China HR Information

Updated on: 2025/08/04 14:03 (UTC)

Overview

The central employment-related law in China is the Labor Law passed in 1994. A variety of other national laws and local rules cover such topics as employment contracts, benefits, social insurance, gender issues, and trade unions.

The Labor Contract Law of 2008 tightened the rules governing employment agreements in an attempt to promote workers’ rights, and the government has taken some steps toward promoting collective bargaining and providing an explicit right to strike.

Hiring

Employment Contracts

Employers must enter into a written employment contract with each employee. If an employer fails to establish a written contract within a month of a worker’s start date, it must pay double the worker’s regular salary each month until a written contract is established. If an employer fails to establish a written contract within one year, the employer is deemed to have concluded an indefinite contract. Collective labor contracts do not replace individual labor contracts. Employment contracts become effective either upon a specified date or on the date of contract execution.

The employment contract is required by law and must contain the following information:

• the employer’s name and location and the name of its legal representative;
• the employee’s name and place of residence and the number of his or her resident identification card or other identity document;
• the term of the contract;
• the place of work;
• a job description;
• work hours, leave entitlements and rest periods;
• compensation;
• social insurance;
• working conditions, including protections against occupational hazards; and
• other information that may be required by law or statute.

Contracts can either have a fixed term, an open term or a term that expires with the completion of a specific task. Most employers choose the fixed-term option since employment contracts can be terminated only in accordance with statutory requirements. In some cases, employers may be required to enter into an open-term contract—for example, when an employee has worked for the employer for at least 10 consecutive years or when an employee has concluded two consecutive fixed-term contracts and proposes or agrees to renew the contract.

Employers are allowed to include a probationary period if a contract will run at least three months. The maximum allowable length of probation ranges from one to six months depending on the length of the contract, as follows:

• contracts lasting at least three months but less than one year: one-month maximum probationary period;
• contracts lasting at least one year but less than three years: two-month maximum; and
• contracts lasting three or more years: six-month maximum.

In the past, in addition to hiring employees directly, many Chinese enterprises used temporary employees obtained from labor service providers. The Labor Contract Law allows the use of temporary employees only for:

• positions existing less than six months,
• auxiliary positions providing services to main business positions, and
• substitutive positions held during the temporary absence of the permanent occupant.

The total number of temporary employees used by a Chinese enterprise may not exceed 10 percent of total head count.

Employer Evaluations. China’s Ministry of Human Resources and Social Security (MHRSS) evaluates all employers annually for their compliance with the country’s labor laws. Employers will receive either an A, B or C rating, and the results will be kept on file for a minimum of three years.

In determining the ratings, MHRSS will examine whether the employer:

• has executed employment contracts with every employee;
• has formulated internal labor protection rules and regulations;
• is compliant with laws on working hours, salary payments and female employee protections; and
• contributes all mandatory social insurance payments.

Employers with perfect compliance will receive an “A” rating and a reduction in inspections from the MHRSS. Employers that have been disciplined for “non-serious” violations will receive a “B” rating and will see no change in the number of inspections. Employers that have committed “serious” violations will get a “C” rating and receive more frequent inspections from the MHRSS.

In order to shed light on the companies that skirt the country’s labor laws, MHRSS will publicize companies considered in “serious” violation of the law in mass media such as newspapers, magazines and TV channels in the employers’ regional markets. The announcements will include the employer’s name, address, registration code; the full name of the legal representative or key person in charge; the exact violation and the fines or other punishments imposed.

The government has issued guidelines on the signing of electronic employment contracts. The electronic contract management platform can be self-built, purchased from a third party, or provided by the government. Either way, the platform must meet the qualification requirements set out in the guideline.

Restrictions on Hiring

Employers cannot employ youths under the age of 16, except in certain arts- or sports-related employment with the permission of the parents or guardians and with a guarantee the youths will continue their compulsory education. Employers face fines or even criminal liability for illegally employing minors under 16.

The government sets a minimum quota for the hiring of disabled employees. The national average is 1.5 percent of a firm’s workforce, but the rate can differ by province. The quota does not apply to companies under three years old and with a workforce of less than 20.

If employers meet the quota they receive tax breaks. If they do not meet the quota, they must make payments to the state Employment Security Fund for People with Disabilities. Employers with 30 or fewer employees are exempt from contributing to the fund in their first three years of operation. The calculation basis for the contribution to the fund is capped at three times the average annual salaries of employees for the previous year at the location where the enterprise is registered. The contribution amount is set by the local province.

Employers are required to report the number of persons with disabilities they have hired to their local employment services institute for persons with disabilities.

