Termination of employment by employers in China is virtually never easy even in absence of a crisis situation. When it comes to the economic downturn, employee dismissal becomes far more sensitive. Three years of unprecedented developments in China stemming from the COVID-19 pandemic have brought on great challenges to multinational companies having local operations in China, including the need to properly handle employment relationships with local staff. In this article, we set out the essentials of employment termination under PRC law, including the grounds and procedures for termination of employment, calculation of severance pay, and some practical issues on terminating employees during the pandemic.
Under the PRC Labour Contract Law, an employer may only dismiss an employee under the designated circumstances under the law, and to the extent that a trade union has been established within the organisation of the employer, a prior notice shall be provided to such trade union for any unilateral termination of employment by the employer. We set out below the major circumstances under which an employer can lawfully terminate the employment of an employee.
An employer and its employee can reach a mutual agreement to terminate the labour contract.
An employer may dismiss an employee with 30 days prior...
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