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PRC Labour Law - Bitesize

5 April 2013
Mayer Brown Newsletter

Termination and Renewal of Employment Contract (Cont'd)

Am I required to give notice to an employee if I decide not to renew his or her labour contract when its term expires?

There are no provisions under the PRC Labour Contract Law which require an employer to provide prior notice to its employees for renewal or non-renewal of a fixed-term labour contract. Therefore, at the national level, if you decide not to renew a fixed-term labour contract, you are not obliged to give notice to the employee.

However, some contracts contain a notice provision which requires notice to end a fixed-term contract. As such, care needs to be taken to comply with your contractual commitment.

In addition, there may exist relevant local rules requiring notification. For example, Beijing requires an employer to provide 30 days' prior written notice to an employee for renewal or non-renewal of a fixed-term labour contract. If the employer fails to do so, it will be obliged to pay the employee the compensation of one day's wages for each day of notice not given, calculated on the basis of the employee's average daily wages for the preceding month.

I have decided not to renew a labour contract with one of my employees who joined our company in 2006. Do I need to pay economic compensation to such employee?

Yes, you are required to pay economic compensation to this employee as required by the PRC Labour Contract Law. However, you only need to pay economic compensation for the period from the date on which the PRC Labour Contract Law came into force, 1 January 2008 (rather than from the employee's commencement date with the company in 2006), to the termination date.

Please note that you are only entitled to choose whether or not to renew the employment contract of an employee in respect of his/her first fixed-term labour contract with you.

Before the expiry of a labour contract, the relevant employee submitted a medical certificate requesting a non-work-related medical treatment period. Can I end the employment relationship with the employee on the normal expiry date?

No. You must extend the term of the contract until the earlier of the date when the employee returns to work after recovery and the date on which the employee has used up his statutory non-work-related medical treatment period.

Do I have to enter into another written contract during the extended medical treatment period? Will I be subject to double salary for lack of such written contract?

No. You are not required to enter into a new contract for the statutory extended period. As such, double salary will not be triggered. However, you may wish to issue a written notice to the employee in respect of the extension in order to avoid any dispute.

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