Recordkeeping

The Chinese government maintains personal files for every citizen over a certain age. The records contain information regarding the date and place of birth, completed schoolwork, educational degrees received, previous work positions, memberships, political activities, and criminal history.

In addition, the employer must keep copies of rescinded or terminated labor contracts for at least two years for inspection purposes.

Background Checks

China’s labor law does not prohibit or restrict employers from conducting reasonable background checks on applicants, although disclosure of certain personal or sensitive information usually will require the consent of the applicant, especially if the information concerns the applicant’s health or other personal matters.

Noncompetition Agreements

Employers are allowed to protect themselves against competition and misuse of confidential information by a restrictive covenant in the employment contract. Employees in possession of company trade secrets can be restricted from being employed by the previous employer’s competitors or running their own competing businesses for a maximum period of two years from the expiration or termination of the employment contract. Employees are entitled to certain financial compensation in these circumstances.

Reference Citations

Employment Contracts: Labor Contract Law, 2008, arts. 10, 17, 81; Labor Contract Law, Implementing Regulations, arts. 6-7

Restrictions on Hiring: Regulations Banning Child Labor, 2014, art. 2 (Chinese); Law of the People ‘s Republic of China on the Protection of Persons with Disabilities, 2007, arts. 33-36

Recordkeeping: Labor Contract Law, 2008, art. 50

Background Checks: Labor Contract Law, 2008, art. 8

Noncompetition Agreements: Labor Contract Law, 2008, arts. 23-24

Immigration and Work Permits

In General

Employers seeking to employ a foreign worker must apply for and secure an “Employment License for Foreigners” and invitation letter for the foreign national before the individual enters the country. After obtaining the employment license and the invitation letter, the foreign national must apply for a foreign worker permit card from the State Administration of Foreign Experts Affairs (SAFEA). The application must be submitted online no later than 15 days after entry into the country.

Visas and Work Permits

Employers seeking to employ a foreign worker must apply for and secure a work notice document from the Ministry of Human Resources and Social Security of the People’s Republic of China.

After obtaining the employment license and the invitation letter, the foreign national must apply for a visa from the State Administration of Foreign Experts Affairs (SAFEA). The application must be submitted online no later than 30 days after entry into the country.

The Z visa is the most common work visa, while the R visa is for foreign nationals who have highly specialized skills that are in short supply.

Each applicant is assigned a unique ID number that does not change, regardless of permit renewal or change of employer.

After obtaining the work visa, the foreigner should apply for a work permit within 30 days of entering or reentering China.

If the employee’s application for the work permit is approved, he or she must obtain a residence permit from the local police station within 30 days of arriving in China.

Although employers may only recruit workers for positions in which no domestic candidates are available, no labor market test is required prior to the recruitment of foreign workers.

Work permits usually have a term of one year and never exceed five years.

Forms

Visa application form (Chinese)

Penalties

Expatriates working illegally in China can be subject to penalties of up to 20,000 yuan and 15 days’ imprisonment. Businesses illegally employing expatriates are subject to fines of up to 100,000 yuan.

Reference Citations

Visas and Work Permits: Rules for the Administration of Employment of Foreigners in China

Nondiscrimination

In General

Employers may not discriminate against employees or prospective employees on the basis of nationality, race, sex, gender, religious affiliation, disability, marriage, pregnancy, or maternity. Chinese law prohibits sexual harassment of women but does not define what constitutes such harassment.

Gender Discrimination

China’s labor law prohibits discrimination on the basis of gender. The law also states that equal employment rights should be granted to men and women and that all should receive equal pay for equal work. Female employees are entitled to the same employment benefits as their male colleagues.

Employers are prohibited by law from entering into employment contracts that restrict a female employee’s right to marry or give birth. Employers are prohibited from reducing wages of female employees or terminating female employees due to pregnancy or maternity leave or because they are nursing.

Effective Jan. 1, 2023, employers must comply with more expansive rules barring discrimination against women in hiring. The new rules contain a list of prohibited actions, including giving preferences to male candidates and asking female applicants if they are married or pregnant. Employers also must establish policies prohibiting sexual harassment, specify responsible personnel to enforce the policies, and set up channels for employees seeking to file sexual harassment complaints.

Reference Citations

Nondiscrimination: Labor Law, 1995, art. 12

Gender Discrimination: Law on the Protection of Rights and Interests of Women, 1992

Employee Privacy

Employee Data

There are no laws in China that address employee privacy. Under the Labor Law, employers are required to collect basic personal information about employees related to their employment contracts. Employees are obliged to truthfully provide this information.

