Eight Basic Rules For China Employment Contracts

1. Use a written employment contract. The employer penalties for not doing so can (and usually are) huge. This one is a no-brainer. Oh, and China pretty much does not have independent contractors. See China’s Tax Authorities Want You.

2. Use a China-centric employment contract.
 Your employment contracts should be written for China. Though it occasionally makes sense for large multinationals that want all of their employment contracts worldwide to be similar, a China-specific employment contract will be better, faster and cheaper.

3. Use an employee rules and regulations manual
These are not optional. Maintaining detailed employee rules and regulations is especially important for terminating an employee beyond his or her probationary period. In disputes over whether an employee has been wrongfully terminated, the burden is on the employer to clearly prove cause for termination and if the employer cannot show clear discipline records to establish grounds for the dismissal, the employer will likely lose.

4. Use probationary periods.
 China is not an at-will employment jurisdiction; you need a good reason to fire someone. But China typically allows a probationary period where termination is considerably easier.

5.  Use your employment contract to nail down your IP.
If appropriate (and often it is not) you should use your China employment contracts to address trade secrets, IP ownership and competition by your employees.

6. Use the right entity.
Make sure your employment contract lists the correct company as the G. You would be surprised at how many times we see employment contracts that were written before our client formed their China WFOE and then never changed after the WFOE was formed. For various reasons, you do not want this.

7.  Use the right law and the right language. 
For employees in China, China law applies. Some Chinese judges will not recognize employment agreements in any language other than Chinese. So put your China employment contracts in Chinese. Many employment rules vary by the province and even by city. It is therefore critical that your employment contracts, your rules and regulations, and your employment related actions all be done pursuant to local requirements.

8. Make sure your employees renew their employment contracts before their old ones expire.
 Because if you don’t, you will be penalized for not having a written contract with your employees.