Overview
China’s primary labor regulatory framework is governed by the Labor Contract Law of the People’s Republic of China and supporting rules including the Labor Law, Social Insurance Law, Regulations on Working Hours, Minimum Wage Regulations, and Labor Dispute Mediation and Arbitration Law. All enterprises operating in China—including foreign-invested companies, representative offices, and cross-border remote teams hiring Chinese-based employees—must fully comply with local labor rules, regardless of employee nationality or working mode.
1. Mandatory Written Labor Contracts
- A formal written labor contract must be signed within 30 calendar days from the employee’s first working day. Oral employment agreements are not legally protected and will result in administrative penalties for employers.
- Key clauses must be clearly stipulated: job position, workplace, contract term, working hours, salary, social insurance, probation period, workplace rules, and termination conditions.
- Probation periods are strictly capped: maximum 1 month for contracts under 1 year; 2 months for 1–3 year contracts; 6 months for open-ended contracts or contracts longer than 3 years. Probation wages cannot be lower than 80% of the agreed regular salary and must meet the local minimum wage standard.
2. Statutory Working Hours & Overtime Rules
- Standard working hour system: 8 hours per day, 40 hours per week.
- Overtime work must be negotiated with trade unions and individual employees in advance, with strict annual caps:
- Daily overtime shall not exceed 1 hour;
- Under special production conditions, maximum 3 hours per day, and no more than 36 hours of total overtime per calendar year.
- Mandatory overtime pay rates:
- Weekday overtime: no less than 150% of regular hourly wage
- Rest-day overtime (weekends) without compensatory leave: no less than 200% of regular hourly wage
- Statutory public holiday overtime: no less than 300% of regular hourly wage (compensatory leave cannot replace holiday overtime pay)
3. Compulsory Social Insurance & Housing Fund
Employers are legally obligated to register and pay five types of social insurance plus the housing provident fund for all formal employees on a monthly basis, shared by both company and staff:
- Pension Insurance
- Medical Insurance
- Unemployment Insurance
- Work-Related Injury Insurance
- Maternity Insurance
- Delayed payment, underpayment or evasion of social insurance contributions will lead to late fees, fines, compulsory back-payments, and labor bureau inspections.
- Foreign employees holding valid Chinese work permits are also covered by this social security system.
4. Minimum Wage Protection
Each province, municipality directly under the Central Government sets its own local monthly and hourly minimum wage standards, which are adjusted regularly.
- The regular salary, probation salary, and overtime base wage must never be lower than the local statutory minimum wage.
- Allowances for transportation, meals or communication cannot be excluded when calculating whether the salary meets the minimum wage threshold.
5. Statutory Leaves
Annual Public Holidays
11 days of national statutory paid public holidays per year, including Spring Festival, National Day, New Year’s Day, etc.
Paid Annual Leave
Employees who have worked consecutively for more than 12 months are entitled to paid annual leave:
- 5 days for total service of 1–10 years
- 10 days for 10–20 years of service
- 15 days for service over 20 years
- Unused annual leave must be compensated at 300% of the regular daily wage if the employer fails to arrange leave upon employee consent.
Other protected leaves include maternity leave, paternity leave, sick leave, marriage leave, and bereavement leave, all regulated by local government policies.
6. Labor Contract Termination & Severance Pay Rules
Legal grounds for unilateral dismissal by employers
Employers can terminate contracts without severance only in cases such as severe violation of company rules, serious dereliction of duty, criminal conviction, or fraud during recruitment.
Mandatory Economic Severance Pay
If the company terminates employment due to operational restructuring, layoffs, objective material changes, or mutual negotiated termination, severance compensation must be paid:
- Standard compensation: 1 month of average monthly salary for each full year of employment;
- For service less than 6 months: 0.5 months’ salary; more than 6 months but less than 1 year: 1 month’s salary;
- For high-income employees whose salary exceeds 3 times the local average social wage, the compensation base is capped, with a maximum compensation period of 12 years.
7. Labor Dispute Resolution Mechanism
All labor disputes must follow the statutory resolution sequence:
- Voluntary negotiation between employer and employee;
- Mediation via the enterprise internal labor mediation committee or local grassroots mediation organizations;
- Labor arbitration (statutory pre-proceeding before litigation, valid within 1 year from the date of the labor right infringement);
- Civil litigation at the local people’s court if either party disagrees with the arbitration award.
Key Compliance Reminders for Global Companies
- Remote-only overseas employers cannot directly hire Chinese employees without a legally registered entity in China; third-party labor dispatch or HR service outsourcing must comply with dispatch quota and position restrictions.
- Company employee handbooks, attendance rules, and reward & penalty policies are only legally valid if formulated through democratic consultation and announced to all staff.
- Personal data of employees must be protected in line with China’s Personal Information Protection Law; biometric attendance, workplace monitoring and data collection require explicit employee consent.
Why Gonex?
Experienced Management Team: each member in the team has 10+ years experiences in Overseas Human Resources Management, composed of seasoned HR professionals.
Powerful connection: Gonex has established over 10 entities worldwide, along with more than 30 stable partners, together offering the most comprehensive overseas human resource services to our clients.
Strict compliance with laws and regulations: At every step in our service process, Gonex strictly adheres to local laws and regulations, ensuring our clients completely avoid any legal disputes.
Competitive price: Gonex’s services are 20% more affordable compared to other companies in the industry, allowing our clients to allocate more resources to their core business.
What Gonex offer?
Employment of Record: This service helps clients legally hire employees in countries or regions where they do not have a legal entity established.
Payroll BPO service: This includes payroll project implementation plan development, project deployment, payroll calculation, payment of funds, administration of statutory and supplementary benefits, customized reporting, and other comprehensive payroll services.
Global Mobility: Based on the company’s internationalization strategy, the company assigns employees to overseas branches/subsidiaries and handles visa and tax matters in accordance with local policies, while assisting in the compliance management of employees throughout their international assignment life cycle.
GONEX One-Stop Solution: Your strategic partner
Compliance and Legal Adherence: GONEX’s Employer of Record (EOR) service ensures legal compliance in employing local staff.
Cross-Border Payroll and Tax Management: Streamlined payroll services simplify cross-border management.
Flexible Employment Solutions: Adaptable employment services cater to changing business needs.
International Talent Dispatch: Support services facilitate the dispatch of key talent to overseas.
Digital HR Management Platform: Technology-driven solutions enhance management efficiency and cultural integration.
Who do we serve?
Gonex served 70+ clients to expand overseas. The incomes of our clients like Mengniu, Kuaishou and CHINT are up to 192.4 billion.
Let Gonex assist you and your company with handling such complex overseas hiring processes! To access more information on corporate international expansion cases, global employment guidelines, worldwide compensation management, regulations for various regional countries, and factory establishment manuals in different nations, you are welcome to visit the GONEX official website at www.letsgonex.com to download these resources or view our company’s business introduction in PDF format (https://letsgonex.com/in.pdf).