Employers are also required to keep personal data of employees confidential and to obtain their consent prior to publicizing their data.

Employee Monitoring and Surveillance

There are no laws in China that address employee monitoring and surveillance.

Reference Citations

Employee Privacy: Labor Contract Law, 2008, art. 8

Compensation

In China, the compensation of an employee can be agreed between the employer and the employee as long as the amount is higher than the minimum wage levels as determined by local governments and adjusted annually or semiannually.

The newly amended Labor Contract Law specifically states that dispatched employees (i.e., those provided by temporary employment agencies) are entitled to equal pay for equal work.

Hours of Work

The standard workweek in China is 40 hours, based on an eight-hour day. The law requires that employees receive at least one full day of rest during the week, although most employers provide two days, usually Saturday and Sunday. The Labor Law allows employers to extend working hours for production or operational needs as long as the labor union, if one exists, and the employees are consulted.

For special work positions not adaptable to standard eight-hour days, the employer can with the approval of the competent labor administration authority adopt a flexible or comprehensively calculated work-time system.

The flexible work-time system can be applied to high-ranking managerial staff, sales staff, field personnel, security personnel, and other employees whose work does not permit compliance with the standard working-hour system. National regulations require employers to protect the health of these employees but do not restrict hours worked or provide for overtime compensation.

Workers in the transportation industry and in seasonal employment can be subject to a comprehensively calculated working-time system in which the worker may be required to work constantly for a certain period of time and then be allowed to rest. Working time in such a system will be calculated on a weekly, monthly, seasonal or yearly basis and cannot on average be longer than eight hours per day or 40 hours per week.

In August 2021, China’s Supreme People’s Court said the overtime practice of “996”, working 9 a.m. to 9 p.m. six days a week, is illegal.

Minimum Wage

There is no national minimum wage rate in China. Each of China’s provinces sets minimum wage rates applicable for its territory. China’s minimum-wage regulations require that for each minimum-wage district, there must be a monthly minimum wage applicable to full-time workers and an hourly minimum wage applicable to part-time workers. Employers are required to publicly inform employees of any new minimum-wage rate applicable to them within 10 days of the date that the rate was issued by the government that established the rate.

Shanghai has the highest monthly minimum wage among 31 provinces (RMB 2,590 per month) and Beijing has the highest hourly minimum wage (RMB 25.3 per hour).

Overtime

The standard eight-hour workday generally cannot be extended more than one hour per day, although up to three-hour extensions are permitted under special circumstances. Even with special extensions, overtime may not exceed 36 hours in a month, except in the case of natural disasters, accidents, or other circumstances in which the health or life of workers or the safety of the workplace is at risk or if a breakdown of public facilities, such as transportation or utilities, is involved.

Employees required to work additional hours beyond the standard eight-hour workday are entitled to overtime pay based on the following criteria:

• on a regular working day, 150 percent of regular hourly wages;
• on a rest day, either compensatory time off or 200 percent of regular hourly wages; and
• for all work on a statutory holiday, 300 percent of regular hourly wages.

Under the flexible working time system, employees are exempt from overtime pay. In some locations, however, such as Shanghai, these employees are entitled to overtime pay if they are required to work on public holidays.

Workers under the comprehensive work-time system in the transportation industry and in seasonal employment may be required to work longer hours without overtime pay as long as the average work period does not exceed the legal limit. These employees are also entitled to overtime pay if they are required to work on public holidays.

Wage Payment

Employees have the right to receive their monthly wages in cash, although some localities specify that salaries may be deposited directly into employees’ bank accounts. Employees must be paid at least once a month. Payment dates are typically specified in employment contracts.

Employers can make the following deductions from wages:

• individual income tax,
• employee social security payments,
• alimony payments as required by court decision, and
• other expenses according to law and regulation.

It is the responsibility of the employer to withhold individual income tax from employees’ salaries. If proper income tax is not withheld, both the employer and the employee are liable under the law.

Mandatory Bonuses

Although not required by law, many companies in China have instituted a 13th month salary payment paid during the month of the Chinese New Year or Spring Holiday.

Reference Citations

Hours of Work: Regulations of the State Council on the Hours of Work of Employees, 1995, art. 3

Overtime: Labor Law, 1995, art. 44

Benefits

Vacation

Employees who have worked continuously for more than one year are entitled to paid annual leave, the amount depending on their total work years (not just their years with the current employer). An employee who has:

• between one and 10 cumulative work years is entitled to five days of annual leave,
• at least 10 years but fewer than 20 years is entitled to 10 days, and
• at least 20 years is entitled to 15 days.

