China Law Blog - Terminating Your China Employee. It Ain't Easy.... - Comments

Anne

Dan — Sat, 09 Jan 2010 13:48:59 -0800

In my experience, laying off 100 employees is categorically different from laying off 5. In the latter situation, cause is not needed as long as the regulatory and contractual notice and compensation are provided. Over 10 employees at one time constitutes a "layoff" that must be approved by the labor bureau as a matter of social policy, not really labor law. Where exactly the cutoff lies, I don't know.

William

Dan — Sat, 09 Jan 2010 13:48:59 -0800

I hear a lot about Chinese college graduates having a hard time finding employment. Is the new labor law one of the reasons why? I know that France's similar laws making it hard to fire people for any reason have also resulted in high unemployment among young people.

Louis Godena

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Good article. But I wonder why you link to Reason Magazine. They of all people embody the general cluelessness of the boosters of "free market" (sic) capitalism toward what is really happening in China. Capitalism, left to its own devices, does not trend toward full employment or better wages; quite the opposite (the USA being the prime example). The Chinese already realize this. And, I suspect, now that the "honeymoon" of globalization is over, so will an increasing number of people here in the West.

Anonymous

Dan — Sat, 09 Jan 2010 13:48:59 -0800

What you say just applies to foreign companies.
When it comes down to local companies, that will be a different story.

Matthew

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Dan,

A good point to also make would be that in capping severance (in respect of post-2008 service) to three times the average monthly wage (in Beijing about 11,600RMB, although one month is payable for every year of service) the exposure of companies is fairly limited under the law.

William,

Such an analysis would be appropriate if you could say that graduates in the US are finding it easy to find jobs. My understanding is that they are not. It is so difficult to find jobs for graduates in China simply because there is far too many universities pumping out graduates every year. It is simply a question of over supply of labor. There is no evidence to suggest that companies would are under hiring because of the labour laws.

Anonymous,

I dont know what you are referring to but these rules apply to all companies - foreign or domestic. I have acted for Chinese companies in employment disputes who have faced exactly the same issues.

Ben

Dan — Sat, 09 Jan 2010 13:48:59 -0800

This country is still communist in so many interesting and surprising ways. No wonder so many people work at the Wal-Mart.

Maciej

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Do those rules also apply to foreigners employed by Chinese companies? Would the labor court (if there is any) treat a foreigner same way, as he would have a Chinese national?

Maciej

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Labor law in Poland also has a long history of protecting the employee, rather than the employer. Similar rules of "reasons" apply, and it is often VERY difficult, if possible, to "let go" an employee who is a Union's member. To hear the "You're fired" line, so famous in US movies, is very, very difficult.

Will

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Also worth noting is that angry, terminated employees have become better at wielding the media to air their grievances, especially (although not exclusively) where a foreign employer is involved. So from the PR side of the trench, consider the possible ramifications of having a terminated employee or employees take their story to the media, and how, in the context of the current labor law, you might respond to public accusations of improper dismissal. It can be tricky, especially considering the need to maintain appropriate confidentiality and the vagueness of many of the conditions in law. Many companies like to tell their "talent" story to the press, and poorly handling a situation like this can blow up months or years of cultivated reputation.

Twofish

Dan — Sat, 09 Jan 2010 13:48:59 -0800

This really isn't an example of China being different but rather the US being different. Chinese labor law is very similar to most developed countries such as France and Germany. It's the US that has labor practices that most of the rest of the world thinks are weird.

Matthew

Dan — Sat, 09 Jan 2010 13:48:59 -0800

I have to agree with Two Fish. Most jurisdictions I have worked in do not permit termination without cause (subject to certain exceptions). In my experience, it is generally far easier to terminate an employee in China than Australia.

Jay

Dan — Sat, 09 Jan 2010 13:48:59 -0800

My experience is the exact opposite. We have lots of trouble finding qualified staff. One reason for that may be that my company doesn't really want to pay too much, but besides that, we just don't see the candidates out there. Job-hunts at the universities are very demoralizing affairs. For one, you have to get in very early (e.g. half a year to one year before they graduate) and even then most of the students with any skills are snapped up by 'famous' companies. What's left after that are those kids who get through university on hongbao and while their resume claims things like "fluent in English, pass CET-6 with top marks" they have trouble even with "hello", and that's their best subject, going downhill from there... So, yes, they do have trouble finding jobs. It's probably the same everywhere, to some extent. If you sleep your way through an arts-history degree then there's no job for you in a downturn (b.t.w. China's downturn is long since over) whereas if you worked very hard to get an engineering degree, for example, then you can pick and choose employers and jobs.
Our company has reverted to giving out a fat bonus to anybody who can get their friend to join us, and we sign them for a minimum of three years (workers having to pay a us a hefty penalty if they leave earlier).

Anonymous

Dan — Sat, 09 Jan 2010 13:48:59 -0800

So if I have a salesman who has worked for me for 3 years and he is no longer meeting his performance targets (for whatever reason) and I want to dismiss him (her) and they want to stay, can I just dismiss him, pay the appropriate severance as laid out by the law, and be done with it. Or do I need to also prove he is worthless and not trying.

So what I am asking is that as long as I pay all the severance payments and follow the law, I can fire him with our and need to prove why I am firing him?

Dan

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Anne,

You are exactly right. Terminating 100 employees is very different (both legally and otherwise) from terminating five.

Dan

Dan — Sat, 09 Jan 2010 13:48:59 -0800

William,

I do not know and I think something like that would need to be studied. I have heard people talk about it having a major impact, but I have always suspected those are just people who do not like the law.

Matthew

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Anonymous,

Yes, so long as you satisfy the legal requirements re compensation there should not be an issue. There may be an issue if the employee is pregnant.

SD

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Are there probational periods for work contracts? Could an employee be released for any reason during this period? What kind of compensation agreement would you need to get rid of a new hire that hasn't worked out during their probation?

Can the blog do a post on part-time employees?

abass

Dan — Sat, 09 Jan 2010 13:48:59 -0800

Marcelo

Dan — Sat, 09 Jan 2010 13:48:59 -0800

And how about when firing an expat rep officer?