A Guide to Termination and Severance Pay in China

Employee Termination & Severance Pay in China

Employee Termination & Severance Pay in China

January 8, 2018

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Key Takeaways

  1. China’s employment termination law prioritizes employee job security
  2. A mass layoff is defined as either of two situations
  3. Terminating an employee at the end of the first fixed-term contract is much simpler than terminating a live employment contract.
Summary

Many foreign companies will find that China’s employment termination law prioritizes employee job security, making contract termination more difficult than in other countries. 

While national guidelines are presented here, it is important to remember that the regional labor administration may have additional guidelines, as rules can vary considerably between jurisdictions.

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China Labor Law Guide: How to Terminate an Employee Compliantly

Chinese employment law allows an employer to set a probation period, during which it is simple to terminate the contract if the employee is unable to meet the requirements of the position.  

The employer may terminate the contract without paying severance if the employee is demonstrably incompetent for the position.  

Nevertheless, the employee is still under contract and is, by no means, considered an at-will employee. Moreover, the only substantive difference regarding termination between probation period and post-probation is the ease of contract termination if the employee is unable to carry out the duties of the position or deemed incompetent.