The calculation of vacation leave for the first calendar year of employment should be prorated to reflect only days actually worked.

Unused annual leave may be carried over to the following year.

Annual leave may be arranged by the employer in consideration of both the needs of the business and the wishes of the employee. Employers that desire to cancel annual leave because of production or work requirements must first get the consent of the workers and then must pay 300 percent of each employee’s daily wage for each day of annual leave accrued but unused.

Holidays

Employees are entitled to 11 national holidays, the dates of some of which vary year to year depending on the lunar calendar:

• Jan. 1: New Year’s Day
• Spring Festival: three days, usually between late January and mid-February
• Tomb Sweeping Day: one day, usually either April 4, 5 or 6
• May 1: International Labor Day
• Dragon Boat Festival: one day, usually in May or June
• Mid-Autumn Festival: one day, usually between mid-September and mid-October
• National Day: three days in early October

Female employees are entitled to a half day of paid leave on International Women’s Day, which falls on March 8. Every year, the government also provides additional public holidays to make long holiday weeks, known as “Golden Weeks,” for the Spring Festival and the National Day holidays.

Employees who are required to work on a holiday are entitled to 300 percent of pay.

Maternity Leave

Under the Special Rules Concerning the Labor Protection of Female Employees, employees who are pregnant are entitled to 98 days of maternity leave. However, different regions have lengthened maternity leave times in the wake of China’s abandonment of its one-child policy.

For example, in the Hainan and Henan provinces, maternity leave has been increased to 190 days. In Beijing and Shanghai, women may take 158 days of maternity leave.

Each province also provides additional leave for certain situations that may arise during or after pregnancy. Depending on the region, additional leave falls into the following ranges:

• 7-30 days for difficult childbirths,
• 7-30 days for late childbirths, and
• up to 75 days for miscarriages.

Female employees are entitled to at least one hour each day during work hours for breastfeeding up to one year from the date of birth. The mother can choose to take this leave as two 30-minute breaks or one-hour long break. Feeding time is counted as working time.

Employers cannot arrange overtime or night shifts for employees more than seven months pregnant or who are nursing, and it does not allow a woman who is pregnant or nursing to be fired or laid off from her job.

Parental leave. Shanghai and Beijing provinces offer parental leave, which entitles eligible parents to five days of paid leave each year until the child reaches 3 years of age.

Paternity Leave

Working fathers are eligible for seven to 30 days of paternity leave depending on locality. In Beijing, up to 15 days of paternity leave at full pay can be taken by the male spouse of a female employee who is over 24 years of age at the date of the child’s birth. Shanghai provides 10 days of paternity leave.

In Beijing, fathers may to take more leave days if their spouses reduce their leave by the same amount and both employers agree.

Parental leave. Shanghai and Beijing provinces offer parental leave, which entitles eligible parents to five days of paid leave each year until the child reaches 3 years of age.

Sick Leave

When an employee suffers a non work-related illness or injury, sick leave of between 3 and 24 months must be granted depending on total years of work experience, tenure with the current employer, and local regulations.

An employee on sick leave is entitled to compensation, the amount of which varies by location. In some locations (such as Shanghai), the amount a worker is paid depends on salary and work experience. In other locations (such as Shenzhen), the amount is based exclusively on salary. In still other locations (such as Beijing and Jiangsu Province), the amount depends on the employment contract. As a general principle, however, the amount an employee is paid during sick leave should be no lower than 80 percent of the minimum monthly salary announced by the local government.

Other Leave

Editor’s note: This information is not available at this time.

Pensions and Social Security

Employers are obliged to provide their employees (including expatriate employees holding work permits) with five types of social insurance benefits:

• old-age pension insurance,
• medical insurance,
• occupational injury insurance,
• maternity insurance, and
• housing funds.

Employer and employee contributions differ between funds. In all cases, the maximum salary taken into consideration for purposes of calculating contributions is three times the average local annual salary as announced by the local government.

Old-age pension insurance: The official retirement age is 60 for men, 50 for women. Generally, an employer’s maximum contribution for pension insurance is about 20 percent of total payroll, although the actual percentage is determined by provincial governments. Each employee is required to contribute 8 percent of his or her salary to a personal account. Employees who have contributed for at least 15 years receive a monthly pension from the common pension fund as well as the funds in their personal accounts. A retired employee who has contributed for fewer than 15 years can continue to make contributions until the 15-year requirement is met, then receive a pension from the state system.

