GILS Employment Law: China
CHINA
(1) Maternity and Family Leave Rights
1.1. How long is the duration of maternity leave?
According to the Special Provisions for Female Employees, female employees who give birth in compliance with PRC birth control policies (“Eligible Female Employees”) are entitled to 98 days of maternity leave, of which 15 days may be taken before delivery. The leave can be extended by an additional 15 days under special circumstances such as dystocia and multiple births (i.e. 15 days for each additional baby). Additionally, extra maternity leave is granted by local regulations where the specific length varies from city to city. For example, in the Beijing and Shanghai municipalities, the total length of maternity leave is 158 days, including a base 98-day period per national law and 60 days granted by local regulations.
An eligible female employee who suffers a miscarriage during the first four months of pregnancy shall be entitled to 15 days of maternity leave, and those who suffer a miscarriage after four months of pregnancy shall be entitled to 42 days of maternity leave.
1.2. What are the rights of a parent when returning to work after parental leave?
According to the Special Provisions for Female Employees, for a female employee whose baby is below the age of one years old, the employer shall not extend her working hours or assign her to a night shift. Instead, the employer must arrange a one-hour breastfeeding time on each working day for the female employee during her nursing period which lasts one year counting from the date of birth. In the event of multiple births, an additional hour of breastfeeding time is granted for an additional baby. Furthermore, an employer who employs a large number of female employees shall, depending on the needs of female employees, establish facilities including a female washroom, maternity rest room and breastfeeding room to properly facilitate female employees’ difficulties in physical health and breastfeeding.
Additionally, according to the Employment Contract Law, a female employee who is enjoying the nursing period is prohibited from being unilaterally terminated by her employer under certain circumstances such as incompetency, mass layoff, etc.
1.3. Do fathers possess the right to take paternity leave?
There is no unified national legislation on paternity leave for male employees in the PRC. Paternity leave is only stipulated in local regulations on a municipal or provincial level. For instance, paternity leave for male employees in Beijing is 15 days and for male employees in Shanghai it is 10 days.
1.4. Are there any additional parental leave rights that employers must adhere to?
According to the Population and Family Planning Law of the PRC amended in 2021, the state encourages local authorities to introduce parental leave if conditions permit. Parental leave is granted by local regulations only. For instance, both Beijing and Shanghai have introduced parental leave (childcare leave) which entitles eligible parents to five days (working days) of full-paid leave each year till the child reaches three years of age.
1.5. Do employees have the right to flexible working arrangements if they are responsible for dependents?
If the dependents are children under three years of age, eligible employees are entitled to the above-mentioned parental leave according to national laws as well as local regulations.
If the dependents are parents, eligible employees may be entitled to the elder care leave granted by local regulations of some provinces and municipalities. For example, in Beijing, an employee who is the only child in his/her family is entitled to no more than 10 working days of full paid elder care leave per calendar year to take care of his/her parents who are in need of nursing care due to illness, injury or disability.
(2) Termination of Employment
2.1. Is it mandatory for employers to provide notice of termination of employment? How is the notice duration determined?
The PRC Employment Law provides limited grounds for the termination of an employment relationship. Whether a prior notice is necessary depends on the specific statutory ground for the termination.
Under any of the following circumstances, an employee must be given a 30-day prior written notice or one month’s salary in lieu of notice:
1. the employee suffers from an illness or a non-work related injury and is unable to take up the original work (or any other work) assigned by the employer to them after the statutory medical treatment period expires;
2. the employee is incompetent and remains incompetent after training or there is an adjustment of job position;
3. there has been a major change to the objective circumstances under which the employment contract was executed which renders the contract impossible to perform, and the employer and employee fail to reach an agreement on amending the contract (“Major Change to the Objective Circumstances”).
In terms of economic layoffs (i.e. mass layoffs), employers shall explain the situation to the trade union or all of its employees 30 days in advance (which can be regarded as a form of prior notice) and seek their opinions before reporting the proposed layoffs to local administrative authorities.
