft our Chinese employment contracts in both Chinese and in English (or sometimes in Spanish / French / German) because that works best.
4. How easy it is to terminate an already signed China employment contract?
Not easy at all. It is generally difficult to terminate an employee during his or her contract term and, contrary to popular belief, this includes employees on probation. Under Chinese law, a probation period is part of the contract term and once you bring someone on as your employee in China it is difficult to terminate them. See Terminating a China Employee: Why YOUR Rules and Regulations are Key.
5. Will an open-term employment contract make it so we cannot terminate an employee until his or her statutory retirement age?
Open-term employees have greater protections against termination than employees on fixed-term employment contracts, but they can be terminated. For example, an open-term employee can be unilaterally terminated without severance if the employer can prove the employee engaged in serious wrongdoing that violated the employer’s rules and regulations. But it does often make economic sense to try to work out a mutual termination even with your most troublesome employees. Despite the issues that arise from open-term contracts, they are sometimes required to get good employees.
6. Does not this offer letter constitute an employment contract?
An offer letter is not an employment contract and no offer letter I have seen comes close to including all that is necessary for a good China employment contract. We regularly take our clients’ offer letters and incorporate the relevant terms from those letter into employment contracts, but doing so always requires we get additional information from our clients for the employment contract.
7. We have been using this same employment contract template for years and no employees have complained about it. Why then do I need to have you review it?
The mere fact that no employees have complained about your employment contracts does not mean they do not need to be improved. China’s national and local employment laws and enforcement policies are constantly changing and you want your employment contracts to reflect those changes. See China Employment Law: Local and Not So Simple. Not only that, your own situation may have changed over the years and you want your employment contracts to reflect that as well. We often review employment contracts that made sense for a company that had 20 employees in one city doing one thing and now make no sense at all for the same company with 200 employees doing ten different things in three different cities. You do not want your company to get ahead of its employment contracts.
Next week I will write about the questions we get about Employer Rules and Regulations.