Foreign Employees in China
commercial practice. She is especially well-regarded for advising
clients on the Asian legal structure of their companies, based on her
sound understanding of the pitfalls and advantages of most Asian
jurisdictions. She has advised clients in various industries such as
manufacturing, energy (oil, gas and mining), technology and services.
direct investments, trademarks, distribution and labor law.
B-1002, R&F Full Square Plaza No. 16,
Ma Chang Road
ZhuJiang New City Tianhe District
Guangzhou, China 510623
+8620 8121 6605 Phone
+8620 8121 6505 Fax
cberube@hjmasialaw.com
dloedt@hjmasialaw.com
www.hjmasialaw.com
prospective employers in China with an
overview of the legal issues related to
hiring local and foreign employees.
Contract
The Labor Contract Law of the PRC
("LCL") sets the provisions that govern
all labor contracts entered into in China.
A valid labor contract must expressly
state certain terms, including the name
of the parties, term of employment, remu-
neration, position, duties, location and
working hours.
There are no national requirements
that labor contracts be executed in
Chinese or, if executed in multiple lan-
guages, that the Chinese version prevail.
However, local authorities in many cities
(such as Shanghai and Changzhou) do
require that the Chinese version prevail,
while authorities in other cities (such as
eign language version of a labor contract
to prevail.
An employer must execute a written
labor contract with an employee within
one month from the date the employment
commences. If not, then beginning on the
second month the employer will be liable
to pay double salary each month during
the first year of employment until a writ-
ten contract is executed, after which this
is treated as a de facto labor contract
with no fixed term.
In addition to the above, foreign
employees are required to obtain their
work and residence permits before they
commence work.
In China, non-compete clauses are
limited in time (two years maximum) and
scope (geographic/industry restrictions).
Also, non-compete clauses only apply to
senior managers, technicians and related
senior employees who are privy to confi-
dential information.
pensate a former employee in order to
enforce the non-compete clause. Upon
termination, the employer must pay
compensation to the former employee
on a monthly basis throughout the
course of the non-compete period.
The amount of the compensation
generally falls between 20 percent and
60 percent of the former employee's
average salary over the previous year.
The employer does not have to pay any
social charges on this compensation
and any income tax due must be paid
by the employee.
An employer may terminate an em-
ployee immediately without prior no-
tice for serious violations of the labor
contract. In the event of termination
without notice, the employer must pro-
vide the employee with written notice
stating the reasons for termination with
supporting elements, as necessary. No
additional compensation is required.