At a glance: hiring employees in China

Bizar Male

Background information on applicants

Background checks

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

No, there are no prohibitions or restrictions under current law or regulations for a potential employer to conduct reasonable background checks on applicants. In practice, employers may engage professional firms to do such checks, but such third parties should hold the proper qualifications and act within the boundaries of the applicable laws and regulations.

However, disclosure of certain personal or sensitive information during the background check requires consent by the applicant, particularly concerning information related to health status or other sensitive personal matters. The Cybersecurity Law (effective as of 1 June 2017) requires any potential employer or background check service provider to provide explicit notice to the data subject of the types of information to be collected, and the method, purpose and scope of data collection and use. Further, the potential employer or background check service provider must obtain the consent of the data subject before collecting, using or sharing any personal information. Moreover, the Cybersecurity Law also mandates that the potential employer or the background check service provider take technological or other actions to ensure the confidentiality and protection of the personal information collected from the applicant.

Medical examinations

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

Generally, employers may require candidates to undergo a medical examination to determine whether their health conditions meet the requirements of the positions. In practice, the employers may determine the items of such examination based on specific job duties and require candidates to submit their examination report. Blanket requirements for medical examinations were common until 2008 when the government restricted the use of medical examinations to learn whether a candidate was a hepatitis B or other infectious disease carrier. Once the Employment Promotion Law came into effect on 1 January 2008, it became unlawful for an employer to require a candidate or employee to undergo a hepatitis B test, request a report of such test or enquire whether the candidate is a hepatitis B carrier. Except for those special occupations approved and announced by the Ministry of Health, such medical examination may not include a hepatitis B test, unless requested by the candidate.

Current laws and regulations in China do not provide whether an employer may refuse to hire an applicant who does not submit to a medical examination. In practice, it is analysed on a case-by-case basis.

Drug and alcohol testing

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

There are no restrictions or prohibitions under the current laws and regulations in China regarding drug and alcohol testing from a job recruitment perspective. In practice, however, some employers may request that their candidates go through drug or alcohol abuse testing in consideration of specific job duties and requirements, although such testing is not common among multinational employers.

Similarly, because the current laws and regulations in China do not indicate whether an employer may refuse to hire an applicant who does not submit to such a test, in practice, it is analysed on a case-by-case basis.

Hiring of employees

Preference and discrimination

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

Yes. According to the Labour Law, the Employment Promotion Law and other labour rules and regulations, employers may not discriminate against women, disabled persons, ethnic minorities, candidates who are carriers of infectious diseases, candidates who come from rural locations and hold rural household residency, or secondees if dispatched to employers by any staffing firm, during the recruitment process.

Under the labour and employment laws of China, if an employee is laid off for reasons such as a bankruptcy reorganisation, difficulties in production or business operations, adjustment of the enterprise’s business methods or material changes in the economic conditions, this employee will have priority if the employer intends to recruit new staff within six months.

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

According to the Labour Contract Law (LCL), an employer should execute a written employment contract with an employee within one month of the employee commencing work, and both the employer and the employee should retain an original contract. If an employer fails to sign an employment contract within one month, for the period commencing from the first day of the second month and ending on the last day of the 12th month, it must pay twice the monthly salary of the employee for each month for which services were provided without a written employment agreement. The employment will be deemed ‘open ended’ if an employer fails to enter into a written employment agreement with an employee within one year of the employee commencing work. Such open-ended employment cannot be terminated unless otherwise explicitly authorised by law. The essential terms of an employment contract are:

  • the employer’s name and address, and the name of its ‘legal representative’ or chief person;
  • the employee’s name, address and ID number;
  • the term of the employment contract, including the probationary period;
  • the nature of the employee’s job duties, work requirements and workplace;
  • the employee’s working hours, leave and holiday entitlements;
  • the employee’s remuneration;
  • social insurance;
  • labour protection, working conditions and professional hazard prevention and protection; and
  • other information as may be necessary for specific employment contracts.

 

As a result of the covid-19 pandemic and in recognition of the practical difficulty in having employees and employers execute hard-copy employment contracts, on 4 March 2020, the Ministry of Human Resources and Social Security (MHRSS) issued the Letter of the General Office of the MHRSS on Issues Related to the Conclusion of Electronic Employment Contracts (Letter) in response to the Request for Instructions on Electronic Employment Contract Management during the covid-19 period from the Beijing Labour Bureau. The Letter stipulates that employers and employees may agree to sign employment contracts electronically. In addition to the employment-related laws and regulations, the execution of an electronic employment contract should follow the requirements under the People’s Republic of China E-signature Law, including that:

  • the electronic employment contract is executed using a reliable e-signature and data message that can be identified as the written form by law; and
  • the employer should ensure that the formation, transmission, and preservation of the electronic employment contract is complete, accurate and not falsified.

