China employee questions

Most of my China employment work is for employers, but in the last few years, my work representing expat employees just keeps rising and now equals nearly ten percent of my China employment practice. This increase in expat employment law is due to two things: 1) Chinese companies are hiring more expats, and 2) word has gotten out that what expats are promised by their Chinese employers seldom if ever matches what their employment contract says they are getting and fewer expats are willing to just “trust that it will all work out.”

I read a great post today over at the Shake Well Before Serving blog today, entitled, Accepting a Job in China? Some Questions to Ask. The author, Jeff Lindsay, starts the post by explaining the following qualifications for writing it:

After nearly 8 years in China, I’ve met a lot of foreigners and heard many surprising stories of some of the challenges they face in their jobs, especially when working for Asian companies. In most cases, the employee made assumptions about their job and their employer based on their experience with Western companies. Others didn’t fully understand what was expected of them and what they would have to do. This can lead to pain, frustration, embarrassment, and financial loss. Please don’t make lots of assumptions and assume that everything will be like it is back home.

You need to ask a lot of questions! If you find yourself saying, “I’m sure it will be OK” or “I trust it will be fine,” you may have a problem. In a very foreign culture with different laws and different levels of compliance with those laws, it’s much better to be asking, “What could go wrong?”

Those are some excellent qualifications — our China lawyers can often be heard to say that “our best China clients are those who have been badly burned but somehow managed to survive” — and he proposes potential employees asking some great questions (Mr. Lindsay’s words are in normal font and my comments are in italics):

Can I see the contract(s) you want me to sign before I resign my current job and show up for work in China? Sometimes the “standard” contract your company will give you when you show up for work will be a shocker. You may find the salary you agreed upon is not what is in your contract, that the benefits that were promised are not in the contract, and that troubling provisions are in the contract, such as a rejection of many of the normal employee rights provided by China’s generous labor laws, and even a requirement that a portion of your income will be withheld for some period of time and perhaps only given to you if certain goals are achieved that you may not be able to control and achieve on your own. When you ask about the benefits or other terms you have negotiated, the response may be, “Of course! But that’s just verbal. Trust us.” Realize that the HR person saying that may be totally sincere, but several years or weeks later he or she may be gone (HR turnover is intense in China) and the new person will not believe you when you bring up the verbal agreement that supposedly was made. Contracts may not always mean a lot in China, but verbal agreements with people who are no longer around mean even less.   This is 100% true and we see this sort of thing all the time. In fact, it is the rare case where we do not see at least one of these things in the contract. One thing we also see all the time is the English language contract will say one thing and the Chinese language contract will say something completely different. HERE IS WHAT YOU NEED TO KNOW: ONLY THE CHINESE LANGUAGE CONTRACT CONTROLS; THE ENGLISH LANGUAGE VERSION IS IRRELEVANT. 

Can you put that in writing? Don’t assume that any of the benefits and other terms you have negotiated will be put into writing in your contract. Be prepared for that, which is usually something that we gullible foreigners have not even imagined as a possible risk. I suggest that you insist that everything is in writing. I 100% agree. What is promised to you orally is irrelevant. Only the Chinese version of your written employee contract, the Chinese version of your Employer Rules and Regulations and China’s national, regional and local laws apply. In other words, if you do not know what all five of those things say (in Chinese, no less), you do not know what your employment terms will be. 

Will there be more than one contract to sign with potentially inconsistent, conflicting, or generally problematic terms? This is likely if you end up with a split income, as described below, or if you are a high-end employee subject to a non-compete agreement or other special terms in addition to a standard employee contract. The additional contract(s) may have terms that undermine or exacerbate portions of your basic contract, or that create serious problems in other ways. Be ready for careful analysis and outside legal guidance and recognize that you can propose alterations. The worst thing to do is say, “Well, I trust that it will be OK.” Remember, the key question is, “What could possibly go wrong?” Correct. And note that splitting income will get you in trouble. Big trouble. More on that below. 

Will I have a legitimate work permit and a work visa? Sadly, many companies bring people here on a tourist visa and have them work illegally. This can get you detained, fined, and deported. If the company is not actively working to get documents needed for a visa long before you come to China, they may be planning to rely on your tourist visa, even if they promise they will get you a visa once here. Sadly, I know too many . . . . who get into awkward situations when some of the companies that bring them here don’t properly provide work visas for them. 100% agree. We see this sort of thing all the time, but usually only when they or a friend of theirs calls or emails us after they are put in jail and then deported. Working in China without a work visa is serious business and if you don’t believe me, read Trust Your China Employer. Just Kidding and ponder why the accompanying picture to that post is someone in prison.

