Refer China: Navigating Labor Contracts for Foreigners in China

Visit experience-shanghai.com

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You are based in China and your job search here has been successful?

Congratulations, now it is time to close the deal with your employer.

Generally, as for any contract, the labor contract should be fairly negotiated and display the conditions of your agreement with your employer, to avoid any unpleasant surprises, with some provisions calling for a special attention.

Here are 10 key points you need to be aware of.

1. Work permit

As a pre-requisite for foreigners, you probably already heard about the work permit's requirement. Indeed, the work permit is your ticket to be legally employed in China.

Unless you possess the China Five-Star Card (commonly called China Green Card), or benefits from very few exceptions, this work permit is a must-have before starting your job.

💡 Our tips: Never work without a work permit, even if it is under processing (unless you want to be kicked out – or worse).

2. A written contract

This almost goes without saying, your labor contract must be written to determine the terms of the employment relationship. In China, from a legal standpoint, a written contract needs to be concluded within a month from your starting date as an employee.

The labor contract must include essential provisions such as the identifications of the employer and the employee, the term of the contract, the job duties, the work premises, the working hours, the off-days and rest periods, the wages, etc. Your employer might also have an employee handbook presented to you for signature, containing general corporate rules applicable to all employees to comply with.

💡 Our tips: Try to negotiate the terms of your labor contract and sign it before the work permit application.

Why? Because once the permit is approved, you might feel more compelled to treat the labor contract as a simple formality and pay less attention to its negotiation.

3. Language

Being in China, the labor contract will for sure be in Chinese, which makes sense since the Chinese version will always appeal better to a Chinese arbitrator or a Chinese Court in case of litigation.

💡 Our tips: Ask for the contract to be in dual language, usually Chinese and English, and double check thoroughly that there are no discrepancies, and that the text is consistent with what you have agreed to. This is important since most of the time, the prevailing version will be the Chinese one.

4. Term and termination

In China, it is common for foreigners to be hired on fixed-term contracts, that can be renewed by completing some procedures.

The termination conditions should also be stated clearly, the usual notice period being 30 days for both the employer and the employee.

💡 Our tips: Be aware that as a foreigner, your labor contract cannot exceed 5 years. So even if your contract states a non-fixed term, it will end after 5 years, unless it is renewed.

5. Probation

Be aware that for a fixed-term contract between 3 months and 1 year, the probation period is of maximum 1 month. Between 1 and 3 years, the probation is of maximum 2 months. And above 3 years, the probation is of maximum 6 months. This gives you room to try and test your new job and decide whether it suits you as well.

6. Work hours, weekly rest, holiday

In China, the usual workload is of 8 hours per day, with a minimum of one day rest per week.

The holidays are all the national holidays, such as New Year's Day, the Spring Festival, International Labor Day, etc. according to a specific calendar published yearly by the Chinese authorities. You also get additional off days with seniority.

💡 Our tips: Even though there are plenty of official holidays, you are entitled to negotiate additional days with your employer.

7. Wages, benefits and social security

This is of course a key provision, and you need to be clear about your salary and any benefits you might be entitled to, such as bonuses, allowances, etc.

And even though you might be told the opposite, note that paying social security contributions for foreigners is not optional anymore in Shanghai. One part is on the employer, the other on the employee.

💡 Our tips: To avoid uncertainty, sit with the HR so you are explained about taxation and the social security contributions beforehand.

8. Non-competition

One key provision of labor contracts is the non-compete. In China, such provision is more designed for key staff and limited in terms of content, geographical scope, and time, without exceeding 2 years. In case it is applied at the end of the contract, the employer must compensate the employee with a monthly amount corresponding to a percentage of its monthly wage.

💡 Our tips: Although it is not often applied, don't forget to ask for the non-compete to be compensated in case you need to comply with it, even though it is not expressly written in your contract.

9. Jurisdiction

In China, be aware that the first level of labor dispute resolution is a labor arbitration committee which will render an arbitration award within 2 months from the date of the arbitration application. In case a party is not satisfied with the outcome, such party can file a lawsuit within 15 days from the notice of the arbitration award.

💡 Our tips: Keep in mind these timings. Respecting those is paramount to be able to get a chance to assert your rights.

10. Applicable law

Last but not least, you might think that Chinese law being known to be quite favorable to employees, your employee status is protective enough.

But did you know that in Shanghai, all the labor rules don't apply equally to foreigners?

If you have an issue regarding working hours, rest and days off, work safety and occupational health, and social security, then you are in luck, you will be protected by Chinese labor law.

But beyond that, e.g. for compensation in case of termination, or penalties in case of breach, you might not be protected by Chinese laws.

💡 Our tips: In order to be fully protected, the labor contract needs to clearly state in a specific provision well emphasized that Chinese Labor Law applies, as well as Chinese Labor Contract Law, and any other relevant labor laws, regulations and administrative rules.

In conclusion, as a foreigner in China, navigating labor contracts will require a special attention, through the appropriate understanding of your rights and obligations. By paying attention to these key points and seeking legal guidance when necessary, you will be able to safeguard you interests and foster a mutually beneficial working relationship with your employer.

Enjoy your new job!

About the authors

Nicolas COSTER

Managing Partner, Paris Bar Lawyer, Arbitrator

Fatéma ADAMJEE

Legal Counsel

Coster Associates is an international legal firm based in Paris and Shanghai, facilitating global business between Europe and China.

With an in-depth knowledge and experience of foreign investment, we help companies set up their business and secure their interests in China and in Europe, supported by a network of partners for a 360° service.

Not only we thrive solving problems, but we aim at turning potential issues into key opportunities for our clients.

We are your legal shield in Asia.

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