Terminating employees in China is not an at-will process. Before ending a labor contract, employers should identify a lawful termination route, confirm the evidence supporting it, complete any required notice or consultation, calculate severance and final payroll, and prepare the required exit documents.
A commercially reasonable decision can still become an unlawful termination if the company uses the wrong legal ground, overlooks protected employee status, skips a required procedure or creates evidence after announcing the dismissal. Before speaking to the employee, employers should confirm the legal basis, supporting evidence, severance requirements, notice, trade union consultation or government reporting requirements, and final payroll. The legal grounds and employer obligations differ between termination for cause and no-fault termination.
Can an employer terminate an employee at will in China?
No. China does not generally recognize at-will employment. An employer cannot end a labor contract simply because the employee is no longer a good fit, management has lost confidence or the business would prefer another person in the role.
The termination must normally fall within a lawful category under China’s Labor Contract Law or be completed through a valid mutual termination agreement.
The main termination routes are:
- Termination by mutual agreement
- Voluntary employee resignation
- Employee-fault termination
- No-fault termination with notice or payment in lieu
- Economic mass layoff
- Fixed-term contract expiry and non-renewal
- Automatic termination following a statutory event
Each route has different requirements. Employers should not combine elements from several routes after the decision has already been communicated.
Legal routes for terminating employees in China
Choose the route before announcing the exit. The Labor Contract Law, Articles 36–48 and 87 provides the statutory framework; a business preference alone does not establish a dismissal ground.
| Route | Labor Contract Law | Notice / procedure | Economic compensation | Evidence to retain |
|---|---|---|---|---|
| Mutual agreement | Article 36 | Agree the effective date; document genuine consent. | N when proposed by the employer; any additional settlement is agreed. | Signed agreement; who initiated it; negotiation and payment records. |
| Employee resignation | Articles 37 / 38 | Article 37: 30 days in writing, or 3 days during probation. Article 38 has different rules; immediate exit without prior notification applies to its specified coercion / danger cases. | Normally none under Article 37; N for qualifying Article 38 employer breaches. | Resignation and delivery record; evidence of any alleged employer breach. |
| Employee-fault dismissal | Article 39 | No statutory 30-day notice; prove the ground and complete applicable union notification. | Normally none for a lawful Article 39 dismissal. | Applicable lawful rules and acknowledgment; misconduct or recruitment-condition evidence; notice and delivery. |
| No-fault dismissal | Article 40 | 30 days’ written notice to the employee OR one additional month’s wage; the statutory ground must first be established. | N with notice, or N plus payment in lieu (often called N+1). See N, N+1 and 2N severance. | Medical-period / reassignment records; training and reassessment; or changed circumstances and unsuccessful consultation, as applicable. |
| Economic layoff | Article 41 | Qualifying ground and headcount; explain to the union or all staff 30 days in advance, hear views and report the plan to the labor authority. | N; Article 41 does not impose a general N+1 formula. | Financial / restructuring basis; headcount; consultation; reporting; protection and retention checks. |
| Contract expiry / statutory termination event | Article 44, read with Articles 45–46 | Confirm the actual event, extension protections and any applicable local / contractual procedure. | N for qualifying expiry, bankruptcy or dissolution; other events differ. For expiry, the equal-or-better renewal offer exception matters. | Contract and renewal offer / response; protected-status check; evidence of the statutory event. |
| Unlawful dismissal — remedy, not a lawful route | Articles 48 / 87 | An employee may request continued performance; if not requested or impossible, compensation applies. | 2N under Article 87; offering it does not create a right to dismiss. | Termination reason, full evidence and procedure; records relevant to reinstatement and compensation. |
Termination by mutual agreement
Article 36 permits an employer and employee to end the labor contract by genuine agreement. Article 46 requires statutory economic compensation when the employer proposes the mutual termination. Record who initiated the exit and any additional negotiated settlement separately.
What should a mutual termination agreement include?
- Identify both parties, the agreed legal basis and the effective termination date.
- State statutory severance, any additional settlement, payment dates and payment method.
- Settle final salary, overtime, unused annual leave, bonuses, commissions and expenses; explain any disputed or conditional amounts.
- Specify the final social insurance and housing fund contribution month and transfer arrangements, subject to applicable local rules.
- Address handover, company property, the termination certificate and other exit documents.
- Confirm continuing confidentiality obligations and whether any lawful non-compete will be maintained, released or otherwise addressed, including compensation where applicable.
- Use case-specific settlement and release-of-claims wording; do not assume a blanket waiver removes mandatory employee rights. Record voluntary consent and allow time to review.
For help obtaining a mutual termination agreement template, ask HROne which document is available and have it adapted to the actual case. The resource page describes client HR templates and offboarding support; it does not identify a publicly downloadable mutual termination agreement.
How employee resignation differs from employer termination
Employee resignation is legally distinct from an employer-initiated termination. An employee may generally resign by giving 30 days’ prior written notice, or three days’ notice during probation. A genuine voluntary resignation usually does not require statutory severance.
