China employment law

If you plan to bring on new China employees, there are a number of employment law issues you should consider. This post briefly discusses a few of these issues.

If your new hire had a previous job in China, you should require your new hire to provide proof (usually consisting of a document from his or her previous employer) that the previous employment relationship ended properly. This is not a legal requirement, but rather, for your own benefit. You want your employee to be dedicated to working for just you and so you want to make sure he or she will not continue working for some other employer. You would be surprised (or maybe you wouldn’t) at how often someone seeks to secretly hold two jobs in China, especially for two different WFOEs. To that same end, you will also want to make clear in your offer letter and in your contract and in your rules and regulations that holding more than one job is prohibited. We see it all the time in China: an employee believes he or she is underpaid and so they get a second job or start their own side business in competition with yours. Though you may not care if your employee is selling Gucci bags on WeChat, you will want to make sure your employee’s moonlighting does not adversely affect work performance or your company. You want to make it easy to terminate an employee whose extracurriculars is harming your business.

Before you bring on any new China employee, you should also make sure there are no unresolved issues between your new hire and his or her previous employer. One issue that comes up often is the non-compete. If you did not ask your new hire if he or she ever signed a non-compete with the previous employer, you may be at risk. It does not matter if the new hire is a relatively low level employee; it is still possible the employee signed a non-compete. If you are considered a competitor under that non-compete, your hiring this person could subject you to liability. Get your potential hire to provide you with a copy of any non-compete agreement and a copy of his or her current or previous labor contract. Chinese courts have upheld the validity of one sentence non-compete provisions in labor contract.

You also should confirm whether your new China hire has completed the hand-over and exit procedures of his or her previous employer. Many China employers require their employees cooperate during the exit process and a failure to do so could subject the employee to liability. We have found it very helpful to learn how new hires handled these exit procedures because how they did so can tell you a lot about them.

It also makes sense to try to determine whether your potential new employee gave adequate notice of leaving to his or her previous employer. If he or she did not, the previous employer can sue your new hire for damages, which is not something you want new employees to be bogged down with during their first few months with your company. And how they treated their previous employer will be a good indication of how they will treat you.

Once your new hire officially starts working for you under a written labor contract, you can now sit back and relax and revel in your ability to recruit great new talent, right? Not exactly. Under China employment law, your new hire can leave just by giving you 3 days notice and this notice need not be in writing. Don’t bother trying to enlarge this notice requirement either as you cannot make it any longer than what the law requires.

Do not forget to have your new hire’s social insurance and employee files properly transferred and set up in a timely manner. The probation period is considered part of the employment period, and just because an employee will not complete his or her probation period for six months does not mean you can wait that long to pay his or her social insurance.

Oh, and lastly, keep in mind that if an “employee” has been working for you as a dispatched worker, he or she should not be considered a new hire for purposes of China’s labor laws. Therefore, you may not set an additional probation period for this employee when he or she becomes your direct hire.

For more on what it takes to incorporate new hires in China, check out China Employment Contracts: Ten Things To Consider and if you ever start getting comfortable with China’s employment laws, I urge you read this. We think it a good idea for you to audit your employment situation yearly.