This national guide explains core rules under the Labor Law, Labor Contract Law, and related regulations, then points you to city hubs and verified employment lawyers.
1. Legal framework
Key sources include the Labor Law, the Labor Contract Law (as amended), the Social Insurance Law, Work Safety Law, and local implementing rules. National standards set the floor; cities such as Beijing, Shanghai, Shenzhen, and Guangzhou often add detail on open-ended contracts, housing fund practice, and foreign-employee procedures.
For foreign-invested enterprises (WFOEs, JVs) the employer of record is usually the Chinese entity. Representative offices generally cannot hire Chinese staff directly and must use a licensed dispatch agency - an area that frequently triggers compliance risk. Entity choice is covered in the company formation guide.
2. Hiring and employment contracts
Written employment contracts are mandatory. A contract should state job duties, workplace, term (fixed, open-ended, or project-based), compensation, working hours, and social insurance arrangements. Failure to sign a written contract within one month can trigger double-salary liability.
| Topic | Practical rule of thumb | Common risk |
|---|---|---|
| Fixed-term | Common for new hires; successive terms may convert to open-ended rights | Rolling renewals without tracking conversion triggers |
| Probation | Capped by contract term (often up to 6 months for long fixed terms); one probation in principle | Repeating probation or using it as free trial labor |
| Non-compete | Senior/confidential roles; mandatory compensation during restriction; reasonable scope | Clauses without compensation or over-broad geography |
| Dispatch / RO | RO typically cannot hire Chinese staff directly | Shadow employment via informal arrangements |
3. Working time, leave, and pay
Standard hours are generally 8 hours/day and 40 hours/week, subject to approved alternative systems (comprehensive or flexible hours) in some roles. Overtime requires premium pay rates. Employees are entitled to paid annual leave based on cumulative years of service, plus statutory holidays, marriage/bereavement leave, and maternity/paternity-related leave under national and local rules.
Paying only a base wage "off the books" while shifting the rest to invoices or personal accounts creates tax and labor exposure for both sides. Wage deductions and "pay in lieu" arrangements are tightly regulated.
4. Social insurance and housing fund
Employers must contribute to pension, medical, unemployment, work-injury, and maternity-related social insurance, plus the housing provident fund in most cities. Contribution bases and rates are local. Under-reporting salary to reduce contributions is a frequent audit and dispute issue for foreign employers.
Build contribution base, housing fund, and IIT withholding into offer letters so finance and HR use one compensation model - not two competing spreadsheets.
5. Foreign employees and work authorization
Most foreign nationals need a work permit and residence permit aligned to the employer and role. Job title, salary level, and degree/experience affect classification. Changing employer or location usually requires permit amendment.
Using business visas for full-time work is a classic enforcement risk. See the visa & immigration guide for pathway detail.
6. Termination and employee exits
China does not follow at-will employment. Unilateral termination by the employer generally requires a statutory ground (e.g., serious misconduct, statutory redundancy situations, or mutually agreed release). Wrongful termination can lead to reinstatement or double statutory severance.
Best practice for foreign employers:
- Document performance issues and training opportunities before "incompetence" terminations.
- Use mutual termination agreements with clear settlement language when commercial certainty matters more than principle.
- Calculate statutory economic compensation carefully; do not invent "global package" figures that undercut local floors.
- Hand back work permits, residence filings, and company property in a controlled exit checklist.
7. Disputes and forums
Labor disputes typically go through labor arbitration before court litigation. Preserve contracts, payroll records, WeChat/email instructions, and attendance data early. For commercial disputes outside pure employment, see the dispute resolution guide.
8. Practical checklist
- Sign a compliant written contract within the statutory window.
- Align workplace, job title, and compensation with social insurance reporting.
- Register foreign hires for work and residence permits before full-time work starts.
- Approve overtime systems properly; avoid informal "all-in" salary myths.
- Treat termination as a legal process - not a Western-style notice email alone.
- Keep bilingual versions consistent when both languages are used operationally.