 

Nonetheless, once conditions permitted hard-copy contracts to be executed, the best practice was for employers to re-execute the employment contracts in a hard-copy form so the parties could each retain an original, as required by the LCL.

To what extent are fixed-term employment contracts permissible?

There are three types of employment contracts under Chinese law, namely:

  • fixed-term employment contracts;
  • open-ended employment contracts; and
  • employment contracts with a specified period to complete the prescribed work.

 

In practice, most employment contracts are fixed-term contracts, and there is no maximum duration for such contracts. When concluding or renewing an employment contract with an employee under any of the following circumstances, an employer is generally obliged to enter into an open-ended employment contract unless the employee requests to conclude a fixed-term employment contract:

  • the employee has worked under two consecutive fixed-term contracts and the employment relationship is to continue;
  • the employee has worked for the employer for more than 10 consecutive years; or
  • the employer has not signed any written employment contract with the employee for more than a year.

 

However, in practice, expatriate employees (which do not include Hong Kong, Macau or Taiwan (HMT)) should not receive open-ended contracts because the maximum term of a work permit is five years, and many local authorities will issue a work permit to an expatriate employee only when the term of his or her employment contract is consistent with the term of the work permit.

Probationary period

What is the maximum probationary period permitted by law?

The probationary period varies depending on the nature and term of the relevant employment agreement as stated below.

 

Term of labour contract Maximum term of probation
Less than 3 months or a contract with a term to expire upon completion of certain work No probation allowed
3 months or more but less than 1 year Up to 1 month
1 year or more but less than 3 years Up to 2 months
3 years or more or open-ended employment Up to 6 months

 

Employers may impose only one probationary period throughout the term of employment, and an extension of the probationary period beyond the maximum period stipulated by the Labour Contract Law is generally not allowed by such Law.

Classification as contractor or employee

What are the primary factors that distinguish an independent contractor from an employee?

Generally, Chinese law does not recognise the concept of an independent contractor. In practice, labour arbitration tribunals or courts tend to recognise the establishment of an employment relationship if the following main conditions are satisfied:

  • the employer and the individual are both legally qualified to enter into an employment relationship under the applicable laws and regulations;
  • employment-related rules and policies of the employer apply to the individual and the individual works for remuneration under the management and supervision of the employer; and
  • the work carried out by the individual is an integral part of the employer’s business.

An individual is ‘legally qualified’ to enter into an employment relationship if he or she is at least 16 years of age and not older than the relevant retirement age and is not a matriculating student.

Temporary agency staffing

Is there any legislation governing temporary staffing through recruitment agencies?

Yes. According to the Labour Contract Law and the Interim Provisions on Labour Dispatch, recruitment agencies shall apply for and obtain labour dispatch operation permits from competent human resources authorities to engage in staffing businesses. Employers should engage staffing firms with valid permits. Temporary staff will enter into fixed-term labour contracts for at least two years with qualified recruitment agencies and be dispatched to the employer. However, the roles of such dispatched employees are limited to those of a temporary, auxiliary or substitute nature.

There are some additional restrictions or requirements for an employer’s use of staffing services. For instance, if a dispatched employee works for more than six consecutive months, this role will not qualify as temporary and, as a result, the arrangement arguably breaches the regulatory restrictions. Also, if an employer plans to engage dispatched employees to work in auxiliary positions, it should consult the trade union or the employees and announce to all employees before it may fill these positions with dispatched workers.

Further, the regulations require that the number of dispatched employees shall not, in any event, exceed 10 per cent of the total number of employees, which is designed to prevent any abuse by using dispatched employees to bypass legal obligations otherwise owed to non-dispatched employees. Dispatched employees, as a matter of law, are entitled to ‘equal pay’ treatment as other employees in the same positions and discrimination is not permitted. Significantly, the Interim Provisions of Labour Dispatch have a general anti-abuse provision that prohibits employers from using staffing services in the name of outsourcing when the substance of the arrangement is labour dispatch. While there are no regulations differentiating good-faith outsourcing from labour dispatch, the courts will examine the specific facts on a case-by-case basis.

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