Employee Termination in China

Employee Termination in China: Legal Procedures & Best Practices

— Ensuring HR Compliance and Minimizing Legal Risks

1. Introduction

Terminating an employee in China is a sensitive process that must strictly follow the country’s labor laws. Unlike some other jurisdictions, China places strong emphasis on employee protection. Any termination that doesn’t comply with legal procedures can result in disputes, compensation claims, or even administrative penalties.

This article outlines the key rules, procedures, and best practices for legally and effectively managing employee termination in China.

2. Types of Employment Termination

Under Chinese labor law, employment can be terminated in three primary ways:

(1) Mutual Agreement
The employer and employee agree to terminate the contract voluntarily. This is often the most straightforward and least risky method. A written agreement and proper compensation (if any) are required.

(2) Unilateral Termination by Employer
An employer may terminate an employee only under legally permitted conditions, such as:

• The employee seriously violates company policies.
• The employee commits gross negligence or malpractice causing serious loss.
• The employee is unfit for the job even after training or reassignment.
• The company undergoes major restructuring, bankruptcy, or dissolution (with notice and severance).

(3) Termination by Employee
Employees may resign by providing written notice (typically 30 days for regular employees or 3 days during probation).

3. Legal Procedures for Employer-Initiated Termination

To ensure compliance, employers should follow these key steps:

Gather Evidence:
Collect sufficient documentation to support the reason for termination (e.g., performance reports, disciplinary records).

Issue Written Notice:
Notify the employee at least 30 days in advance (or pay one month’s salary in lieu of notice).

Consult with the Labor Union (if applicable):
If a union exists, it must be informed before termination.

Settle Severance Pay:
In most cases, the employer must pay economic compensation based on the employee’s service years (generally one month’s salary per full year of service).

Complete Documentation:
Provide the employee with a written termination certificate and handle social insurance and tax deregistration accordingly.

4. Common Mistakes to Avoid

• No written evidence: Terminating without proper documentation can be deemed illegal dismissal.
• Improper reason: Not all performance or attitude issues legally justify termination.
• Lack of severance: Failing to pay the required compensation can lead to labor arbitration.
• Oral notice only: Verbal termination is not legally valid; written notice is mandatory.

5. Best Practices for HR Compliance

• Maintain detailed HR and payroll records.
• Implement clear employee handbooks and policies aligned with Chinese labor law.
• Conduct regular legal audits on employment contracts.
• Seek legal or HR advisory before executing sensitive terminations.

6. How We Can Help

• Our HR compliance team provides:
• Legal review of employment termination cases
• Drafting of termination and settlement agreements
• Labor dispute prevention and resolution support
• Ongoing compliance advisory for foreign-invested companies

7. Conclusion

Employee termination in China requires careful planning, documentation, and legal compliance. By following proper procedures and seeking professional guidance, your company can minimize risks, protect its reputation, and maintain a compliant HR environment. Tannet Group Limited is now in its sixth five-year development plan and continues to serve global investors with professional corporate solutions. For inquiries, please contact us at +86-755-82143512 or email anitayao@citilinkia.com. Visit our website at https://tannet-group.net/.