Additionally, though not required by the Employment Contract Law, some local regulations of cities such as Beijing require the employer to give prior notice (or salary in lieu of notice) to employees when the term of an employment contract expires and the employer decides not to renew it.
2.2. Can employers enforce "garden leave" during the notice period, where the employee remains employed but does not have to attend work?
PRC law does not have the concept of garden leave; however, it is used by some companies in practice, as long as: 1) such arrangement has been prescribed by the effective internal policies of the employer; or 2) such arrangement has been agreed by the employee and the employee has been paid with normal salaries during the leave.
2.3. What safeguards do employees have against dismissal? Under what circumstances is an employee considered to be dismissed? Is consent from a third party necessary before dismissal by an employer?
Employers must inform the trade union when they are planning to unilaterally dismiss an employee. If the trade union considers that the proposed dismissal is not compliant with legal requirements, the trade union can request the employer to rectify the situation. The employer must consider the trade union’s opinions and notify the trade union in writing of its final decision on the termination. Furthermore, judicial remedies are also available to employees who consider that they have been wrongfully dismissed by employers.
An employer’s decision to dismiss an employee must be clearly expressed to that employee. Under no circumstances should an employee be treated as being dismissed if there is no such clear expression.
Consent from a third party is not required before an employer can proceed with the dismissal.
2.4. Are there specific employee categories enjoying special protection against dismissal?
According to the Employment Contract Law, the following categories of employees are protected against being terminated unless the termination is based on a ground stipulated in Article 39 of the Employment Contract Law such as employee’s severe misconduct, gross neglect of duty, etc.:
1. an employee who has been exposed to occupational disease hazards and has not received any occupational health check-up, or who is suspected of having contracted an occupational disease and is being diagnosed or is under an observation period;
2. an employee who has been confirmed as having lost (or partially lost) their capacity to work as a result of contracting an occupational disease or sustaining a work-related injury with their current employer;
3. an employee who has contracted an illness or sustained a nonwork-related injury and his/her medical treatment period has not expired;
4. a female employee during a pregnancy, maternity or nursing period;
5. an employee who has been working for 15 years consecutively for the current employer and will reach statutory retirement age in less than five years’ time.
2.5. Under what circumstances is an employer justified in dismissing employees: 1) due to individual reasons; 2) business-related grounds? Do employees receive compensation upon dismissal, and if so, how is it calculated?
1. Employers can dismiss employees for the following reasons related to individual employees:
1.1. when the employee fails to meet the recruitment requirements during the probation period;
1.2. when the employee commits severe misconduct;
1.3. when the employee commits a serious dereliction of duty or engages in corrupt practices, causing substantial damage to the employer’s interests;
1.4. when the employee establishes an employment relationship with another employer, which has a severe impact on the performance of tasks assigned by the employer, or the employee refuses to correct the wrongdoing as requested by the employer;
1.5. when the employee is subject to criminal liabilities;
1.6. when the employee uses means such as deception, coercion or taking advantage of a vulnerable position to cause the employer to enter into the employment contract or amend the employment contract contrary to the employer’s true intent;
1.7. when the employee suffers from an illness or a non-work related injury and is unable to take up the original work (or any other work) assigned by the employer to them after the statutory medical treatment period expires;
1.8. when the employee is incompetent and remains incompetent after training or an adjustment of job position.
Employees are not entitled to any severance when being dismissed for the above reasons 1–6, while employees shall be entitled to statutory severance when being dismissed for the above reasons 7 and 8. The severance is usually one month’s salary for each year of service with the employer. A service period of at least six months but less than a year will be counted as one year, and a service period of less than six months will be counted as half a year. The one month’s salary is calculated based on the employee’s average monthly salary during the 12 months prior to termination which is capped at three times the average monthly salary of local employees, as determined by the local government.
