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on Wednesday, 23 November 2016
in Business in China

HR Management Can Be Tricky in China

Interview with PTL Group HR & Admin Manager--Jasper Zhang

Jasper Zhang, a professional HR and Admin expert, joined PTL Group in 2011. Jasper has intensive experience in recruitment, HR management, payroll, KPI evaluation and various admin and mass layoff projects.

Q: What do newcomers and foreign companies coming to China need to learn before they start to hire employees here?

A: I think that there are two things foreign companies need to learn before they start to recruit their local employees: the Chinese Labor Contract Law and the C&B (Compensation & Benefit) system. For the C&B system in China, foreign employers should keep in mind that, conventionally, Chinese employees will always ask for something more than gross salary, e.g. a transportation allowance. So when checking with a Chinese candidate what their current income is remember to also ask about the salary package on top of the gross salary. In addition, you also need to understand the social benefits and housing system in China. By doing so, you will understand the total employer cost to you to hire this candidate.

Launched in 2008, the Labor Contract Law was formulated to improve the labor contract system, to specify the rights and obligations of the parties to labor contracts, to protect the legitimate rights and interests of workers and to build and develop harmonious and stable employment relationships. It is very different from the labor law in the West, especially the aspects as follows:

Contract type

There are 3 types of employment contracts in China: fixed-term contract, open-ended contract and employment contract for the duration of a certain task. For a fixed-term contract, it is obligatory for the employer to offer an open-ended contract after two consecutive fixed-term contracts between the same parties. Therefore I always recommend our clients to start a fixed-term contract with a new employee for 3 year contract and 6 month probation.

Probation

Duration of the Contract

Maximum duration of the probation period

Less than 3 months/certain task contract/part-time

No probation period

3 to 12 months

1 month probation period or less

1 to 3 years (does not include 3 years)

2 months’ probation period or less

3 years and more/ open-ended contract

6 months’ probation period or less


Frequently our clients come to me and ask if they could hire a person in China just for 6 months with the probation period being the entire employment period. I always refer them to the table below where it clearly states the maximum duration of the probation period directed by the Labor Contract Law in China.

Job description

A job description is nothing new for most employers; however we still see a lot of companies, especially start-up companies, not being able to provide clearly defined job descriptions. This is crucial as it will affect many aspects of your employee management ranging from KPI performance, bonus evaluation and even termination.

Leave

In China, the minimum annual leave for an employee is from 5 to 15 days, depending on the accumulated working years; however many foreign companies will allocate more days of annual leave to display good company culture; this makes foreign companies generally more attractive to talented candidates. On top of this, there are various types of leave: maternity leave, marriage leave, funeral leave and sick leave, etc. For each type of leave the number of days is decided depending on the specific situation, and it may vary from city to city. For example, a father can get 10 days paternity leave in Shanghai, whereas in Beijing he may get 15 days instead.

Therefore it is highly recommended that foreign employers learn the rules clearly or consult a professional service provider for guidance.

Enrollment details

When we hire new employees, we always do a reference check and ask that the candidate provides the materials requested, as we want to ensure that the right candidate is hired at a reasonable cost. Once we had a client who conducted a very satisfactory interview with a candidate that we found for him. During the interview the candidate claimed that his current salary was 15,000 RMB/month plus all other allowances & bonuses. Subsequently our client agreed upon a 20% increase for the candidate and both parties left the table with a satisfactory result. Later, we processed the recruitment and enrollment check and found the candidate’s real previous salary was 12,000 RMB/month… After reporting this to our client, he made the decision not to hire this candidate due to trust issues.

Termination

Termination is always a tough topic, however the Labor Contract Law contains terms that protect employees when it comes to termination. Companies/employers need to provide compensation if they cannot give solid proof of reason to terminate the employee and do not follow the procedure by law, which should be recognized by potential arbitration or a court. When not familiar with the rules, it may cost an employer a fortune to terminate an employee’s contract (or they may even not be able to terminate it) and it might even go to arbitration with the employee.

We have also drafted a specific article to address termination terms and what to avoid when processing a termination.

Q: Can foreign employers employ Chinese employees on a freelancer contract?

A: It is not covered by the Labor Contract Law, therefore employees will not be protected when facing conflicts such as salary payment, termination compensation, etc. For the employer, despite the fact that they are not bound to provide termination compensation, they don’t have control over their employees either; this is especially true for companies who want their employees to sign a NDA (non-disclosure agreement). Therefore we recommend foreign employers employ Chinese employees “legally” within the realm of the China Labor Contract Law. 

For more information about the HR management services that PTL Group provides, please click here.

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