Hiring and firing has always been very different here in China compared to back in the west. Countries like the US and UK have long established labour regulations. In China, this is not the case. Until the implementation of new legislation at the start of 2008, the labour market here was virtually lawless and totally unpredictable. However, even with the new laws in effect, hiring and firing can still be a potential minefield. This is especially true for westerners working for smaller operations that lack large legal and HR teams, and for those starting or operating their own business.

Photo: Steve Dinn

Back in the early part of the decade, particularly at the lower-end of the job market, companies would not offer employees contracts or pay them social insurance. Whilst this created an environment conducive to exploitation and poor working conditions, it made hiring and firing much easier. If you mis-hired, rectifying the problem was easy, you could simply get rid of the person in question. Now, the situation is no longer so simple. In fact it can be pretty tricky. The onset of the new labour laws saw the workplace pendulum swing dramatically towards the employee. This swing was so dramatic that, in a few specific areas, employee power may actually have surpassed that in the west. Therefore, we decided to highlight two of the most important areas of the labour laws and how they differ from legislation in the west. We have also slipped in a few titbits on how companies are dealing with this legislation.

Removing Poor Performers
If you have read any of my previous articles, I am sure you will have heard me ramble on about the amount of young graduates hunting for jobs. This means that any vacancy on offer is likely to receive hundreds of applicants. Therefore, sorting the wheat from the chaff can be difficult. This can prove to be a major problem as it is no longer as easy to rectify recruiting mistakes – removing someone is now a lengthy and potentially costly experience.

Managers from the west may be used to following clear disciplinary procedures in order to remove under-performing employees. This may not be a speedy or pain-free process, but it is often direct and rarely unduly costly – as long as the employer has clear grounds, of course. Here in China, the process is slightly less clear or direct, and can be a surprisingly pricey undertaking. To remove an employee who is not cutting the mustard, the employer cannot simply issue warnings and then terminate them as they might in the west. Rather, they must first collect conclusive evidence of the employee’s failure to meet their job requirements. After this, they must either reassign the employee or offer training in their original role (this training must be specific to their role and acknowledged by both employer and employee). Then, the employer must prove that, even with the training or reassignment, the employee is still under-performing. Even after all this, and with the employer providing categoric proof of under-performance, the employee is entitled to severance pay based on their length of service.

With such a potentially costly situation, naturally, many employers have been developing ideas to help them safeguard their interests whilst staying firmly within the legislation. There are two major factors they need to consider whilst doing this. The first is the probationary period. In the west this is also an important way of gauging an employee’s ability. However, here in China it has grown significantly in importance. The end of an employee’s first three months is the company’s last chance to remove them with relative ease, if they fail to do so, they could be in for the long haul. The second is employment contracts. This is the area in which Chinese and western standards have converged most. “Proving” an employee’s under-performance is crucial. Therefore, the employer must make perfectly clear in employment contracts what is acceptable and what is unacceptable, as Allan Nee of Tianjin’s Baode Law explained: “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 is, though, not just removing employees that can be a problem. Long-serving employees can also create a potential headache. At home, managers may be used to offering fixed-term contracts of varying length with relative freedom – at the end of each term if both parties are happy they can simply renew. Things are not that simple here in China. With removing employees being so difficult, many companies could easily be tempted to offer only shorter fixed-term contracts to give them a safety-net and a cheap way out of a mis-hire. In an ideal world, a company could sign an employee up for 6 months and then cut them loose if it was not 100% happy. This option, though, has also been removed. Any employee completing two consecutive fixed-term contracts, is entitled to sign a contract with no fixed-term – a contract for life if you will!

With high-quality employees, this situation is no bad thing as companies can offer them long-term security. However, with those that are untried and untested – for example, younger employees who have potential, but are yet to realize it – it represents a major risk. No company wants to offer a job for life unless they are sure the employee is worth the investment. Many companies are now offering shorter fixed term contracts – 1 year for example – when they first hire an employee. This, obviously, allows them to take a look at an employee and gives them an escape hatch if he or she does not fit in. This is followed by a longer term deal – 3 or 4 years perhaps – which gives the employee time to develop within the organisation and allows the company to decide if it wants to keep the employee 'for life.'
 

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