2. Employers can dismiss employees for the following business-related reasons:
2.1. Major Change to the Objective Circumstances (see question 6.1 above) such as business relocation, merger and acquisition, asset transfer, etc.; or
2.2. economic layoffs (see question 6.9 below).
Employees are entitled to statutory severance when being dismissed due to the above business-related reasons.
2.6. Are there particular protocols that employers must adhere to regarding individual dismissals?
Procedural requirements for individual dismissal are as follows:
1. notifying the trade union of the termination ground;
2. delivering the termination notice to the employee and making the statutory severance payment if needed;
3. registering the termination with labour authorities if so required by local regulations, and assisting with the social insurance and housing fund transfer for the employee; and
4. issuing an employment certificate to the employee.
2.7. What claims can an employee pursue if they are dismissed? What remedies are available for a successful claim?
An employee being dismissed can bring a wrongful dismissal claim in the judicial authorities, and if his/her claim is upheld, possible remedies include: 1) reinstatement of employment (in which case the employer must also make up the remuneration applicable to the entire period of the judicial proceedings); or 2) double statutory severance payment.
2.8. Can employers resolve claims before or after they are initiated?
Yes, employers can settle with employees by means of mediation or conciliation at any time before or after the claims are initiated.
2.9. Does an employer bear additional obligations when dismissing multiple employees simultaneously?
According to Article 41 of the Employment Contract Law, if an employer proposes to unilaterally reduce its workforce by 20 persons or more, or by 10% or more of the total number of its employees under specific circumstances, the employer must complete the following procedures before making any redundancies:
1. to explain the circumstances to its trade union or to all employees 30 days in advance;
2. to consider the opinions of the trade union or the employees; and
3. to report the redundancy plan to the competent labour administrative authorities.
In addition, employees with long fixed-term employment contracts, open-ended employment contracts or those who are the sole income earners in a family with dependent children or elderly people must be retained with priority during the redundancies.
2.10. How can employees enforce their rights regarding mass dismissals, and what are the consequences if an employer fails to comply with its obligations?
Employees who consider that they have been wrongfully dismissed may bring the wrongful dismissal claim to the judicial authorities individually or through class actions. If their claim is sustained, employees will be entitled to either reinstatement of employment or double severance payment.
(3) Data Protection and Employee Privacy
3.1. How does the employment relationship get impacted by employee data protection rights? Is the transfer of employee data across borders unrestricted for employers?
With the PRC Personal Information Protection Law (“PIPL”), rules and regulations relating to processing personal information are stipulated with more clarity. Employers, as data processors, shall also comply with the PIPL and other data protection laws when collecting and processing the personal information of employees.
There are specific requirements for cross-border data transfer in the PIPL, such as obtaining each employee’s separate and informed consent, entering into a contract with the overseas recipient and conducting personal information protection impact assessment, etc.
3.2. Are employees entitled to obtain copies of any personal information held by their employer?
Yes, according to the PIPL, the employee has the right to obtain copies of his/her personal information which is held by the employer.
3.3. Do employers have the authority to conduct preemployment checks on prospective employees (such as criminal record checks)?
Employers can carry out pre-employment checks on prospective employees; however, the checks must be within a reasonable scope and on a necessity basis. Whether an employer can take the initiative to check employees’ criminal records will depend on the nature of the employer and the position applied for. For example, the current law expressly prohibits persons who have received criminal penalties from working in the People’s Bank of China, and so the bank is permitted to conduct criminal record checks on prospective employees. It is good practice to obtain the prospective employees’ informed consent before conducting such checks.
According to the Criminal Law of the PRC, employees must faithfully disclose their criminal records to employers, except for those who were under the age of 18 at the time the crime was committed and were given penalties lighter than imprisonment of five years.
3.4. Do employers have the right to monitor employee emails, phone calls, or use of company computer systems?
Considering that the employees’ expectation of privacy on workrelated issues is relatively low, employers are generally entitled to monitor the employee’s work-related emails and telephone and computer system if there is a reasonable ground for such monitoring.
