China employment compliance in 2026

Valid grounds for termination without severance (summary dismissal) under Article 39 include serious breach of company rules, gross negligence causing material damage, criminal conviction, and fraud in the employment application. These grounds must be documented and the employer bears the burden of proof.

Valid grounds for no-fault termination (with notice and severance) under Article 40 include medical incapacity after the treatment period expires, failure to meet job requirements after training or reassignment, and material change in the original contract circumstances. The employer must give 4.286 weeks notice or pay one month salary in lieu.

The probation trap

During a probation period, the employer can dismiss an employee who does not meet the hiring criteria. The standard for "not meeting hiring criteria" must be defined in writing before the probation starts. An employer who fails to set written criteria, or who cannot prove the criteria were not met, faces an Article 87 claim. The maximum probation period for open-ended contracts is 6 months and cannot be extended or repeated.

Special protection: pre-retirement employees

Employees with 15 or more years of continuous service with the same employer, and who are within 5 years of statutory retirement age, have enhanced protection. Article 40 no-fault termination is not available for them. Only Article 39 summary grounds (serious breach, criminal conduct) apply. This protection is relevant for long-tenure hires.

Source: Labour Contract Law of the PRC (Supreme People's Court English version)

1. Issue a written contract

   Chinese law requires a written labour contract within one month of the start date. Missing this deadline triggers double-wage liability. Teamed issues compliant contracts on day one.

2. Register with social insurance

   The employee must be enrolled in the five-pillar social insurance scheme and the housing provident fund. Registration must happen at the local social insurance bureau for the city of employment.

3. Set probation criteria in writing

   The maximum probation period is defined by contract length. Criteria for passing probation must be documented before the probation begins. An undocumented criterion cannot be used as a ground for dismissal.

4. Follow dismissal procedure exactly

   Valid grounds must be identified before any termination. Notice or pay in lieu must be issued where required. Skipping a step makes the dismissal wrongful and triggers the Article 87 double-severance penalty.

5. Complete administrative handover

   On termination, the employer must provide a written exit certificate and transfer social insurance and housing provident fund records to the employee. These formalities are required by law and must be completed promptly.

Protected grounds under Chinese employment law:

• Sex. Employers cannot refuse to hire women or set higher hiring bars for women. Maternity-related dismissal is prohibited.
• Ethnicity and nationality. Prohibited under the Labour Law and the Employment Promotion Law.
• Religion and belief. Cannot be used as a hiring or dismissal criterion.
• Disability. The Employment Promotion Law requires employers to accommodate qualified candidates with disabilities. Discriminatory dismissal on grounds of disability is prohibited.
• Infectious disease carrier status. Explicit ban under the Employment Promotion Law. Hepatitis B carrier status is a common historical source of discrimination and is expressly covered.

Key differences from UK and EU frameworks

• No uncapped awards. Claims are heard by labour arbitration and then the courts. Award values are lower than in common-law jurisdictions.
• No reverse burden of proof. The employee generally bears the burden of establishing discrimination. Documentation of fair procedure is still important.
• Limited scope for indirect discrimination claims. The framework is less developed than the EU Equal Treatment Directives. Courts assess direct discriminatory acts rather than neutral policies with disparate impact.

Pregnancy and maternity protection is strong and specifically enforced. Female employees on maternity leave, during pregnancy, or in the nursing period cannot be dismissed under Article 42. This is one of the absolute bars to termination regardless of contract type.

How whistleblowing protection works in practice:

• Retaliation is not directly criminalised. An employer who dismisses an employee for making a report must still satisfy a valid Article 39 or Article 40 ground. If no valid ground exists, the Article 87 penalty applies. The dismissal is unlawful, not specifically a whistleblowing retaliation offence.
• Sector-specific obligations. Financial services, food safety, pharmaceutical, and environmental sectors have reporting obligations backed by regulator-specific protections. Employees in regulated industries have stronger standing than the general Labour Contract Law provides.
• Letters and Visits. Employees can report employer violations to labour bureaus, safety regulators, and courts through the formal petition system. Retaliation against an employee for making a formal regulatory complaint is prohibited under the Labour Law.
• Trade union channel. The All-China Federation of Trade Unions (ACFTU) provides an internal reporting channel. Its effectiveness varies by workplace. The ACFTU is not an independent body in the same sense as Western unions.