How will the taxes due to China be paid? Ex-pats are typically told that the company will handle all Chinese taxes. Make sure this is in writing. Also make sure the company will pay taxes on your full income, which leads to the next question. The key here is simple. Make sure all of your taxes get paid. 

Are you going to split my income to evade taxes? Sadly, some companies use a practice of splitting a foreign employee’s pay, with part of the salary being paid to a Chinese bank account, and another part being paid to a bank in the employee’s home country [or Hong Kong], typically using some foreign (non-Chinese) agency to wire money to the home country. That system is convenient for getting money to your home bank account, but the problem is that the employer typically doesn’t report the foreign income to China and only withholds Chinese taxes for the China income. Ex-pats generally don’t understand that taxes aren’t being paid on the foreign income when this happens [actually I think they do understand this!], and it can be a devastating shocker to eventually learn what might have been going on and how much risk and gargantuan penalties you potentially face. There are cases where an employee in China may do genuine work for oversees entities that may justify offshore income, but you should check carefully into this matter and get legal advice before accepting split income arrangements. Do not risk getting into trouble in China, and do all you can to respect Chinese law. If you find your company is not respecting Chinese tax laws, it’s time to resign. For some good guidance, see these articles by Dan Harris at the China Law Blog: “China Expat Pay: Splitting with Hong Kong is 100% Illegal and 200% Dangerous (Part 1)” and Part 2. I cannot remember a single instance in the last five years where split pay was legal but I can remember many instances where expats got in huge trouble when China’s tax authorities learned of their split pay, and most of those instances were in the last two years. China’s tax authorities have gone high tech and they have gotten really good at catching people who do this and they like nothing more than hitting them up for back taxes and interest and massive penalties and collecting all of those under threat of jail. Do not mess around with this. Please. 

Will you respect Chinese Labor Law or will my work contract say I have essentially no rights (e.g., no severance pay, etc.)? Some contracts say that there will be no benefits or rights except for what is mandatory under China’s labor laws. That means no severance pay, for example, and other potential disappointments. This is a tough one because what your contract says is just part of the equation. China’s employment laws might also protect you. 

When I leave, how much notice do you require? If you are asking me to give, say, three months of notice, will you respond to my resignation notice by exercising your right to terminate me with 30 days’ notice with no severance pay? Yes, this absolutely can and does happen, even for employees who have seemingly been loyal and valuable workers for many years. It’s an ugly way to treat an employee, but there are often incentives for some people in the company to lay off a certain number of people, so they might jump at the chance to turn a voluntary resignation into a lay-off that gets them credit for their own KPIs, so I’ve been told by a China expert. The employer will always retain the right to fire you with 30 days notice (some will give less and dare you to sue), so if you are asked to give more notice than that, point out that this is unfair and either change the contract to require 30 days or consider a provision that gives you compensation if they refuse to respect your advance notice and respond by giving you 30 days notice in return. This is 100% true. Beyond even this issue, there is the issue of you being able to maintain your work visa and not getting deported. Our expat employee clients who retain us for employment law assistance when starting their job almost always retain us for employment law assistance when quitting their job as well. China employee terminations are complicated.

How much cash will I need to bring to get started with housing and everything else in China? Many people don’t understand that the company is not going to help you with housing at all or that at most they will provide some monthly stipend toward housing, but only after you have found your apartment and paid the huge fees and deposits required to get started, and then present your company with an official receipt for your first month’s rent. If you are renting, say, a 15,000 RMB/month apartment, you may have out-of-pocket expenses from paying your first month’s rent plus a deposit of two-months’ rent, plus a rental agent fee of 35% of a month’s rent, adding up to a little over 50,000 RMB, or nearly $7,400 in cash before you receive your first paycheck and long before you’ll get your first housing stipend for some portion of your monthly rent. It’s expensive to start working in China. Are you ready? Great (non-legal questions to ask). 

Will housing benefits and other benefits begin as soon as I start, or is there some minimum term of service required before they begin? Which ones actually begin on day one? And can you put that into writing? One friend relied on the promised housing stipend in selecting a nice apartment, more expensive than he might want if paying for it on his own, but only later found out that the significant housing benefit would only begin after several years of service. Ouch. This goes back to your contract and how China treats oral promises. Basically, if you do not have a promise expressly written in the Chinese portion of your China employment contract, it does not exist unless Chinese law expressly provides for it.’

Mr. Lindsay continues his blog post with a bunch of additional (non law related) tips and I urge you to go there to read the whole thing.