3.5. Can employers control an employee's use of social media both inside and outside the workplace?
The company may have the right to prohibit its employees from using social media for private purposes during business hours. Employees can use social media at private times but his/her use of social media must not violate his/her obligations towards the company such as confidentiality and no defamation, nor should such use cause any negative impact on the company. Otherwise, any misuse by an employee even outside the workplace and business hours may account to misconduct which an employer can take disciplinary actions towards him/her, provided that the company’s internal rules have clear provisions on this issue.
(4) Court Practice and Procedure
4.1. Which courts or tribunals hold jurisdiction over employment-related complaints, and what is their composition?
According to the Employment Dispute Mediation and Arbitration Law of PRC, before filing an employment dispute with court, it is mandatory to submit the dispute to the competent local employment dispute arbitration committee, an institution specialising in hearing employment dispute cases. The committee is composed of representatives of labour administration departments, trade unions and enterprises. In practice, most of the cases are usually heard by a sole arbitrator sitting alone.
If any party is unsatisfied with the arbitration award which is not final, the party is entitled to bring the lawsuit to the competent people’s courts (the first instance courts and then the second instance court). The first instance tribunal is usually composed of judges and/or jurors, and the total number shall be odd. Jurors performing jury duties shall have equal rights and obligations as judges. For simple cases, the summary procedure may apply by the first instance court and the case will be tried by one judge. The second instance tribunal is composed of judges, the number of which must be odd too
4.2. What procedures govern employment-related complaints? Is conciliation obligatory before proceeding with a complaint, and is there a fee for employees to submit a claim?
Under PRC law, most of the employment-related disputes are solved under a two-stage framework: arbitration and litigation. Without going through arbitration procedures, parties cannot commence litigation procedures for disputes. When there is a dispute, the party will usually file a claim at the arbitration committee first, and if any party is unsatisfied with the arbitral award, it can bring the case to the courts. However, the arbitral awards regarding the following employment disputes are exemptions:
1. claims for labour remuneration, medical fees for a work-related injury, severance pay or damage compensation of no more than the amount of local minimum monthly wages multiplied by 12 months; or
2. disputes in respect of working hours, rest and leaves, or social insurance, arising from implementing national labour standards.
For the above two types of cases, an employee still has the right to bring a lawsuit before court within 15 days after receiving the awards. In contrast, the employer has no right to bring a lawsuit over the same arbitral awards before court.
Under PRC law, an employer and employee are encouraged to consult with each other and to reach a conciliation agreement on employment dispute settlement. Even though the employment disputes had been submitted to arbitration or litigation, an employer and employee still could negotiate and reach a conciliation agreement, as long as the final arbitral award or court decision has not been made. The conciliation is not mandatory and must be based on both parties’ voluntariness. The parties may choose to directly submit their employment disputes to arbitration without any preclaim conciliation.
All the employment dispute arbitrations are free of charge. The litigation cost is RMB 10 for the first instance trial and RMB 5 for the second instance trial, and are usually borne by the losing party.
4.3. What is the typical duration for resolving employment-related complaints?
For arbitration, the arbitral committee shall finish making the award within 45 days from the date when it accepts the arbitration application. If an extension is needed due to the complexity of the case, an additional 15 days will be granted.
At the stage of litigation, the case in the trial of first instance shall be completed within six months and the case in the trial of second instance shall be completed within three months.
Therefore, it usually takes around one year for a case to go through both arbitration and litigation until the parties can get the final judgement. However, long delays in hearing cases happen frequently as a result of the explosion of employment dispute cases in recent years.
4.4. Is it possible to appeal against a decision at the first instance, and if so, how long does such an appeal usually take?
Yes. If the party is dissatisfied with the judgement of the first instance court, it has the right to file an appeal with the higher-level people’s court within 15 days from the date of service of the judgement. The second instance proceedings should be completed within three months but can be extended subject to the approval of the president of the court. The judgments made by the courts of second instance are final and take effect upon its serving upon the parties.
