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Termination by employers in China is not easy although it is not without problems. When it comes to economic recession, workers are more vulnerable. Three years of unprecedented developments in China stemming from the COVID-19 pandemic have created major challenges for multinational companies operating locally in China, including the need to to properly manage labor relations with local employees. In this article, we set out the procedures for termination of employment under PRC law, including the reasons and procedures for termination of employment, the calculation of termination pay, and some reasonable grounds for termination workers during an epidemic.
Grounds and procedures for termination of employment by employer
Under the PRC’s Labor Contract Law, an employer may terminate an employee under the conditions prescribed by law, and if a union has been established in the organization of the employer, a notice is sent to that trade union. for any termination of employment by the employer. We outline below the main circumstances in which an employer can terminate the employment of an employee.
The employer and his employee can mutually agree to terminate the employment contract.
- Cancel with 30 days prior notice or one month’s fee in lieu of such notice
An employer may terminate an employee with 30 days’ prior notice or one month’s pay in lieu of such notice if (“Article 40 Conditions” under the PRC Labor Law) :
- the objective conditions have changed so much that the initial employment contract cannot be enforced, and there is no agreement between the employer and the employee regarding the modification of the employment contract;
- the employee is unable to perform his original job or another job assigned by the employer at the end of the time set for medical treatment for illness or injury while absent work; a
- the employee is not eligible for the position, remains unemployed after receiving training, or is assigned to another position.
- It ends due to employee error
The Labor Standards Act allows an employer to dismiss an employee without prior notice or pay in lieu of notice if:
- does not meet the eligibility criteria during the probationary period;
- materially violates the employer’s laws and policies;
- is negligent or negligent in the performance of his duties, adversely affecting the interests of the employer;
- has induced the employer to employ him by such means as deception, fraud or coercion;
- is employed at the same time by another employer, which seriously affects the performance of his duties, or he refuses to rectify the situation after receiving the employer’s request; or
- will be charged with a crime.
If due to changes in bankruptcy, management difficulties, transfer of assets or changes in management methods, etc. that require the termination of employment contracts with more than 20 employees or more 10% of the total workforce (or less), the employer. must notify the union or all employees of the company, at least 30 days before the termination, and after receiving the union and the opinions of the All employees must report the termination request to the local authorities.
- Termination by dismissal of the employer
If the employer decides to terminate himself before the end of his employment, the employment contracts with his employees will be terminated. Under such circumstances, the employer must complete the legal procedures for voluntary dismissal and notify the employees before the decision on dismissal is made. Since it takes a long time (up to several months) to complete, in general, the employer negotiates with the employees and terminates the employment contracts with his employees in advance by mutual agreement, by giving or 30 days. advertise or pay for a monthly fee in lieu of advertising.
Calculation of Salvage Cost
Under the PRC’s Labor Contract Law, the employer must pay under most circumstances when the employment contract is terminated, including the circumstances listed in the section above.
Severance pay is calculated by reference to the employee’s monthly salary and the number of years of service to the employer. Periods between six and twelve months are considered one year of employment, and periods of less than six months are considered half a year of employment.
The economic salary paid by the employer to each employee is equal to the average monthly salary of the employee during the last 12 months before the termination of the employment contract multiplied by the number of years of service of that employee.
However, if the average monthly salary of the employee is more than three times the monthly salary of the employees in the area where the employer is located for the previous year as announced by the government of the area, the monthly payment for the calculation of the division. The salary for that employee should be three times the average monthly salary of local employees, and the number of years calculated for the severance pay should be capped at 12 years. [1]
Reasons for Annual Leave
According to the PRC Laws on Annual Leave for Employees and its corresponding provisions, an employee who has been working for an employer for at least 12 months is entitled to paid annual leave. number (“Annual Leave”). In general, the employer must pay for unused Annual Leave if employment is terminated.
The number of days for Annual Leave is determined based on the cumulative working time of the employee and the employer. An employee’s Annual Leave shall be (i) 5 days if his years of service are more than 1 year but less than 10 years, (ii) 10 days if more years of employment. more than 10 years but less than 20 years, and (iii) 15 days for more than 20 years.
However, if an employee falls under any of the following circumstances, he is not entitled to take any Annual Leave under the Act: (i) the employee is entitled to any summer vacation and/or a longer vacation. other than his annual leave, (ii) the employee takes at least 20 days of leave for self-employment, and the pay is not deducted in accordance with the policy of the employer’s company, or (iii) an employee with 1 year of service. 10 years and taking sick leave for two months or more, or 10-20 years taking sick leave for three months or more, or more than 20 years taking sick leave for four months or more.
When the employer terminates the employment contract with an employee, for the days of Annual Leave not taken, the employer must pay the employee at the rate of 300% of the employee’s daily earnings, there:
- Daily Salary = Monthly Salary / 21.75
- number of days of Annual Leave not taken = (number of calendar days in the company this year/365 days) × number of days of Annual Leave that should be enjoyed the employee in the whole year – the number of Annual Leave. days in the current year are used
The 300% compensation specified above does not apply to contractual paid annual leave other than Annual Leave dates. If the payment for days of annual leave agreed in the employment contract or specified in the employer’s company policy exceeds the legal standard, that contract or company policy applies.
Stop Work on Covid-19
As of 2020, the PRC government has announced a number of public policies and laws on labor issues during the Covid-19 pandemic. The PRC Supreme Court and some local high courts have also issued judicial interpretations to guide labor issues and disputes arising out of the current pandemic situation.
Those newly published laws, policies and judicial interpretations indicate that PRC regulators prefer to promote effective measures for employers to take, rather than resort to sanctions in times of crisis. employers.
The PRC government clearly stated that an employer cannot unilaterally terminate an employment contract with an employee who is a Covid-19 patient, suspected of being a patient, and a closed contract related to isolation treatment, if or medical examination, and an employee who is unable to work normally. due to quarantine or other emergency measures imposed by the government on certain termination grounds such as Article 40 Terms and Conditions 41 under the PRC Labor Contract Law. For employees in the aforementioned situations whose employment contracts expire during the period of prevention and control of Covid-19, the expiry date of such employment contracts shall be extended until the end of the employment. employee medical, medical examination, or isolation, until emergency procedures have been postponed.
For other employees who are not classified as employees with Covid termination obligations under these laws, the termination procedures will remain the same as the procedures set forth under the PRC Labor Contract Law, as stated in the section above.
Conclusion
Many companies operating in the PRC should consider layoffs during the pandemic, especially when mass layoffs are considered. In order to reduce the negative impact on the business that may result from unfair termination of employment, employers should look at the new laws and policies that have been issued by the government in this regard, and carefully and carefully look and evaluate the complexity and legal problems before going to one. labor force reduction strategy. Legal procedures under the law must be followed at all times to avoid conflict of interest and punitive damages for severance.
[1] These rules apply to the calculation of severance pay of an employee who began his employment with the employer after January 1, 2008 when the PRC Labor Contract Law came into effect. For employees who started working before that date, the calculation of the severance pay for those employees for the period before 1 January 2008 will be based on the current rules with a slight difference.
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