Medical insurance: China’s medical insurance system consists of a pooled fund and personal accounts. Employers contribute 8 to 10 percent of payroll depending on the province within which they are located, and employees contribute 2 percent of income. Employee contributions are deposited into personal accounts along with approximately 30 percent of employer contributions. The rest of the employer contributions goes into the pooled fund. Employees may use medical insurance funds when seeing a doctor or purchasing medicines at designated hospitals and pharmacies.

Occupational injury insurance: All enterprises in China must contribute toward occupational injury insurance. Contribution amounts depend on the level of occupational risk in specific industries. Employees do not contribute to this fund.

Unemployment insurance: China’s unemployment insurance system covers all urban employers, including foreign-invested enterprises (FIEs). The unemployment insurance fund is financed by both employer and employee contributions. In general, employers are required to pay 2 percent of their payroll into the fund, employees 1 percent of their salary. The actual percentage is determined by provincial governments.

Maternity insurance: This type of insurance is funded by employer contributions, which may not exceed 1 percent of total payroll and are generally maintained under provincial regulation at approximately 0.5 to 0.8 percent of an enterprise’s total wage expense.

Housing funds: Generally, both the employer and the employee make contributions to the employee’s housing fund at a rate of at least 5 percent of salary. The actual percentage is determined by the provincial governments. All contributed funds are deposited into the personal account of and are owned by the employee. Housing funds may be used by the employee to buy or repair his or her own residence or may be withdrawn as a lump sum upon retirement. Expatriates working in China are not required to participate in the housing funds.

Workers’ Compensation

The process for reviewing and processing workers’ compensation claims in China entails four basic steps:

• health professionals diagnose the injury or illness,
• local labor and social security officials verify that the injury or illness is work-related,
• the degree of disability is assessed, and
• social security authorities calculate the benefits to be paid.

The criteria for assessing a worker’s degree of disability is primarily addressed by the “Standard for Determining the Seriousness of Work-related Injuries and Occupational Diseases”, which was issued by the Ministry of Labor and Social Security in 1996. The regulations list ten basic grades of disability, with grade 1 being the most serious.

The level of compensation and the responsibility for paying it are largely determined by the 2011 Social Insurance Law, the Work-related Injury Insurance Regulations, and the 2002 Law on the Prevention and Treatment of Occupational Diseases. However, the actual payout will vary from region to region due to local implementing regulations and selective enforcement of certain provisions.

Reference Citations

Vacation: Regulations on Paid Annual Leave for Employees, 2007, arts. 3, 5

Holidays: Regulations on Annual Holidays (Chinese)

Maternity Leave: Special Rules Concerning the Labor Protection of Female Employees, 2012, art. 7 (Chinese)

Sick Leave: Enterprise Workers Illness or Non-Work Related Injury Medical Period Specified, 1994, art. 3 (Chinese)

Pensions and Social Security: Social Insurance Law (Chinese)

Workers’ Compensation: Standard for Determining the Seriousness of Work-related Injuries and Occupational Diseases (Chinese); People’s Republic of China Occupational Disease Prevention Law (Chinese)

Labor Relations

In General

The Trade Union Law gives all employees the right to join a labor union and provides employees with an implicit right to strike. Under Chinese labor law, only unions belonging to the state-sponsored All-China Federation of Trade Unions are permitted to exist.

Right to Organize

While China’s constitution guarantees freedom of assembly and of association, under Chinese labor law only union organizations belonging to the All-China Federation of Trade Unions (ACFTU) are permitted to exist. The Chinese Communist Party exercises leadership over labor unions, and while Chinese Trade Union Law grants unions the right to carry out their work independently, in practice these rights have to be exercised in compliance with the s of Association of the ACFTU.

In recent years, the Chinese government has tried to improve the balance of interests between Chinese employers and employees by encouraging employees to establish labor unions and conclude collective contracts with their employers. In addition, the ACFTU has been striving to establish more labor unions in foreign-invested enterprises, and political pressure has been building for FIEs to enter collective contracts.

The Trade Union Law gives all employees, including mid-level executives and senior management, the right to join a labor union, and any enterprise with 25 or more employees who are union members must have its own union. Such unions usually are single-company associations operating solely in a specific company and are known as “enterprise unions” or “grass-roots unions.” All enterprise unions are organized under the umbrella of the ACFTU, which occasionally exerts political pressure on them to behave in a certain manner. Most negotiations, however, are conducted by labor union representatives at the enterprise level.

Dispute Resolution

Labor disputes in China may be resolved in one of four ways: consultation, mediation, arbitration, or court proceeding.

Consultation is not required under Chinese labor law, but the worker and/or labor union can discuss the dispute with the employer in an effort to resolve differences.

