Is it a legal requirement that employees be given an employment contract ?

Under China's Labor Contract Law (2007), it is a legal requirement that all employees receive a written employment contract. The employment contract may be a Fixed Term Contract, Open-ended Contract, or Contract to be Terminated upon the Completion of Specific Task. In general, a written contract must be signed within 1 month after the employee starts work. Oral contracts are ONLY permitted in case of part-time workers

What factors constitute a fair dismissal i.e. legally justifiable reasons to terminate employment without the need to pay compensation?

A fair dismissal can be relied on by the employer if the employee,
a) fails to meet the requirements for employment during the probation period;
b) materially breaches the employer's rules and regulations;
c) causes substantial losses to the employer due to his serious dereliction of duty or engagement in graft for personal gain.

What is good practice with regard to dismissal procedures to minimize the risk of claims for unfair dismissal?

If an employer wishes to unilaterally terminate an employment contract, it should first inform the trade union of the reasons for the termination. It is also advisable, if possible, to conclude a comprehensive settlement agreement with the employee, stipulating total severance and compensation, to prevent the employee raising other claims at a later time. Regarding employee who may have access to the company chop, legal representative chop, business license, and other important documents, it is advisable to secure these items before the termination is announced to the employee.

If an employee is dismissed unfairly what is the financial range of compensation that can be made to employees?

Severance payments are mandatory under China labor law and are calculated based on formulas promulgated by the Chinese government. Financial compensation shall be paid based upon the number of years the employee has worked for the employer at the rate of 1 month's wages for each full year. Any period not less than 6 months but less than one year shall be counted as 1 year. The financial compensation payable to a worker for any period of less than 6 months shall be 1/2 of his monthly wage. If the monthly wage of a worker is three times greater than the average monthly wage in the previous year for employees as announced by the People's government at the municipal level directly under the central government or at the city-with-district level where the employer is located, the rate for financial compensation paid to him shall be 3 times the average monthly wage of employees and shall be for not more than 12 years of work.

On Dec. 02, 2008, Ms. Zhang (female), the defendant, began working as a cashier for the plaintiff, a large supermarket located in Luoyang City, Henan. On Dec. 09, 2008, both sides signed the labor contract and agreed on the following terms:

1) Contract term was for one year, from Dec. 09, 2008 to Dec. 09, 2009
2) Initial monthly salary was to be RMB 800 per month
3) One rest day per month was granted

The supermarket also notified Ms. Zhang that Article 14 of company's Employee Handbook stipulated that the first monthly wage should be kept by the supermarket as a guaranty. If an employee left his/her job without leave, the guaranty paid by the employee would not be returned. On the expiration of the employment contract, the guaranty would be returned. Also, RMB 20 and a one day's wage would be deducted if the employee was absent from work without a valid reason.

Ms. Zhang worked as a cashier in the supermarket until Jan. 06, 2009. After this date, she failed to show up for work and never returned.

The supermarket did not return Ms. Zhang's initial one month pay (deposit) based on the clauses contained in the employment contract allowing for only one rest day per month and that the employer was allowed to retain the deposit if the employee failed to report to work without a valid reason. On Feb. 13, 2009 Ms. Zhang filed a complaint with the local labor arbitration committee of Jianxi District of Luoyang City. However, neither party was satisfied with the arbitration award and both filed suits in the People's Court of Jianhe District of Luoyang City, Henan Province. The court found for the employee and ordered the company to pay her RMB 1,013 Yuan as compensation for unpaid wages.

After hearing the case, the court held that the employment contract clause providing for only one rest day per month violated China's labor law and therefore invalid. The court also held that it was illegal for the employer to keep Ms. Zhang's first month's salary as a forfeited deposit and ordered the company to return the deposit.