For foreign-invested enterprises: internal speak-up channels and non-retaliation policies are best practice and help satisfy group-level compliance obligations (SOX, UK Bribery Act, EU supply chain obligations). Chinese labour law does not prohibit such policies and arbitration panels take them into account when assessing whether a dismissal was for a legitimate reason.

Key employer obligations under PIPL:

• Privacy notice. Employees must be informed at the time of hire what personal data is processed, for what purpose, and for how long. This applies before or at the point of collection.
• Lawful basis. PIPL requires a legal basis for processing. For employment data, consent is commonly used but is not always sufficient on its own. Contractual necessity and compliance with legal obligations are also available bases.
• Sensitive personal data. Biometric data, health records, financial data, and location data require separate and specific consent. Employers using attendance systems with facial recognition or fingerprint scanning must obtain explicit consent.
• Employee rights. Employees can request access to their data, correction of errors, and deletion in some circumstances. There is no mandatory 1-month response window equivalent to the UK GDPR SAR regime, but timely responses are required.
• Data breach notification. Significant breaches must be reported to the Cyberspace Administration of China (CAC). There is no fixed 72-hour window equivalent to GDPR; the obligation is to notify promptly, with the threshold varying by severity.

Cross-border transfer rules: the key risk for multinationals

• Sending employee personal data from China to a parent company outside China is a cross-border transfer under PIPL.
• For most businesses, a standard contract approved by the CAC is required before data leaves China. For large-scale processors or critical infrastructure operators, a government security assessment is mandatory.
• This is a live compliance obligation. Many foreign-invested enterprises have not completed the required standard contracts. Teamed handles the data processing and transfer obligations for employees on its payroll.

Three frameworks shape worker representation in China:

• Trade Union Law (2021 amendment). Enterprises with 25 or more employees are encouraged to establish a trade union committee. The union's role is consultation, not collective bargaining in the Western sense. Unions advise on employment contracts, working conditions, and redundancy plans.
• Labour Contract Law, Article 41 (collective redundancy). Before a mass layoff affecting 20 or more employees, the employer must explain the situation to the trade union or all staff. The employer must listen to their views. The plan must then be notified to the labour administration 30 days before implementation. This is a genuine procedural obligation with consequences for non-compliance.
• Employee Representative Congress (ERC). Larger enterprises are expected to maintain an ERC for workforce consultation. The ERC reviews company rules that affect employees' interests. Rules adopted without ERC consultation can be challenged in arbitration.

Practical note for foreign-invested enterprises

The ACFTU is not an adversarial body in the sense of UK or European trade unions. Collective bargaining as practised in the West does not exist in China. However, the consultation process for redundancies and rule changes is a real legal requirement. Skipping it adds procedural invalidity to any subsequent dismissal, which compounds Article 87 liability.

EOR-to-EOR switching in China: unlike the UK, TUPE-equivalent automatic transfer protections do not exist. Moving employees from one employer structure to another requires new contracts. Continuity of service for severance calculation is a real issue and must be managed in writing.

Real HR and legal experts handle your China hires, from the first written contract through every monthly social insurance filing. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.

China requires a written labour contract within one month of the employee starting work. Without a written contract, the employer owes double wages for every month beyond that first month. Teamed issues compliant contracts on day one. Most EOR relationships in China graduate from a cautious single hire to a full team once the compliance obligations are clear. The PIPL cross-border data transfer standard contract is built into the onboarding flow. Article 41 collective consultation procedures are managed by Teamed's in-country team. China feels unfamiliar at first until it isn't: once the process is right, the same framework scales across every additional hire.

Key sources: Labour Contract Law of the PRC (Supreme People's Court English version), L&E Global China employment law overview.