The Complicated World of Hiring and Firing in China

The Complicated World of Hiring and Firing in China
Jun 19, 2024 By Paul Bacon , eChinacities.com

Hiring and firing in China are far from straightforward. While the UK has had some form of labour regulation in place for the best part of two centuries, until the implementation of new legislation at the start of 2008, the labour market in China was virtually lawless and largely unpredictable. However, the new laws have not necessarily made hiring and firing any easier. Whether you’re a foreigner starting out in your first job or you’re thinking of starting your own business here, read on for the nitty-gritty of hiring and firing in China.

Hiring and Firing in China

The Balance of Power

Back in the early noughties, particularly at the lower-end of the job market, Chinese companies would often hire workers without contracts and were not required to pay their social insurance. While this created an environment conducive to employee exploitation and poor working conditions, it made hiring and firing much easier for bosses and managers. If you mis-hired, rectifying the problem wasn’t a headache; you could simply fire the person in question and move on.

Thankfully for employees, firing someone is no longer so simple. In fact, it can be pretty tricky. In what you could say is true communist style, China’s labour laws saw the workplace pendulum of power swing dramatically towards the employee. The swing was so dramatic, in fact, that in some circumstances, employee rights in China may actually surpass those in the West.

Getting the Hiring Right

If you’ve read any of my previous articles on eChinaCities.com, you’ve probably heard me ramble on about the sheer amount of young graduates hunting for jobs in China. This over-saturation means that any vacancy on offer is likely to receive hundreds of applicants. For HR departments and managers, therefore, sorting the wheat from the chaff can be a slog. Unfortunately for them, however, there’s no easy way around it.

As removing someone is now a lengthy and potentially costly process (see below), it’s important to get things right first time as often as possible. Consequently, job hunters in China can usually expect a rather lengthy application process.

The Cost of Firing

Managers from the West are probably used to following clear disciplinary procedures in order to remove under-performing employees from the payroll. This may not be a speedy or pain-free process, but it’s usually fairly direct and rarely costly to the employer – as long as they have clear grounds, of course.

Here in China, however, the process is less clear and can be surprisingly pricey. If an employee isn’t cutting the mustard, an employer can’t simply issue warnings and then terminate them as is common practice in the West. They must first collect conclusive evidence of the employee’s failure to meet the requirements of the job. After this, they must either reassign the employee to a new role or offer training in their current role, both of which must be acknowledged by employer and employee. Then, the employer must prove that the employee is still underperforming, even with reassignment or extra training. Even after all this, the employee is still entitled to severance pay based on their length of service.

The Importance of Probation 

With firing being so potentially time consuming and costly, many China-based employers have naturally developed ways to safeguard their interests while staying firmly within the law. The most important of these methods is probably the probationary period.

Also an important way of gauging an employee’s ability in the West, here in China the probationary period is of even greater importance. For a one-year contract, a company has three months in which they can remove a new employee with relative ease. If they fail to do so within this period, they’re in for a tougher time.

Another important tool for employers is the contract. As “proving” an employee’s under-performance is crucial, the employer must make perfectly clear what is and isn’t acceptable in the contract. As Allan Nee of Tianjin’s Baode Law explains, “If the rules and regulations are not clear and perfectly defined, the employer may lose the opportunity to discipline a troublesome employee.”

Long-Term Employees

It’s not just new hires that can cause problems for managers in China. Long-serving employees can also create a potential headache. At home, fixed-term contracts of varying length offer both employers and employees relative freedom; at the end of each term, an employer can simply renew or cancel the contract.

Things are not so simple here in China. With it being so difficult to remove employees, companies could easily be tempted to offer only short fixed-term contracts, therefore giving them a cheap and easy way out of a mis-hire. A company could sign an employee up for six months, for example, then cut them loose if they weren't 100% happy. This option has, however, been removed. Any employee who has completed two consecutive fixed-term contracts is entitled to sign a contract with no fixed-term – essentially, a contract for life!

This is no bad thing for companies who are lucky enough to have hired right in the first place, as it offers longterm security for both parties. However, it presents a major risk when it comes to the employees you’re just not sure about yet, for example younger hires who have yet to realise their potential. No company wants to offer a job for life unless they’re sure the employee is worth the investment. And let’s not forget that many employees start off full of energy and ideas, only to become lazy and disillusioned over time.

As a result, some companies in China offer an initial shorter fixed-term contract – one year, for example – which gives them an early escape hatch if a new hire doesn’t fit in from the get-go. This is then followed by a longer-term contract – three or four years perhaps – giving the employee time to develop within the organisation and allowing the company time to decide whether or not it wants to keep the employee “for life.”

Any more light to shine on this thorny subject? Drop your comments in the box below.

 

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