Employment in Mainland China is not generally at will. An employer ending a labor contract needs a statutory or agreed route, evidence that fits that route, and the required procedure. Mutual separation, expiry, no-fault termination, misconduct dismissal and economic layoff have different conditions and payment consequences. A contract clause or management preference cannot replace the governing statute.
Before notice is issued, the employer should test protected status, trade-union procedure, occupational-health obligations, notice or pay in lieu, statutory severance, unused leave, final wages, social-insurance steps and work-permit consequences. A wrong ground, late-created evidence or defective process can turn an intended lawful exit into reinstatement or unlawful-termination compensation.
Direct answer
Choose the legal route before drafting the letter. Identify who is initiating the exit, the statutory article relied on, the facts that existed at the decision date, the required consultation or notice, and every payment and handover obligation. Do not blend performance, misconduct and redundancy into a single fallback theory.
The principal routes are employee resignation, employee termination for employer breach, mutual termination, employer summary dismissal, employer no-fault termination, economic layoff and expiry or another statutory termination event. Each route changes the evidence, timing, severance and remedy analysis.
Employee-initiated exits
An employee can ordinarily resign by giving the statutory advance notice, with a shorter period during probation. The resignation should be voluntary and clearly documented. Pressure, a forced resignation form or an employer-created intolerable situation can produce a dispute over who actually terminated the relationship.
An employee may terminate without ordinary advance notice where an employer commits a listed serious breach, including specified failures involving labor protection, timely and full wages, social insurance or invalid rules. Some urgent circumstances permit immediate departure. A qualifying employee-initiated termination can require the employer to pay economic compensation.
Mutual termination
The parties can agree to end the contract. The agreement should state the effective date, payment components and dates, leave treatment, property return, expense reconciliation, confidentiality, intellectual-property handover, reference or separation documents, and any post-employment restrictions.
Where the employer proposes the mutual termination, statutory economic compensation is generally part of the baseline analysis. A settlement can resolve disputed claims, but validity still depends on mandatory law and the absence of fraud, coercion or other vitiating circumstances. Avoid an unexplained lump sum: separate statutory compensation, notice pay, wages, leave, bonus, expenses and negotiated consideration.
Summary dismissal for employee fault
Labor Contract Law Article 39 provides defined grounds for immediate employer termination, such as failure to meet disclosed hiring conditions during probation, serious violation of lawful rules, serious dereliction or self-dealing causing major harm, materially conflicting employment that is not corrected, specified invalid-contract conduct, or criminal liability.
The employer bears substantial proof risk. Preserve the valid rule, consultation and publication record, employee acknowledgment, investigation material, comparable enforcement history, loss analysis and decision approval. A label such as “loss of trust” or “poor attitude” is not itself a statutory ground. Record 3265 remains the specialist guide for for-cause dismissal, and record 3264 covers probation.
No-fault employer termination
Article 40 addresses limited no-fault circumstances, including inability to perform after the statutory medical-treatment period, incompetence after training or reassignment, and a major objective change that makes performance impossible after consultation fails to produce an amendment. The employer generally must give 30 days’ written notice or one additional month of wage in lieu, and economic compensation is normally due.
These routes require more than a conclusion. For incompetence, define and prove the standard, support and training or reassignment. For objective change, identify the external change, explain why performance became impossible and document genuine consultation. Payment in lieu replaces notice; it does not cure a missing statutory ground.
Economic layoffs
Article 41 is a collective route, not a convenient name for several individual dismissals. The statutory headcount threshold, qualifying economic reason, advance explanation to the union or all employees, consideration of their views, and report to the labor administration must be tested. Selection protections and priority rehiring rules also matter.
Do not use individual agreements to conceal a planned collective process without assessing Article 41. Record 3266 remains the detailed economic-layoff sibling.
Protected employees and occupational health
Article 42 restricts use of Articles 40 and 41 for specified employees, including certain occupational-disease exposure cases, work injuries, medical-treatment periods, pregnancy and related protected periods, and qualifying long-service employees near retirement. Fixed-term expiry can also be extended while protected circumstances continue.
Check protected status before the decision, not after notice. The SPC’s 2025 Labor Dispute Interpretation II confirms the importance of pre-departure occupational-health examinations for workers exposed to occupational hazards and addresses when later examination can affect a continuation claim. Local maternity, work-injury and retirement rules require separate review.
Trade-union procedure
Under Article 43, an employer unilaterally terminating a labor contract must notify the labor union of its reasons in advance. The union may require correction, and the employer must consider and respond to its views. Current judicial rules recognize procedural consequences and limited circumstances for correction before litigation.
Map the actual workplace structure and obtain local advice where no enterprise union exists. Do not assume that “no union” automatically erases all representative or consultation steps. Keep the notice, delivery proof, response and final consideration record.
Notice and decision letter
The decision letter should identify the contract, effective date, precise legal ground, essential facts, notice arrangement, payments, property and handover requirements, and dispute channels. Serve it through a provable method permitted by law and the employer’s valid rules.
Do not add new grounds after a dispute begins. Decision makers should approve the supported ground before service, and translations should preserve the meaning of the controlling Chinese document.
Payments and exit administration
Prepare a component ledger for final wages, statutory economic compensation, notice pay where applicable, unused annual leave, earned bonus or commission, expenses, social insurance and housing fund, and negotiated settlement. Economic compensation, compensation for unlawful termination and notice pay are different items.
Issue required separation and file-transfer documents and complete social-insurance procedures within the statutory framework. For foreign employees, coordinate work-permit and residence-permit consequences promptly; immigration status is not resolved merely by paying severance.
Remedies and disputes
If employer termination is unlawful, the employee may seek continued performance where legally and practically available or statutory compensation generally calculated at twice the Article 47 economic-compensation standard. The 2025 SPC interpretation also addresses wages between an unlawful decision and reinstatement and allocation where both parties contributed to the loss.
Labor disputes ordinarily pass through labor arbitration before court proceedings. The general arbitration limitation period is one year from when the claimant knew or should have known of the infringement, subject to statutory rules on interruption, suspension and wage claims. Preserve the termination letter, service, contracts, rules, union file, payroll, attendance, messages and investigation evidence immediately.
Employer checklist
- Identify the initiating party and exact statutory route.
- Freeze the evidence that existed before the decision.
- Check protected status and occupational-health duties.
- Complete training, reassignment or consultation where the route requires it.
- Complete union, representative and layoff procedures.
- Calculate notice, compensation, wages, leave and benefits separately.
- Approve and serve one accurate decision letter.
- Coordinate property, data, access and intellectual-property handover.
- Issue separation documents and complete benefit and immigration steps.
- Preserve the file through the dispute period.
Common mistakes
- Treating employment as at will because the contract says so.
- Selecting misconduct when the evidence shows only weak performance.
- Paying an extra month without proving an Article 40 ground.
- Using “redundancy” without testing Article 41.
- Missing a protected employee or required health examination.
- Creating investigation evidence after notice.
- Ignoring union procedure.
- Combining every exit payment into an unexplained lump sum.
Sources
- Labor Contract Law of the People’s Republic of China, especially Articles 36–50, 87 and 89.
- Implementing Regulations of the Labor Contract Law, State Council.
- SPC Interpretation II on Labor Disputes, effective 1 September 2025.
- Labor Dispute Mediation and Arbitration Law, especially Articles 2, 5, 6 and 27.
- Current provincial and municipal employment, union, benefit and adjudication rules for the employing location.
General legal information only; not legal advice for a particular employee, decision or dispute.