The employer, located in Yongzhou, Hunan Province, is in the business of manufacturing and selling aluminum products. Mr. Zeng, the employee, began working for the company, although he did not enter into a written labor contract with the employer. Six month later, Mr. Zeng's right hand was injured while fixing aluminum strips and the local labor bureau classified as a level 10 work injury. Mr. Zeng and his employer failed to reach an agreement on compensation for the injury and Mr. Zeng filed a claim with the local labor arbitration committee. During the arbitration hearing, the company insisted that Mr. Zeng was not the employee since it had not entered into a signed labor contract with him. The arbitration committee found that Mr. Zeng was an employee of the company, that Mr. Zeng had been injured, and ordered the company to pay compensation. The employer filed an appeal with the local People's Court.

The court ruled that although there was no labor contract between the company and Mr. Zeng, a labor relationship did exist and that the employer was responsible for Mr. Zeng's work related injuries. The court ordered the company to pay damages to Mr. Zeng.

In addition, according to Article 82 of the Labor Contract Law, if an Employer concludes a written employment contract with a Employee more than one month but less than one year after the date the employee begins work, the company shall pay to the employee twice the monthly wage as a penalty. The company was therefore ordered to pay double wages to Mr. Zeng as a pentaly for not concluding a written labor contract with him.

On Apr. 01, 2010, the People's Court of Luxi County, Jiangxi Province mediated a labor dispute case in which the employee sought overtime compensation from his employer. The court ordered the company to pay the overtime payments.

In Dec. 2008, Xiao Wang began working for a company located in Luxi County. The company was a large company, quite famous in the locality, and known for attracting investment. In addition, the owner of the company was wealthy and was personally well known in the community. The company, in order to be more competitive, was very strict with its employees, who were often asked to work overtime on weekends and statutory holidays without additional payment. This aroused many complaints from the workers, however, the company's management ignored the protest and continued to require the employees to work uncompensated overtime. Mr. Xiao Wang requested overtime on many occasions but was refused each time. Finally, Mr. Wang filed a claim with the People's Court, claiming payment of his overtime wages.

On acceptance of the case, the People's Court of Luxi County immediately arranged for negotiation between the two parties to resolve the dispute. However, the company's management continued to refuse to pay the requested overtime wage, stating that overtime work is an employee's duty. The judge then explained to the company's management, several relevant stipulations contained in the PRC Labor Contract Law. The court informed the company managers that it is the legitimate right of an employee to demand overtime pay for his work performed on weekends and statutory holidays and that the employer should pay the overtime in accordance with the law. Finally, the company agreed to negotiate with Xiao Wang on the overtime compensation and the two parties entered into a binding mediation agreement.

On March 30, 2010, the People's Court in Changwu County, Shaanxi province resolved a labor dispute through pre-trial mediation, in which the defendant YongLe Commercial Co., Ltd. (assumed name) compensated the plaintiff, Niu Ling (assumed name) for economic losses of RMB 43,000.

On December 31, 2007, the plaintiff, Niu Ling, already past the retirement age, signed a one-year labor contract with the defendant Yongle Commercial Co., Ltd. to work as a cook. On November 22, 2008, the plaintiff's left hand was injured while she was cleaning the pasta machine. She was sent to the hospital where her little finger and ring finger were amputated.

On May 4, 2009, the plaintiff's injury was certified by the labor arbitration department as a work-related injury. On October 19, 2009, the labor arbitration department revoked the decision of "work-related injury" based on the grounds that "the plaintiff had passed the retirement age and was not qualified to engage in a labor relationship. The employee filed an appeal with the People's Court. .

The court found for the employee. Although the plaintiff had passed the statutory retirement age, her labor contract signed with the defendant did not violate any provisions of the relevant labor law and an employment relationship existed. The court held that the plaintiff suffered a work-related injury during the working time, and that the employer was liable for paying compensation for the work related injury.

Finance Minister Xie Xuren wrote an article in Truth Seeking, an important journal in China, stating that the Ministry of Finance has put social security tax on the agenda. Social security tax refers to a payroll tax levied on both employers and employees, which will be used to pay for social welfare programs.