(5) Work Permits
5.1. What are the restrictions or limitations placed on individuals holding a work permit in terms of job duties, employer changes, or duration of stay?
According to Article 43.2 of the Exit-Entry Administration Law of the People's Republic of China, individuals holding a work permit are limited to performing the job duties specified in their work permit application. Changing employers typically requires obtaining a new work permit.
The duration of stay for individuals with work permits is tied to the validity of the work permit. Generally speaking, the work permit for foreigners should be valid for 1 year but varies from case to case. According to the Notice on the Comprehensive Implementation of the Work Permit System for Foreigners in China issued jointly by the State Administration of Foreign Experts Affairs, the Ministry of Human Resources and Social Security, the Ministry of Foreign Affairs, and the Ministry of Public Security, work permits for foreigners coming to China are divided into three types: A, B and C. For Category A for high-end talents, the foreigners can apply for the work permit for up to 5 years; for category B for professionals, the foreigners can apply for the work permit for up to 2 years; and for category C, the work permit is valid for 1 year.
Work permit of Category A for foreign high-end talents: applied for senior managers, professional and technical talents, and other talents with important influence. It usually requires a high degree of education, professional skills, or extensive work experience, as well as a proven track record in a related field. The work permit of Category A is usually approved by a national department or a relevant senior talent management agency.
Work permit of Category B for foreign professionals: applied for foreigners who are engaged in industries such as technology, education, medical care, culture, sports, finance. Applicants need to meet the relevant academic qualifications, work experience and occupation requirements, and be sponsored by an employer in China.
Work permit of Category C: usually for foreigners in the case of short-term work, internships, cultural exchanges, etc. Applicants need to meet specific requirements, such as age restrictions, skill requirements, or the needs of a particular project.
5.2. What are the requirements for obtaining a work permit?
1. Some common requirements for the employees include:
1.1. Employment Contract: A valid employment contract with a Chinese employer;
1.2. Educational Qualifications: Typically, a bachelor's degree or higher is required, although there may be exceptions for certain specialised professions;
1.3. Work Experience: Relevant work experience in the field may be required for certain positions;
1.4. Health Examination: A health examination conducted at a designated hospital or clinic in China;
1.5. Clean Criminal Record: A clean criminal record from the individual's home country or any other countries where they have lived;
1.6. Employer Sponsorship: The employer in China initiates the work permit application process and provides necessary support and documentation.
2. Employers must meet the following basic conditions for applying for a foreigner's work permit in China:
2.1. established legally in accordance with Chinese law, with no record of serious violations and untrustworthiness;
2.2. the positions for the employed foreigners should be those with special needs, for which there is a temporary shortage of suitable candidates in China, and which do not violate the relevant provisions of the state; the wages and salaries paid to the foreigners hired shall not be lower than the local minimum wage; and where laws and regulations stipulate that there should be prior approval, approval is required.
The requirements for obtaining a work permit in China might vary depending on factors such as the individual's nationality, the type of work they will be doing, and the regions.
5.3. Are there any recent changes or updates to work permit regulations or policies that individuals or employers should be aware of?
On January 24, 2024, the Ministry of Human Resources and Social Security of Chinese held a press conference for the fourth quarter of 2023, pointing out that it will promote the one-window acceptance, parallel examination and approval, and joint handling of two certificates for foreigners' work permits and work-type residence permits in China, improve the service guarantee mechanism for foreign experts, and work with relevant departments to optimise policies and measures and strengthen contact services. This will be more convenient for applications for work permits.
5.4. Are there specific industries or occupations that have different requirements or exemptions for obtaining a work permit?
