China Employee Probation: You May Have Just One Shot

As I wrote in China Employee Probation: Don’t Let It Slip Away, labor contracts for new employees often include a probation period (试用期) designed to give the employer (mostly) and the employee time to test each other out. The big thing you must remember is that terminating a Chinese employee who is  not on probation is usually difficult and expensive and it therefore nearly always makes sense to consider a probation period for any new employee.

Our China lawyers usually (but not always) recommend an initial employment term of three years with a six month probation period — six months is the longest probation period typically allowed. We recommend a six month probation period for a number of reasons, chief of which is that you may only get one shot at any probation period at all.

The general rule under China’s Labor Contract Law is that employers may use only one probation period for the same employee. In other words, you may not set up another probation period for the same employee when you renew his or her labor contract and any failure to follow the Labor Contract Law rules subjects employers to administrative and civil liability.

But what if you initially set a probation period that is less than the maximum period? For instance, what if you initially set a two-month probation period for an employee with whom you contract for an initial employment term of three years, can you extend the probation period for another four months via an amendment to the existing labor contract? It mostly depends on the employer’s location, but the usual answer is no.

In some municipalities (Beijing and Shenzhen immediately spring to mind), you cannot extend the probation period even if the employee’s initial probation period was less than the legal limit. Once you have set a probation period, you are bound by it and under no circumstances can you extend it. In cities like Beijing and Shenzhen, extending a probation period will be treated as the equivalent of setting a new probation period for purposes of the Labor Contract Law, and for that reason, not allowed.

As is so often the case when it comes to employer-employee legal issues, the Shanghai Labor Bureau’s position is completely different. Shanghai generally allows employers to extend a probation period, provided the following are all true:

1. The entire probation period (after extension) is within the legal limit;
2. The employee agrees to the arrangement;
3. The extension occurs before the end of the probation period; and
4. The employer and the employee enter into a written amendment to the existing labor contract documenting the probation extension.

Bottom line: If you are unsure about whether you wish to retain an employee beyond his or her probation period, you need to think long and hard before you give that employee “a second chance” by extending his or her probation period. If you do not think the employee is a good fit for your company, letting him or her go right then might be your only good option. But as is true of so much employment law in China, it all depends on where you and your employee are.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.