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Key Country Facts

Currency: Yuan (CNY)

Time zone: UTC +8, some areas use UTC+6

Capital city: Beijing

Official language: Putonghua and standard Chinese characters are the common language of the country. The minority areas can use their own national language.

Employment Contracts

The Employment Contract Law is the most important law in China relating to an employer and employee relationship. This law is applicable to the employment of foreigners as well as local Chinese employees, and it applies to local Chinese companies as well as Wholly Foreign-Owned Enterprise (WFOE).

Written employment contract is required by law. Certain terms need to be defined:

  • Fixed-term or open-ended.
  • Different lengths of probation.
  • Need to state name, position, term, benefits, social security, etc.

The contract must be in Chinese, common to have English translation. Courts will only rely on Chinese version in case of dispute.

China Holidays

Holiday Date
New Year’s Day Jan 1
Spring Festival Feb 11 to 17

In replace, work on Feb 7 (Sun) and Feb 20 (Sat)

Qing Ming Festival (Tomb-Sweeping Day) Apr 5
Labour Day May 1 to 5

In replace, work on Apr 25 (Sun) and May 8 (Sat)

Dragon Boat Festival Jun 14
Mid-Autumn Festival Sep 19 to 21

In replace, work on Sep 18 (Sat)

National Day Oct 1 to 7

In replace, work on Sep 26 (Sun) and Oct 9 (Sat)

Vacation

One year or more and less than 10 years’ cumulative service: five days of vacation; 10 years or more and less than 20 years’ cumulative service: 10 days of vacation; 20 years’ cumulative service or more: 15 days of vacation. Common practice is to give more annual leave to key staff to incentivize them.
Allowances for paid leave and sick leave, etc. are based on total working life, not just working period with the company.
Employers are obligated to ensure their employees take their vacation days. Even to the extent that if an employer fails to do so, they are required to compensate the employee for untaken paid leave.
In addition to regular salary, the employer is required to pay the employee 200% of the employee’s daily wage for each day of untaken paid leave, where daily wage = monthly salary / 21.75. This is not required for days of paid leave beyond the specified law.
For instance, if the company offers more paid leave than what’s specified by law, the company may not be required to compensate for these days of untaken leave. If the employer is unable to give the employee their entitled leave, they must compensate the employee with 300% of the normal compensation.

Sick Leave

Sick leave can be availed in case of illness or non-work-related injury. The employee shall provide the supporting document issued by a certified practitioner or a recognized medical organization and shall be approved by the employer.
The number of annual (paid) sick leave permitted shall be pre-decided and stated in the employment contract of the employee, no carry over suggested. In case of a severe illness, employees in the first year of employment are entitled to a sick leave of maximum three months; one month of sick leave shall be increased for every full year after, but not more than 24 months total.
Employees need to use this leave separately from annual leave.

Maternity/Paternity Leave

Maternity leave can be used for prenatal examination, childbirth, breastfeeding period, late pregnancy and delivery.

  • Prenatal examination includes doctor visits during the first 12 weeks. Prenatal examination time is counted as working time.
  • Natural delivery – 128 days
  • Difficult delivery – 128 + 15 days
  • Multiple deliveries – 128 + 15 days + 15 days extra per baby
  • Abortion or Miscarriage within first 4 months – 15 days
  • Abortion or Miscarriage after first 4 months – 42 days
  • Prenatal leave: After 7th month of pregnancy can avail 1-hour daybreak. May also avail 2.5 months prenatal leave upon employer approval.
  • Breastfeeding leave: For a child less than a year old, female employees may have up to two feeding periods per day (30 minutes per baby). Travel time for the same period shall be counted as working time. Alternatively, after childbirth, female employees may also apply for leave of 6.5 months upon employer approval. With maternity insurance (a part of social security insurance), the employee is compensated with an allowance rather than her normal salary during maternity leave.

Male employees requesting paternity leave are, in the plurality of regions, entitled to 15 days. However, this may vary by location. The following are the cities that do not follow the 15-day norm:

  • 7 days (of paternity leave): Tianjin, Shandong
  • 10 days: Shanghai, Anhui
  • 20 days: Sichuan, Hunan
  • 25 days: Ningxia, Guangxi, Inner Mongolia
  • 30 days: Yunnan, Gansu

Termination/Severance

Since it is more difficult to terminate an employee after the probation period, it’s usually (but not always) recommended to set an initial term of three years for a new employee. This allows the employer to set a six-month probation period (the longest permitted under Chinese law).

Employers need to pay severance (Severance payment = One month’s salary for each year of service; for more than six months service but less than one year, it shall be calculated as one year; for less than six months service, shall pay half a month’s salary) unless the employee failed to satisfy the conditions of the recruitment under the probation or seriously violated Company Regulations or committed a Civil Crime, and the employer has clear evidence to prove so.

Otherwise, the employer needs to give a 30-day advance written notice to the employee and part ways with mutual consent. The employer may pay one-month salary over and above the severance pay in case the employer does not want to serve a 30-day advance notice period.

Bonus

A 13th month of salary is customary in many parts of China, and it is typically paid out before the Chinese New Year. This is not required, so the conditions for earning this bonus month of salary need to be specified clearly and in writing.

China Social Security

Mandatory Benefits contributions are made by both employer and employee and applicable to both expat and Chinese employees. Mandatory Benefits contributions consists of 5 mandatory insurance schemes (pension fund, medical insurance, industrial injury insurance, unemployment insurance and maternity insurance) + a housing fund (only applicable to Chinese employees).

Social Security System Monthly Salary Cap (RMB)  Employer Contribution  Employee Contribution
Pension Insurance 24.633 16.00% 8.00%
Medical Insurance 24,633 9.00% 2.00%
Unemployment Insurance 24,633 0.50% 0.50%
Work-injury Insurance 24,633 0.256% 0
Maternity Insurance 24,633 1.0% 0
Housing Fund (locals only) 24,633 7.00% 7.00%
Total 33.756% 17.50%

This information does not constitute legal advice.

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