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As a global EOR expert, we manage payroll, employment contract best practices, statutory and market norm benefits, employee expenses, as well as severance and termination. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.
Hiring in China
Written employment contracts are mandatory for full-time employees in China. Employers have a grace period of 1 month following the commencement of employment to provide a written contract. If an employer fails to do so, they must pay the employee double their monthly wage amount for each subsequent month without a written contract, up to 1 year. If an employer fails to provide a written contract to an employee for 1 year, then it shall be deemed that the parties have executed an open-ended employment contract.
When negotiating terms of an employment contract and offer letter with an employee, it may be useful to keep the following standard benefits in China in mind.
Employment contracts in China
It is a requirement for employment contracts to stipulate the essential terms of the employment relationship, which includes:
- Name and identification of the employer
- Name and identification of the employee
- Contract term
- Job duties and location
- Working hours, rest, and leave entitlements
- Social insurance entitlements
- Workplace protection, health, and safety measures
While it is at the discretion of the employer and employee, it is best practice to also include probation, training, confidentiality, and other applicable incentives. An offer letter and employment contract in China should always state the salary and any compensation amounts in Chinese yuan (CNY) rather than another currency.
Working hours in China
The Labor Law of the People’s Republic of China designates a 5-day workweek of no more than 8 hours a day and no more than 44 hours a week. Offices are usually open from 9 a.m. to 6 p.m. each day, with a 2-hour lunch from noon to 2 p.m., although hours may vary from city to city. Government offices are open from 9 a.m. to 5 p.m. and closed on weekends.
Holidays in China
There are 7 paid public holidays in China:
- New Year’s Day
- Spring Festival (3-day holiday)
- Tomb-Sweeping Festival
- Labour Day
- Dragon Boat Festival
- Mid-Autumn Festival
- National Day (3-day holiday)
Employees are entitled to these public holidays with full pay. The public holidays are not included in the statutory paid annual leave. The statutory minimum is to provide paid leave for the legally required holidays. However, the market norm is to give employees a bit of flexibility around the Lunar New Year so that they can avoid peak travel days. Offering employees an extra day off before and after the officially published dates is an excellent supplementary benefit.
Vacation days in China
Employees receive vacation days based on their years of general employment. “Years of service” is the employee’s total years of employment with any company. This means your new employees may be entitled to paid annual leave during their first year of employment with you as well. Below is the guidance of statutory annual leave regulations for employees based on their years of service:
- Employees who have worked between 1 year and less than 10 years are entitled to 5 days of paid annual leave.
- Employees who have worked for at least 10 years, but less than 20 years, are entitled to 10 days of paid annual leave.
- Employees who have worked for 20+ years are entitled to 15 days of paid annual leave.
In practice, most international employers hiring mid-level to senior executives in China will provide 2 to 4 weeks of annual vacation days.
Employers are required to make arrangements for employees to take vacation time each year. Unused vacation time in 1 year may be carried over to the next year, but not beyond that 1 year. An employer who fails to allow an employee to take annual leave must pay 300% of the employee’s daily wages for each unused vacation day. This 300% payment is not required if the employee voluntarily chooses not to take their vacation days.
China sick leave
Employees are entitled to sick leave for non-work related injuries or illness. The sick leave period varies between 3 to 24 months, depending on the length of service with the employer and the number of years in general employment.
Generally, an employee is compensated during their sick-leave period at 60 to 100 percent of their regular wage, depending on the employee’s seniority.
Parental leave in China
Pregnant employees are legally entitled to at least 158 days of paid maternity leave, which may commence a fixed number of days prior to the expected date of childbirth. The actual number of days may vary by city.
In the case of multiple births, such as twins, the birthing parent may receive an additional 15 days for each additional child.
Pregnant employees are entitled to full pay during their leave. This is either paid through social security or by the employer if they did not contribute to social security on the employee’s behalf.
Paternity leave varies widely, depending on location, but normally ranges from 10 to 25 days.
Both parents will be entitled to at least 5 days of parental leave until their child turns 3, but more days may be allowed depending on each city’s local regulation.
Health insurance in China
Basic health and pension insurance is provided through the national system. However, some employers provide supplementary health insurance to their employees.
China supplementary benefits
Employers in China contribute to a housing fund, which subsidizes employee real estate rental and purchasing costs. Some contributions are mandatory. However, employees normally negotiate for an increased housing fund rate. Different cities have different policies related to housing funds.
In general, we recommend budgeting 20% to 30 % for employer taxes on top of the total cost of an employee’s salary for the total cost of compensation in China.
A 13th-month salary or annual bonus is not a statutory requirement, but it is the market norm in China. Likewise, it may be common for employees in sales roles to receive a commission plan. When negotiating with employees, clearly state the monthly salary, how many months it will be paid, and the total annual salary.
Termination and severance in China
A probation period may be agreed to between an employer and an employee in an employment contract. The maximum length of a probation period for an indefinite employment contract is 6 months.
The notice of termination depends on the employee’s employment period. Employers must give at least 3 days’ written notice during the probation period. However, the prior written notice period for those who have passed the probation period shall be no less than 30 days.
Terminations must be for a legally supported cause, and the reasons must be clearly documented. It is worth noting that unilateral terminations in China are extremely challenging.
Contracts may include a payment in lieu of notice clause, which allows employers to pay employees instead of requiring them to work their notice period. Much longer periods of contractual notice, binding on both parties, are common.
It is illegal to terminate a pregnant employee or one who is on maternity leave or breastfeeding.
Paying taxes in China
Statutory benefits in China include 5 insurances for medical insurance, pension, workers’ compensation, unemployment insurance, and parental benefits. A housing fund is in addition to these 5 insurances. Contribution amounts vary by province and by the employee’s income bracket.
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