Hiring Chinese Staff: Labour Contracts, Probation and Social Insurance
China Field Notes · by Daona · 14 min read
China's labour law is written to protect employees, and courts apply it that way. There is no "at-will" employment. Get three things right from day one — a written contract, a lawful probation and full social insurance — and most of the problems foreign employers run into never start.
Your entity is registered (Issue 05), the chops are carved (Issue 06), the first fapiao has been issued (Issue 08). Now you want to hire. The candidate is good, the salary is agreed, and someone suggests "we'll sort out the paperwork after she starts".
That sentence is where many disputes begin. The Labor Contract Law (劳动合同法) sets deadlines that run from the first day of work, and the penalties are automatic: double wages, deemed open-ended contracts, back-payment of social insurance. None requires a dispute — only lateness.
· WFOE, JV or Chinese company: hires directly, after registering with the social insurance and housing fund authorities.
· Representative office: generally hires through a licensed foreign-enterprise service agency, which is the legal employer (Issue 05).
· Labour dispatch (劳务派遣): only for temporary, auxiliary or substitute positions, and no more than 10% of total workforce under the Interim Provisions on Labour Dispatch.
· Outsourcing / employer of record: commercial arrangements with a licensed provider for companies without an entity; compliance depends on the provider.
Sign within one month. A written labour contract (书面劳动合同) must be concluded within one month of the first day of work.
Double wages. After one month and up to one year without a contract, the employer owes double wages each month from the second month (Art. 82) — up to 11 months of extra salary.
Deemed open-ended. After one year with no written contract, the employee is deemed to have an open-ended contract (无固定期限劳动合同) (Art. 14).
| Type | Typical use |
|---|---|
| Fixed-term 固定期限 | The common choice: one to three years for a first contract |
| Open-ended 无固定期限 | No end date; ends only on statutory grounds |
| Task-based 以完成一定工作任务为期限 | Ends when a defined project is completed |
When open-ended becomes mandatory
Unless the employee asks for a fixed term, the employer must offer an open-ended contract after 10 consecutive years, or on renewal after two consecutive fixed-term contracts (absent misconduct or certain incapacity grounds). Refusing also triggers double wages. Two one-year contracts reach that point in two years — choose the first term deliberately.
The contract must cover the parties, term, job and workplace, hours and rest, pay, social insurance and working conditions. Use Chinese (bilingual is fine, Chinese prevailing) and keep a signed original. Many cities publish a model contract.
| Contract term | Max probation |
|---|---|
| Under 3 months, or task-based | None |
| 3 months to under 1 year | 1 month |
| 1 year to under 3 years | 2 months |
| 3 years or more, or open-ended | 6 months |
· Once per employee — not again on renewal or promotion.
· Pay at least the lowest wage for the same job or 80% of the contract wage, and never below the local minimum wage (Art. 20).
· A contract that is only probation is treated as a contract for that term, and the probation is void.
· Social insurance from day one. Probation is employment.
· Ending it requires proof the employee fails written hiring conditions acknowledged at hiring. The employee may resign with three days' notice.
The most common mistake: a "second probation" on renewal. It is unlawful and can cost compensation.
Standard hours are 8 a day and 40 a week, with at least one rest day. Overtime is generally limited to one hour a day (three in special cases) and 36 hours a month, and paid at:
| When | Minimum pay |
|---|---|
| Extended hours on a working day | 150% |
| Rest day, no time off in lieu | 200% |
| Statutory public holiday | 300% |
The comprehensive (综合计算工时) and flexible (不定时工作制) working hours systems generally need local labour authority approval. Calling a role "management" does not remove overtime by itself.
Paid annual leave, by cumulative work experience with any employer:
| Cumulative experience | Leave |
|---|---|
| 1 to under 10 years | 5 days |
| 10 to under 20 years | 10 days |
| 20 years or more | 15 days |
Unused statutory leave the employer did not arrange is generally paid at 300% of daily wages. China has 13 days of public holidays from 2025. And from 1 January 2025 the retirement age rises gradually over 15 years — men from 60 to 63, women from 50 to 55 or 55 to 58 by role. Check individual dates against the official tables.
| 五险一金 | Employer | Employee |
|---|---|---|
| Pension 养老 | 16% in all major cities | 8% |
| Medical / maternity 医疗 / 生育 | Yes | Commonly 2% |
| Unemployment 失业 | Yes | Yes |
| Work injury 工伤 | By industry risk | No |
| Housing fund 公积金 | 5%–12%, local | Matching |
Rates are set city by city. Payroll guides put the employer's social insurance share at roughly 26–28% of the base in Shanghai and Beijing before the housing fund; with it, total employer cost commonly lands in the low-to-mid 30s per cent. Contributions use the contribution base (缴费基数) — previous year's average salary, or starting salary for new hires — between a local floor and a ceiling commonly around three times the local average wage, usually reset each July. Register new staff within 30 days of hiring.
