Home   Knowledge  China  Foreign Investment in China  Human Resources  Statutory Grounds to Terminate Labour Contracts in China 

KNOWLEDGE

SHARE

Statutory Grounds to Terminate Labour Contracts in China

【Font:L M S

Statutory Grounds to Terminate Labour Contracts in China

The Labour Contract Law of the PRC stipulates specific circumstances (“statutory grounds”) that a labour contract can be terminated. In other words, the employer must have legal grounds if it want to terminate a labour contract in China lawfully. The main legal grounds stipulated in the Labour Contract Law of the PRC include:

  1. Article 39: The employer may terminate the labour contract if the employee:

    (1)
    is proved during the probation period not to satisfy the conditions for employment.
    (2)
    materially breaches the employer’s rules and regulations.
    (3)
    commits serious dereliction of duty or practices graft, causing substantial damage to the employer.
    (4)
    has established an employment relationship with another employer at the same time which materially affects the completion of his/her tasks with the employer, or the employee refuses to make a correction as demanded by the employer.
    (5)
    is prosecuted in criminal proceedings in accordance with the law.

    Economic compensation (“severance pay”) is not applicable to the above circumstances.  

  2. Article 40: The employer is entitled to terminate the labour contract under any circumstance listed below. However, the employer shall inform the employee in written notice 30 days in advance or pay one-month salary in lieu of notice.

    (1)
    After the set period of medical care for an illness or non-work-related injury, the employee can engage neither in his/her previous work nor in other work arranged for him/her by the employer.
    (2)
    The employee is incompetent and remains incompetent after training or adjustment of his/her position.
    (3)
    The objective circumstances relied upon at the time of conclusion of the labour contract has changed significantly and as a result the labour contract can no longer be performed. And, after negotiation, the employer and employee are unable to reach agreement on amendment to the labour contract.

    The employer must pay severance pay to the employee in accordance with the law for the above circumstances.

  3. Article 36: The labour contract can be lawfully terminated upon negotiation and consensus between the employer and the employee. The employer must pay severance pay to the employee in accordance with the law if the termination is proposed by the employer.

  4. Article 44: The labour contract shall be terminated under any of the following circumstances:

    (1)
    The fix-term labour contract has expired.
    (2)
    The employer is declared bankrupt pursuant to the law.
    (3)
    The employer is revoked of business license, or is ordered to close down or is discharged, or decides to dissolve before the schedule.
    (4)
    The employee has started to enjoy the basic pension insurance benefits.
    (5)
    The employee is dead or declared dead or declared missing by a People's Court.

    The employer must pay severance pay to the employee in accordance with the law for the circumstances specified in item (1), item (2) and item (3). Severance pay is not applicable to the circumstances specified in item (4) and item (5).

Terminating an employee without statutory grounds will be considered as an unlawful termination of labour contract which may result in double severance pay to the employee.

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:

Email: info@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
WhatsApp/ Line/ WeChat: +852 5616 4140
Skype: kaizencpa

Language

繁體中文

简体中文

日本語

close