In China, the Labor Contract Law (2008) recognizes three main types of employment agreements.

Fixed-Term Contract

A fixed-term contract establishes an employer-employee relationship for a predetermined period. This type of contract is commonly used for both part-time and full-time positions. The maximum duration of a fixed-term contract is typically three years, with the option for renewal upon mutual agreement. It's important to note that after two consecutive fixed-term contracts with the same employer, the employee has the right to request an open-ended contract if the company wishes to continue the employment.

Open-Ended Contract

An open-ended contract, also known as a non-fixed term contract, offers employment with no set end date. This type of contract provides greater job security for the employee. Open-ended contracts are generally favored by Chinese labor law and are the preferred option for establishing long-term employment relationships.

Contract for a Specific Task or Project

This type of contract is designed for temporary or project-based work. The employment relationship terminates upon the completion of the designated task or project. Contracts for a specific task or project offer flexibility for employers with temporary needs but may not provide the same level of security for employees.

Chinese employment agreements must comply with the Chinese Labor Contract Law (2008) and incorporate essential elements to ensure a legally sound and comprehensive document.

Parties to the Agreement

The agreement should clearly identify the employer, including the company name, legal representative, and registered address. It should also include the employee's full name, identification number, and residential address.

Contract Term

The type of employment contract and its duration should be specified.

Job Description and Location

The agreement should provide a clear description of the employee's job duties and responsibilities. The primary work location should also be specified.

Working Hours and Rest Periods

The standard working hours per day and week should be defined, adhering to the 40-hour workweek stipulated by law. Regulations for rest periods, breaks, and overtime work, including overtime pay calculations, should be outlined.

Remuneration and Benefits

The employee's base salary, including currency and payment schedule, should be detailed. Any bonuses, allowances, or other forms of compensation should be specified. The employer's responsibility to contribute to social insurance for the employee, covering areas like pension, healthcare, and unemployment, should be clarified.

Termination

The grounds for termination by both the employer and the employee, following legal guidelines, should be defined. The notice period required for termination and any associated severance pay calculations, as mandated by law, should be specified.

Dispute Resolution

The mechanism for resolving any disputes arising from the employment contract, such as arbitration or litigation, should be established.

Governing Law and Language

The law that governs the interpretation and enforcement of the contract, typically being the laws of the People's Republic of China, should be indicated. The language(s) in which the contract is written and signed, with Chinese being the primary language for legal purposes, should be specified.

The probationary period is a key component of employment agreements in China, providing a window for both employers and employees to evaluate their compatibility before entering into a long-term commitment.

Purpose and Benefits

The probationary period serves a dual purpose. For employers, it offers a chance to assess an employee's skills, work ethic, and fit within the organization. For employees, it provides an opportunity to evaluate the job duties, work environment, and company culture to determine if the role meets their expectations.

Legal Framework

The Chinese Labor Contract Law (2008) governs the legality and limitations of probationary periods. The maximum duration of a probation period is directly tied to the type of employment contract:

• Contracts less than three months or part-time positions are not allowed to have a probation period.
• Fixed-term contracts with a duration of three months to one year can include a probation period of up to one month.
• Fixed-term contracts exceeding one year or open-ended contracts can include a probation period of up to six months.

Termination During Probation

During the probation period, both employers and employees reserve the right to terminate the employment relationship with minimal notice, typically ranging from one to thirty days depending on the contract. However, employers are required to provide a valid reason for termination beyond simply not meeting performance expectations during probation.

Important Considerations

The probation period should be explicitly defined within the employment contract. Employers are advised to use this period to effectively assess employee performance through clear performance evaluations and feedback mechanisms. Once the probation period ends successfully, the employee transitions to the full terms and conditions outlined in the employment contract, usually with increased benefits and job security.

In China, employment agreements can include confidentiality and non-compete clauses to safeguard an employer's sensitive data and competitive edge. However, these clauses are subject to specific legal prerequisites and restrictions as per the Chinese Labor Contract Law (2008).

Confidentiality Clauses

Confidentiality clauses are designed to protect an employer's trade secrets and confidential information from unauthorized disclosure by employees. They can cover a broad spectrum of information, such as customer lists, technical expertise, and business strategies.

Key Points:

• There's no compulsory requirement for a separate non-disclosure agreement (NDA) in China. Confidentiality obligations can be incorporated directly within the employment contract.
• The duration of confidentiality obligations can extend beyond the termination of employment, provided the information remains a secret.

Non-Compete Clauses

Non-compete clauses prevent employees from accepting positions with competitors or establishing their own competing businesses for a specified period after leaving the company.

Legal Restrictions:

• Non-compete clauses can only be applied to a select group of employees who have access to the employer's trade secrets, typically senior management or technical staff.
• The maximum enforceable non-compete period is two years after employment termination.

Additional Considerations:

• To be enforceable, non-compete clauses must be accompanied by financial compensation to the employee during the restricted period.
• Courts in China may deem overly broad non-compete clauses unreasonable and unenforceable.