The following four categories of persons are exempt from applying for a foreigner's work permit:
1. foreign professional and technical management personnel directly funded and hired by the Chinese government, or foreign professional and technical management personnel funded and hired by state organs and public institutions, with senior technical titles or special skill qualification certificates confirmed by national or international authoritative technology management departments or industry associations. In general these foreigners should hold the Foreign Expert Certificate issued by the Bureau of Foreign Experts;
2. foreign workers who hold the "Permit for Foreigners to Engage in Offshore Petroleum Operations in the People's Republic of China" to engage in offshore oil operations, do not need to land, and have special skills;
3. foreigners who have been approved by the Ministry of Culture to carry out commercial theatrical performances with the "Temporary Business Performance Permit"; and
4. foreigners who hold China's Foreigner's Permanent Residence Permit.
5.5. What is the ratio of foreign and local labor?
The specific Ratio was not found in the government’s official reports, however, according to an unofficial report published online dated January 4, 2024, the number of work permits issued by China for foreigners has reached 484,000, indicating that the proportion of foreign high-end talents is as high as 23.4%. This influx of foreign professionals to China is mainly active in key fields such as education, finance, science and technology, and culture, and is mainly concentrated in economically developed regions such as Beijing, Shanghai, and Guangdong.
(6) Tax
6.1. What are the legal obligations and requirements regarding the individual income tax paid by employers?
According to the Law of the People's Republic of China on the Administration of Tax Collection, employers have several legal obligations and requirements regarding individual income tax paid by employees. Some of the key obligations and requirements include:
1. Withholding Tax: Employers are responsible for withholding individual income tax from their employees' salaries and wages based on the applicable tax rates and tax brackets;
2. Tax Calculation and Reporting: Employers must accurately calculate the amount of individual income tax to be withheld from each employee's salary or wages based on the employee's income level and any applicable deductions or exemptions;
3. Monthly Reporting and Payment: Employers are required to report and pay the withheld individual income tax to the tax authorities on a monthly basis. This typically involves submitting tax reports and payments to the local tax bureau;
4. Annual Reconciliation: At the end of each year, employers are required to reconcile the individual income tax withheld from employees' salaries and wages with the total annual income tax liability. Any discrepancies must be corrected, and annual tax reconciliation reports must be submitted to the tax authorities;
5. Employee Records: Employers must maintain accurate records of individual income tax withholding for each employee, including salary/wage payments, tax withheld, and any applicable deductions or exemptions;
6. Compliance with Tax Laws: Employers must comply with all relevant tax laws, regulations, and policies related to individual income tax withholding, reporting, and payment.
Failure to comply with these legal obligations and requirements regarding individual income tax can result in penalties, fines, or other consequences for employers.
6.2. What is the percentage of withholding tax?
The employer is responsible for deducting individual income tax (withholding tax) from the employees’ salaries.
According Article 2 of Individual Income Tax Law of the People's Republic of China, individual income tax shall be paid for the following personal income:
1. income from wages and salaries;
2. income from remuneration for labour services;
3. income from author's remuneration;
4. income from royalties;
5. business income;
6. income from interest, dividends and bonuses;
7. income from property lease;
8. income from the transfer of property;
9. incidental income.
Resident individuals who obtain the income from items 1 to 4 of the preceding paragraph (hereinafter referred to as "comprehensive income") shall calculate individual income tax on a consolidated basis according to the tax year. For non-resident individuals who obtain the income in items 1 to 4 of the preceding paragraph, the individual income tax shall be calculated on a monthly or sub-itemized basis.
Taxpayers who obtain the income from items 5 to 9 of the preceding paragraph shall calculate individual income tax separately in accordance with the provisions of this Law.
According to Article 3 of Individual Income Tax Law of the People's Republic of China, the rates of the individual income tax are as follows:
1. For comprehensive income, a progressive tax rate of 3% to 45% shall be applied.
Individual Income Tax Rate Table 1 (Applicable to Comprehensive Income):
2. For comprehensive income, a progressive tax rate of 3% to 45% shall be applied.
Individual Income Tax Rate Table 1 (Applicable to Comprehensive Income):
3. Income from interest, dividends and bonuses, income from property leases, income from property transfer and incidental income shall be subject to a proportional tax rate of 20%.
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