China Employment Law: 7 Mistakes That Cost Foreign Companies €50K+

China has some of the most employee-protective labor laws in the world. Most foreign companies find this out the expensive way.

These are the 7 mistakes we see foreign companies make — over and over again.

Mistake 1: Probation Period Termination Without Clear Hiring Criteria

"My employee is on probation. I can fire them for any reason." False. In China, even during probation, you need documented evidence that the employee was clearly informed of hiring criteria and failed to meet them. No documentation = you lose. Average payout: 3 months salary.

Mistake 2: No Written Job Description Signed By Employee

Your employment contract says "Sales Manager." That is not enough. You need a detailed, written job description with specific KPIs — signed by the employee on their first day.

Mistake 3: Severance Calculation Errors

Statutory severance: 1 month salary per year of service, based on AVERAGE salary (including bonuses), capped at 3x local average wage. Calculate wrong, employee claims additional compensation.

Mistake 4: Overtime Without Proper Tracking

Weekdays: 150%, weekends: 200%, public holidays: 300%. Without formal signed time tracking, claims go back 1-2 years and employers usually lose.

Mistake 5: Non-Compete Clauses Without Compensation

2-year non-compete is unenforceable without monthly compensation — minimum 30% of monthly salary during the non-compete period.

Mistake 6: Social Insurance Base Underreporting

Pay ¥20,000 but report ¥8,000 for social insurance. Consequences: back payment + 0.05% daily late fee + 1-3x fine. Average cost: ¥300,000+ per employee.

Mistake 7: No Written Resignation Confirmation

Employee says "I quit" and walks out. One month later files for unlawful termination. You have no proof. You lose. DBIC Rule: All resignations must be in writing, dated, signed, and HR stamped.

The Employment Compliance System

For every client employee: signed job description with KPIs, signed handbook, monthly signed time sheets, quarterly performance reviews, all employment changes documented and signed. This is not bureaucracy. This is protection.