Employment Law in China

Contracts

In China, employment contracts can be fixed-term or permanent, depending on the nature of the job and the agreement between the employer and employee. Permanent employment contracts must include benefits such as social insurance, housing fund contributions, paid leave, and severance pay. Fixed-term employees are entitled to the same benefits as permanent employees, and after two consecutive fixed-term contracts or ten years of service, employers are generally required to offer a permanent contract.  

China also has apprenticeship contracts, mainly for training, which are governed by labor laws and regulations.

Termination and notice periods

In China, labor laws generally require a 30-day written notice for termination or salary in place of notice. In most cases, terminated employees are entitled to a warning and a fair hearing. Just cause for a dismissal includes the following: 

• Theft 
• Disorderly behavior 
• Bribery 
• Insubordination 
• Habitual negligence of duty 
• Lack of capability 
• Financial irregularities 

Employees with at least one year of service are entitled to severance pay of one month's wages for every year of service. There is no statutory gratuity payment in China; however, additional compensation may be provided based on employment contracts or collective agreements. As your Employer of Record (EOR) in China, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with labor laws and minimize legal risks.

Probation periods

In China, probation periods are indirectly addressed in local law, varying based on contract length: up to one month for contracts between three months and one year, two months for contracts between one and three years, and up to six months for contracts exceeding three years, applicable in both private and government sectors.

Working hours and overtime

In China, the standard working week typically consists of 40 hours, spread across five days, with a legal maximum of eight hours per day and 44 hours per week on average. Employees are entitled to at least one rest day per week, commonly on Sunday.  

Any work beyond the standard working time is considered overtime. Chinese labor law limits overtime to three hours per day and 36 hours per month. Overtime compensation rates are as follows:  

• 150% of the regular wage for overtime on workdays  
• 200% for overtime on rest days if no compensatory leave is provided  
• 300% for overtime on statutory public holidays  

Employers must adhere to these regulations to ensure compliance with Chinese labor laws and to promote a balanced work environment.

Taxes 

In China, withholding tax is known as Individual Income Tax (IIT) and is deducted by employers before paying salaries to employees. Employers must deduct IIT from employee salaries based on applicable income tax rates and submit it to the tax authorities.

Employer payroll contributions

China's social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers' compensation is financed by contributions from state governments, employers, and employees.