Chinese labor law permits employers to set a probation period to evaluate their employees’ suitability and make a (more or less) informed decision about whether to retain an employee for the long term or even for a life-term. Foreign employers are often confused about employee probation in China and the following are six common myths regarding China employee probation.
Myth 1: The employer doesn’t have to contribute to the employee’s social insurance account until after the employee has completed his or her probation period to the employer’s satisfaction. Your obligation to pay mandatory social insurance starts as soon as the employee begins working for you.
Myth 2: The employer need not sign a written employment agreement with an employee on probation until the end of the probation period. The probation period is deemed to be part of the employment period so you must have a written employment contract with all employees, even those on probation. It’s preferable to have the signing “ceremony” on an employee’s first day, but in no event should you wait beyond 30 days after your employee’s commencement date.
Myth 3: The employer can use a simple “probation period contract” instead of a formal employment contract, because who needs the formalities at this stage? Even if this arrangement does not otherwise violate any Chinese labor laws, this idea is usually not practical. You will need a formal employment contract eventually and you might as well have one at the very outset.
Myth 4: The employer can extend for another probation period if it is not sure about whether to retain this employee beyond the probation period. Be careful here. Some places do not allow for extending the probation period and the employee’s written consent does not matter. Some places may allow it but the combined length of the probation period cannot exceed the statutory maximum.
Myth 5: The probation period is an employment-at-will period so the employer can unilaterally terminate an employee on probations without cause. You can only terminate an employee when one of the statutory conditions for termination is present. You may unilaterally terminate an employee that does not satisfy your conditions of employment without having to pay severance. But you must be able to prove that the employee failed to meet your standards. A well-documented discharge with detailed explanation for why the employee does not meet your expectations will significantly reduce your risks of later being sued for wrongful termination.
Myth 6: An employer that lets an employee go before the expiration of his or her probation period can set a new probation period if it decides to hire the employee back. Setting a new probation period for the same employee runs afoul of the Chinese labor laws. Though China court decisions on this issue are somewhat inconsistent, we nearly always recommend using only one probation period for the same employee.
Bottom line: Do not use employee probation periods unless and until you know the laws.
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.