Mediation is also a voluntary process handled at the enterprise level. If an agreement is reached through mediation, it must be honored by both parties. Mediation is conducted by committees of the enterprises themselves, by grass-roots mediation institutions or by neighborhood or town mediation organizations. Labor-dispute mediation committees are composed of company and employee representatives. If parties choose not to attempt mediation or if mediation fails to produce an agreement, labor arbitration proceedings may be initiated. Mediation is considered to have failed if not completed within 15 days from the date of application.

In the next step, an arbitration committee—composed of representatives of the government, labor unions and employers—appoints either a tribunal of three arbitrators or in less complicated disputes a single arbitrator to hear the case. The statute of limitations for arbitration proceedings is one year from the time the dispute began.

If the parties fail to reach an agreement through arbitration or if any party is dissatisfied with an arbitration award—except in the case of small claims or those involving compensation, in which case the arbitration award will be final—a lawsuit may be filed in people’s court within 15 days from the day the arbitration award is received.

On Feb. 21, 2022, the Ministry of Human Resources and the Supreme People’s Court jointly issued a regulation modifying the regulation on handling arbitration of labor and personnel disputes.

Strikes and Lockouts

While previous versions of the constitution provided an explicit right to strike, the current version, which went into effect in 1982, does not. The Trade Union Law, however, while not explicitly granting a right to strike, does refer to trade unions’ duties in the case of work stoppages or slowdowns.

The Trade Union Law states that in cases of work stoppages or slowdowns, the labor union must consult with the employer, present the demands of the workers as well as proposals for solutions and help management in returning to production as quickly as possible.

The law prevents employers from terminating workers for engaging in trade union activities, but since unions aren’t given the explicit right to strike, it would appear possible for employers to terminate workers for activities that disrupt production, violate work rules or lead to work slowdowns.

Successorship Clauses

Acquisition of Chinese enterprise by foreign investors: A foreign investor that acquires equity in a wholly Chinese-owned enterprise or establishes a new foreign-invested enterprise to acquire the assets of a domestic enterprise is required to submit to authorities an employee settlement plan that describes how the employees will be treated following the acquisition.

Transfer of business from Chinese enterprise to foreign-invested joint venture: If a foreign-invested joint venture is created through the acquisition of a Chinese enterprise, there is no automatic transfer of employment. According to local regulations, however, joint ventures must give priority to employing workers from the Chinese partner.

Transfer of business from state-owned enterprise to foreign-invested enterprise: If an FIE acquires a state-owned enterprise, the FIE must develop a plan to resettle its employees. The plan is subject to approval by the employees. Terminated employees are paid severance, while employees who are retained enter into a new or amended employment contract with the FIE.

Reference Citations

Right to Organize: Trade Union Law, 1992, arts. 5 and 10

Dispute Resolution: Labor Law, 1995, arts. 77-84

Strikes and Lockouts: Trade Union Law, 1992, art. 27

Safety, Health and Security

In General

Chinese labor law requires employers to establish a system for work safety and health and to comply with safety and health standards and procedures. Chinese law also provides for the prevention, control and eradication of occupational health and safety hazards and for the prevention and treatment of occupational illnesses.

Workplace Safety and Health

Chinese labor law requires employers to take the following actions to protect employees’ health and safety:

• establish and administer a system for work safety and health,
• comply fully with work safety and health standards and procedures,
• take steps to prevent work-related accidents,
• educate employees regarding work safety and health,
• provide safe and clean working conditions, and
• provide necessary protective equipment.

Chinese law provides for the prevention, control, and eradication of occupational health and safety hazards and for the prevention and treatment of occupational illnesses. The Ministry of Human Resources and Social Security and the Ministry of Hygiene have created a detailed catalogue of recognized occupational diseases. Employers are required to take precautionary measures to avoid occupational diseases and educate employees about potential occupational dangers by including information in employment contracts and providing health training to affected employees.

Employers must assign special personnel to perform routine testing and supervision of potential risk factors in the workplace, and periodic reports must be provided to local health administrators and employees. Employers must also arrange regular physical examinations for employees who work in hazardous occupations.

Employers can be fined up to 100 million yuan in the event of a workplace accident and “persons in charge” 100 percent of annual income if the accident occurred due to their negligence.

Drug and Alcohol Use

China ratified the World Health Organization’s Framework Convention on Tobacco Control in 2005 and had pledged to ban smoking in public places by 2011, but the government has now said such rules will be more gradually phased in. Some cities have limited bans in place and the national government bans smoking in hospitals. In 2015, a new regulation in Beijing became effective and enhances such prohibition.

