International Law

China Employment Contracts. Get Them In Writing Early.

By Dan

China's "new" Labor Law has now been around long enough such that most companies doing business in China have at least some understanding for its basic requirements. At least I thought that until recently, when I received a phone call from a client who told me that he had just heard from a second "fairly savvy" China person that there are "real advantages" to not having a written contract with your employees.  WRONG.  

The day someone in China (be that person a foreigner or a Chinese citizen) starts working at or for your company, that person is deemed to have an employment relationship with your company. The employment relationship starts on that day, not on the day this person signs a written employment contract with your company.  

China's Labor Contract Law could not be clearer: employers must have a written employment contract with everyone who works for them and they must do so within one month of the day on which the employee first starting working for the company. if there is no written contract within that first month, the employee can claim double salary for however long the company was out of compliance.   

On top of this, if the company fails to have a written contract with its employee (and for purposes of this post, I strongly urge you to give the widest definition possible to the word "employee" here) for a year, the employee is not only entitled to double salary, he or she has also become an "open-term" employee, which means you cannot get rid of them as you might be able to do with someone whose initial year contract just expired.  

I cannot even begin to think of the advantages that might outweigh the disadvantages set forth above.  Can you?

Full post as published by China Law Blog on October 20, 2010 (boomark / email).