Termination of Employment Contract in China

Termination of Employment Contract in China

Updated on Tuesday 06th September 2016

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Termination-of-Employment-Contract-in-China.jpgSometimes, due to increasing market pressures and other situational factors, employers often need to fire employees in China, which is no easy task. Specific issues need to be addressed by employers before and after employee dismissal. In addition, the termination can be done generally by mutual agreement between the employer and the employee. If the employee does not consent, Chinese law provides very limited grounds for termination of the labor contract by the employer.
Our Chinese lawyers can provide assistance in the matter and detailed information on the termination of employment contract in China.

Types of unilateral termination by the employer

1. Termination with cause
This takes immediate effect upon the employee’s receipt of termination notice when talking about misconduct or fault of the employee. Under one of the following circumstances, Chinese Labor Contract Law permits employers to unilaterally terminate labor contracts in China without having to provide economic compensation or notice:
the employee significantly breaks the employer’s rules and regulations;
the employee does not fulfill the employment conditions during the probation period;
serious dereliction is committed by the employee, causing substantial damage to the employer;
the establishment of another employment relationship that impacts the completion of the employees’ tasks with the existing employer/ the refusal to terminate the employment relationship with the other employer, after required to do so by the existing employer;
taking advantage of the employer’s difficulties to terminate a labor contract or the employee using coercion or deception in order to determine the employer act contrary to his/her true intent;
criminal liability is found against the employee. 
Our Chinese attorneys will provide documented guidance regarding the conditions of properly terminating an employment contract in China.
2. Termination without cause
Being required to serve a 30-day prior written notice to the employee (or pay him/her the amount that would have been obtained as a wage during the notice period), the employer is permitted to unilaterally fire the employee in China under the following legally recognized grounds:
being unable the engage in the original work, the employee suffers a non-work injury or an illness;
the employee is deemed incompatible with the job position even after being assigned to another position or receiving training; 
the objective circumstances under which the employment contract was concluded have significantly changed, causing the performance of the employment contract impossible; the parties fail to reach an agreement on the amendment to the labor contract.
On the other hand, there are certain circumstances in which an employer cannot fire an employee in China; these are legally defined as blocking termination, such as:
pregnancy/maternity leave or in the nursing period;
labor capability partially or completely lost (due to a work injury or occupational disease);
more than 15 years of continuous work for the same employee and less than five years from retirement etc.
Because of the drastic consequences of unlawful dismissal under the Chinese law and the strict requirements on unilateral termination of an employment contract by the employer, most employers in China choose to negotiate a mutually agreed termination of each employee. Most often, employers would normally offer a termination package higher than the amount that the employee would be strictly entitled to receive under law, in order to convince the employee to agree to termination.
For further information on termination of employment contract in China, please contact our Chinese law firm.


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