Reference Citations

Workplace Safety and Health: Labor Law, 1995, arts. 52-57; Law of the People’s Republic of China on Work Safety, 2002

Drug and Alcohol Use: Beijing Tobacco Control Ordinance (Chinese)

Termination

Termination by Employer

Under Chinese law, employment contracts can end if:

• the term of the contract expires,
• the parties mutually agree,
• the employer terminates the employee during a probationary period,
• the employer terminates the employee for just cause,
• the employer terminates the employee with proper advance notice or by paying salary in lieu of notice,
• the employer terminates the employee by mass layoff,
• the employee terminates the contract for just cause,
• the employee terminates the contract with proper advance notice,
• the employee reaches the statutory retirement age or begins receiving his or her old-age insurance pension,
• the employee dies or is declared to be missing or deceased by a court,
• the employer is declared bankrupt, or
• the employer loses its business license, is ordered to close or liquidate or decides to dissolve.

Termination without notice or severance: An employer may terminate an employment contract without giving advance notice and without paying severance under any of the following circumstances:

• during the probationary period if the employee does not meet the conditions of recruitment,
• upon a serious violation of company work rules,
• if the employee has committed a serious dereliction of duty that results in substantial harm to the employer,
• if the employee is subject to criminal prosecution,
• if the employee establishes an employment relationship with another employer that affects the employee’s ability to perform his or her duties for the initial employer, or
• if the employee is found to have used coercion or deception in establishing or modifying the contract.

Labor unions must be notified by employers of any proposed unilateral termination and may demand that an employer correct an action that violates government law or the terms of a labor contract.

Termination with advance notice and payment of severance: The law requires 30 days’ notice—or payment of one month’s wages in lieu of notice—as well as severance pay to employees who are terminated for the following reasons:

• the employee is unable to perform job duties due to incompetence despite receiving proper training or being transferred to another post;
• the employee, after undergoing treatment for a non-work-related injury or illness, is unable to perform the original work or other work arranged by the employer; or
• the employment contract cannot be fulfilled due to a major change in the “objective circumstances” that form its underlying basis and, after consultations between the employer and the employee, no agreement can be reached on modifications to the contract.

Severance pay is one month’s salary per full year of work plus a half month’s salary for a partial year of work of less than six months or a full month’s salary for a partial year of work of six months or more. Workers whose salary is more than three times the monthly average for the locality in which they work are subject to limits on the amount of salary (three times the monthly average) and seniority (12 months) that can be used in calculating severance.

Employees terminated by agreement or by the expiration of a fixed-term contract without an extended contract being offered are also entitled to severance.

Special protection against termination is afforded employees:

• exposed to occupational hazards but not undergoing a post-employment occupational health check;
• suspected of having contracted an occupational illness or under medical observation;
• on sick leave and undergoing medical treatment for non-work-related injuries or illnesses;
• who have partially or totally lost their capacity to work due to occupational disease or injury;
• who are pregnant, on maternity leave or breast-feeding; or
• who have at least 15 years of service with an employer and are less than five years away from retirement.

Termination by Employee

Termination without notice: A worker may terminate an employment contract without giving advance notice if the employer:

• fails to provide working conditions specified in the contract;
• fails to pay the worker on time and in full;
• fails to pay the required social insurance premiums;
• establishes rules that violate labor laws or regulations and negatively affect the worker;
• is found to have used coercion or deception in establishing or modifying the contract;
• forces a person to work through violence, intimidation or illegal restrictions on personal freedom; or
• requires a worker to perform hazardous operations that threaten his or her safety.

Termination with advance notice: A worker can terminate the contract without having to provide cause with 30 days’ notice, three days’ notice for a probationary employee.

Plant Closings and Mass Layoffs

Layoffs of 20 or more workers or 10 percent or more of the total number of the enterprise’s employees are allowed in the following cases:

• serious production and business operation difficulties,
• restructuring due to bankruptcy,
• revision of business methods or introduction of major changes to production, or
• a major change in economic circumstances rendering contracts impossible to perform.

The law leaves it to local governments to make decisions on some of these cases, so there is no uniformity in the way standards are applied throughout China. In many cases, standards only apply to domestically owned enterprises, which makes it easier for foreign invested enterprises to execute mass layoffs.

When initiating mass layoffs, employers must explain the reasons for dismissals to the labor union or to all employees 30 days in advance. Employers must consider the opinions of the labor unions or the employees on the dismissals and report the workforce reduction plan to the local labor bureau. Employees who are laid off are entitled to severance payments.

In determining which employees to retain, employers are required by law to give preference to those with long fixed-term contracts, those with open-term contracts and those who are sole income earners in families that include children or seniors.

