Terminating Probationary Employees in China

Employee probation is one of the most often misunderstood China employment law issues. Many employers understand employee termination in China is difficult because China is not an employment-at-will country. But far too many wrongly believe things are otherwise for employees still on probation. Needless to say, this mistaken belief often leads to big problems.

Consider this scenario: an employer hires an employee on January 1st and sets a 2-month probation period, well within the legal maximum probation period. The employer conducts employee evaluations and carefully preserves evidence demonstrating the employee’s failure to meet the conditions of employment clearly specified in the employment contract. The employment contract was in Chinese and was properly executed by both parties. In other words, everything has been done right. But then the employer sends the employee his termination notice on March 1, one day after the employee’s probation period ended.

Should this employee pursue a claim against its former employee, what will happen will depend on the locale, but many courts in China will rule that the employer’s late termination notice means it cannot use “failure to meet the conditions of employment during the probation period” as a basis for unilateral termination without severance pay. This scenario is based on real cases and shows both how technical China’s courts can be when it comes to employee protections and how one day does make a difference!

Clever employers will argue that even though it notified the employee of its termination decision after the probation period had ended, its reasons for such termination occurred DURING the probation period, so it should not lose on a technicality. But this “technicality” matters for purposes of China employment law. Over two decades ago, after receiving a request from a provincial labor department seeking guidance on how to determine an employer’s right to terminate an employee for failing to meet the conditions of employment during the probation period, China’s Office of the Ministry of Labor issued a formal reply stating that after the probation period has passed, an employer cannot use probationary rules as grounds for terminating a labor contract. Many China courts still either explicitly or implicitly abide by this guidance statement.

Probation issues tend to be rife at foreign companies in China and our employer audits invariably reveal such problems. The issue goes beyond making sure you terminate an employee before the probation period ends. It is important you also check your overall HR practices regarding  probation periods across your organization. Are you using probation correctly? Are you setting your probation periods so short as to make employee terminations practically impossible? Are you preserving the evidence necessary to support a termination? If you don’t fully understand how employee probation actually works in China, you may end up worse off making your termination based on that as opposed to just waiting.