No more "waiver" agreements
Since 1 September 2025, Article 19 of the Supreme People's Court's Interpretation (II) on labour dispute cases (劳动争议案件适用法律问题的解释（二）) makes any agreement — or unilateral employee promise — that the employer need not pay social insurance invalid. Commentators note an employee who resigns over unpaid contributions can claim severance, and the contributions remain due. At risk: cash allowances in place of contributions, no enrolment during probation, and bases far below actual salary.
| Route | Grounds (summary) | Severance |
|---|---|---|
| Mutual agreement (Art. 36) | Both sides agree | Yes, if employer proposed |
| Summary dismissal (Art. 39) | Failing probation conditions; serious breach of rules; serious dereliction; criminal liability | None |
| With notice (Art. 40) | Illness after treatment period; incompetence after training or new role; major change in circumstances. 30 days' notice or one month's pay | Yes |
| Economic layoff (Art. 41) | Restructuring, serious difficulty; 20+ staff or 10%+ triggers consultation and reporting | Yes |
| Contract expiry (Arts. 44, 46) | Fixed term ends | Yes, unless employee refuses same or better terms |
Some employees are protected from Article 40 and 41 terminations — e.g. during pregnancy, maternity and breastfeeding, a medical treatment period, or within five years of retirement after 15 years' service.
"Serious breach of rules" works only if the employee handbook (员工手册) went through a democratic procedure (discussion with employee representatives or all staff) and was made known, usually by signed acknowledgement (Art. 4).
Severance (经济补偿, Art. 47)
· One month's wages per full year; six months or more counts as a year, under six months earns half a month
· Based on the average monthly wage of the last 12 months
· High earners: above 3× the local average monthly wage, capped at 3× and at 12 years
· Unlawful termination: reinstatement, or twice the severance (Art. 87)
Non-compete (竞业限制): only for senior managers, senior technical staff and others with confidentiality duties; up to two years; monthly compensation payable. Without an agreed amount, courts commonly apply 30% of the last 12 months' average wage, not below the local minimum. Under the Supreme People's Court's 2020 interpretation, if the employer stops paying for three months for reasons attributable to it, the employee may ask to end the restriction. Don't add one to every contract by default.
A WFOE in a large city hires a marketing manager at ¥20,000 a month. Illustrative rate set — not any city's official schedule — with ¥20,000 inside the base floor and ceiling:
| Scheme | Employer | Employee |
|---|---|---|
| Pension | 16% · ¥3,200 | 8% · ¥1,600 |
| Medical (incl. maternity) | 9.5% · ¥1,900 | 2% · ¥400 |
| Unemployment | 0.5% · ¥100 | 0.5% · ¥100 |
| Work injury | 0.2% · ¥40 | — |
| Housing fund | 7% · ¥1,400 | 7% · ¥1,400 |
| Total | 33.2% · ¥6,640 | 17.5% · ¥3,500 |
| Company cost | Calculation | Amount |
|---|---|---|
| Monthly | ¥20,000 + ¥6,640 | ¥26,640 |
| Annual | ¥26,640 × 12 | ¥319,680 |
| Employee take-home | Calculation | Amount |
|---|---|---|
| Annual taxable income | (20,000 − 3,500 − 5,000) × 12 | ¥138,000 |
| Annual IIT | 138,000 × 10% − 2,520 | ¥11,280 |
| Average monthly tax | 11,280 ÷ 12 | ¥940 |
| Average net pay | 20,000 − 3,500 − 940 | ¥15,560 |
| Ends after 3 years 4 months | Calculation | Amount |
|---|---|---|
| Lawful, with severance | 3.5 × ¥20,000 | ¥70,000 |
| Unlawful | ¥70,000 × 2 | ¥140,000 |
Illustrative. Tax shown before special additional deductions; cumulative withholding makes actual monthly tax vary through the year.
Budget roughly one-third on top of gross salary, and treat the gap between ¥70,000 and ¥140,000 as the price of a poorly documented termination.
Paperwork on day one, not week five. Contract, written probation conditions and handbook acknowledgement signed on or before the first day.
Choose the first contract length deliberately. Three years allows six months' probation and delays the open-ended point.
Pay social insurance on the real salary. Since the 2025 interpretation, under-declaring is one of the most expensive shortcuts to unwind.
Build the handbook properly once. Translate, consult, collect signatures, keep records.
Use licensed help where the law requires it. Payroll, social insurance registration and legal opinions are handled by licensed HR providers and law firms. Daona is not an HR agency or law firm; we coordinate and introduce, and providers' fees are settled by the client directly at cost.
"Probation lets us let people go freely." Only with proof they failed written hiring conditions.
"She agreed in writing not to have social insurance." That agreement is invalid.
"We'll agree a package below statutory severance." You can pay more, not less.
"Our global handbook applies in China." Only after the democratic procedure and communication.
"A senior manager has no overtime." Not unless the role is approved for flexible hours.
"Everyone retires at 60." Not any more.
Your checklist
☐ Open social insurance and housing fund accounts before the first hire
☐ Sign a written Chinese labour contract on or before day one
☐ Probation within the cap, once only, with written hiring conditions
☐ Probation pay ≥ 80% of contract wage and ≥ local minimum
☐ Register for social insurance within 30 days, on the actual salary
☐ Adopt the handbook democratically; collect signed acknowledgements
☐ Diary contract expiries and the open-ended trigger
☐ Use non-competes only where you will pay compensation
☐ Reply HIRE for our Hiring Your First Employee Checklist
Rules as of October 2026. This column provides general information, not legal advice. Employment contracts, payroll and social insurance registration should be handled by your HR team, a licensed HR service provider or a law firm; local rates and bases should be confirmed with the local authorities. Government fees and licensed firms' fees are settled by the client at cost.
China Field Notes · by Daona