If an employer that has laid off workers seeks to hire again within six months, it is required to give preference to the workers it laid off.

Payment on Termination

Severance pay is one month’s salary per full year of work plus a half month’s salary for a partial year of work of less than six months or a full month’s salary for a partial year of work of six months or more. Workers whose salary is more than three times the monthly average for the locality in which they work are subject to limits on the amount of salary (three times the monthly average) and seniority (12 months) that can be used in calculating severance. Employees terminated by agreement or by the expiration of a fixed-term contract without an extended contract being offered are also entitled to severance.

Unemployment Insurance

To be eligible for unemployment benefits, individuals must meet the following criteria:

• both former employee and former employer paid insurance premiums for at least one year,
• employment was terminated involuntarily,
• the former employee has registered as unemployed, and
• the former employee is seeking new employment.

Unemployed individuals are entitled to receive unemployment benefits for up to 24 months, depending on the length of time unemployment insurance premiums were paid. The benefit amounts are set by local authorities. Individuals can lose their entitlement to unemployment benefits if they do not accept a job offered by the labor authorities.

Reference Citations

Termination by Employer: Labor Law, 1995, Chapter 4

Termination by Employee: Labor Law, 1995, Chapter 4

Plant Closings and Mass Layoffs: Labor Law, 1995, art. 41

Payment on Termination: Labor Law, 1995, art. 47

Unemployment Insurance: Social Insurance Law, 2010, (Chinese)

Personal Taxes

Residency Requirements

Foreign workers not domiciled in China, but residing in China for at least 183 days during a tax year and no more than five years are subject to individual income tax for that tax year only on income sourced from China and income sourced outside China but paid by entities in China. After the fifth year, such workers need to pay income tax to China based on worldwide income.

Income is sourced from the country where an individual actually works to derive the income, regardless of the location of the entity paying the income.

Under terms of the Chinese bilateral tax treaty with the U.S., a U.S. national resident in China for no more than 183 days in a calendar year is exempt from Chinese income tax for that year, provided compensation is not paid or borne by a Chinese enterprise, a fixed base or a permanent establishment in China. Locally paid employees, whether Chinese nationals or expatriates, are subject to income tax from their first day of employment in China.

Taxable Income

Residents of China are subject to individual income tax on their worldwide earnings. Taxable income includes all income derived by an individual from employment such as salary, wages, bonuses, allowances, subsidies, and stock and securities subscription rights.

A foreign worker not domiciled in China but who has resided in China continuously or cumulatively for more than 90 days (or 183 days where a tax treaty applies) is subject to tax only on income sourced from China during the actual working period in China. A foreign worker not domiciled in China, but residing in China for at least 183 days during a tax year and no more than five years is subject to individual income tax for that tax year only on income sourced from China and income sourced outside China but paid by entities in China. After the fifth year, such workers need to pay income tax to China based on worldwide income.

Exempt (nontaxable) benefits for expatriate employees in China include reimbursement for:

• expenses incurred for relocation to China,
• substantiated (documented) housing costs in China,
• costs of educating dependent children in China, and
• two round-trip home visits annually.

Employers are required to withhold individual income tax from employee compensation and remit it to the State Treasury within the first 15 days of the month following the month in which the compensation was earned. Within the same period, employers are required to file a tax return documenting compensation, withholding, and payment. Expatriate employees paid by a Chinese employer generally are not required to file a tax return. Employee returns must be filed (within the first three months of the following year) if the employee stays in China for a full year (ignoring short-term absences) and earns more than 120,000 yuan annually.

Tax Rates

Employee wages and salaries are taxed on a progressive system with rates ranging from 3 percent to 45 percent.

Employers make contributions for old-age pension insurance, medical insurance, occupational injury insurance, unemployment insurance, maternity insurance, and local housing fund. The contribution rates, which are subject to statutory limits and caps, vary from city to city.

Reference Citations

Residency Requirements: Individual Income Tax Law, art. 1 and 2

Taxable Income: Individual Income Tax Law

Tax Rates: Individual Income Tax Law

Web References

In English unless otherwise noted.

Law and Regulation

Labor Contract Law

Labor Contract Law Implementing Regulations

Labor Law

Law on the Prevention and Treatment of Occupational Diseases (Chinese)

Law on Work Safety

Provisions on the Employment of Foreigners in China (Chinese)

Government Websites and Publications

Embassy of the People’s Republic of China in the United States of America

Ministry of Commerce

Ministry of Human Resources and Social Security (Chinese)

The State Council of the People’s Republic of China

Other Websites and Publications

China Labor Watch

International Labor Organization, China

International Labor Organization, Country Profiles: China