Employers should nevertheless retain clear written evidence that the employee initiated the resignation. If the employee resigns because of qualifying employer misconduct under Article 38, statutory economic compensation may still be required.
Immediate termination for employee misconduct
Article 39 permits an employer to terminate a labor contract without advance notice in specified employee-fault situations. Severance is generally not required when the employer validly proves an Article 39 ground.
Possible grounds include:
- The employee is proved not to satisfy the stated recruitment conditions during probation
- The employee seriously violates lawful employer rules and regulations
- The employee commits serious dereliction of duty or misconduct for personal gain and causes substantial damage
- The employee maintains another employment relationship that seriously affects completion of current work and fails to correct the issue after being requested to do so
- The labor contract is invalid because of the employee’s fraud, coercion or exploitation of the employer’s unfavorable position
- The employee is held criminally liable
The employer carries a substantial evidence burden. A termination letter that repeats legal wording without proving the underlying facts is unlikely to be enough.
| Possible misconduct ground | Evidence the employer should have | Common documentation failure |
|---|---|---|
| Failure to meet recruitment conditions during probation | Written recruitment conditions, employee acknowledgment, assessment records and proof the decision was made within probation | Using vague statements such as “not suitable” or “poor culture fit” |
| Serious violation of company rules | Lawfully adopted rule, employee acknowledgment, investigation records and evidence of the violation | Relying on a handbook the employee never received |
| Serious dereliction of duty | Job responsibilities, specific acts, damage records and evidence connecting the conduct to the loss | Claiming serious damage without quantifying or proving it |
| Conflicting outside employment | Evidence of the other employment, serious impact on work or refusal to correct | Assuming every side activity automatically permits dismissal |
| Fraud during hiring | False statement, materiality, reliance and evidence the contract was concluded against the employer’s true intention | Discovering an inaccurate detail that did not affect the hiring decision |
| Criminal liability | Reliable documentation showing criminal liability | Treating suspicion, detention or investigation as a final finding |
Can an employer terminate an employee during probation?
Probation is not at-will employment. Under Article 21, employer dismissal during probation is limited to Article 39 grounds or Article 40(1)–(2), and the employer must explain the reason. Review the probation period rules alongside the recruitment conditions and evaluation evidence.
For Article 39(1), establish lawful and specific recruitment conditions, communicate them to the employee in writing before relying on them, and retain acknowledgment. Keep objective evidence showing which conditions were not met; a manager’s general dissatisfaction is insufficient. Make and communicate this probation-based decision within the probation period and retain proof of delivery.
Check the agreed probation dates and the relevant evidence before acting. Beijing HRSS’s published probation case illustrates the importance of clear, reasonable conditions and proof that they were disclosed. Article 40 routes carry their own prerequisites, notice and compensation rules.
No-fault termination with notice or payment in lieu
Article 40 permits dismissal only for its three specified no-fault grounds. Give the employee 30 days’ prior written notice or pay one additional month’s wage instead, in addition to statutory economic compensation. Notice or payment cannot replace a valid ground; check Article 42 protection and applicable union procedure.
Article 20 of the State Council Implementing Regulations bases that additional month on the employee’s wage in the previous month. This is distinct from the wage base for N, generally the preceding 12-month average under Article 47, subject to applicable rules and caps.
Employee cannot return after the medical treatment period
This route may apply where an employee, after the statutory medical treatment period for a non-work-related illness or injury, cannot perform the original job or another job arranged by the employer.
The employer should document:
- The applicable medical treatment period
- Medical and absence records
- The employee’s ability to perform the original position
- Alternative work considered or offered
- The employee’s response
- Any disability or protected-status issues
Employee remains incompetent after training or reassignment
Poor performance alone does not automatically permit termination. The employer should first demonstrate incompetence against objective job requirements and then provide training or adjust the employee’s position. Termination may be considered only if the employee remains incompetent afterward.
A defensible file may include:
- Clear job responsibilities and performance standards
- Objective performance results
- Contemporaneous feedback
- A documented improvement or training plan
- Training completion records
- A reasonable reassignment where appropriate
- A second evaluation showing continued incompetence
Employers should avoid creating a short performance improvement plan merely to manufacture a termination record for a decision that has already been made.
Material change in objective circumstances
This route may apply where objective circumstances relied upon when the contract was concluded have materially changed, making the contract impossible to perform, and the parties cannot agree on an amendment after consultation.
The employer should establish:
- The objective circumstance that changed
- Why the change was outside ordinary management preference
- How the change makes the existing contract impossible to perform
- Alternative arrangements considered
- Proposed contract amendments
- Genuine consultation with the employee
- Failure to reach an agreement
A desire to reduce cost or replace the employee with a cheaper candidate does not automatically satisfy this standard.
How does severance work when terminating employees in China?
| Term | Meaning | Typical application |
|---|---|---|
| N | Statutory economic compensation based on qualifying service and the applicable wage base. | Employer-proposed mutual agreement, Article 40, Article 41 and other qualifying Article 46 events. |
| N+1 | N plus the Article 40 additional month paid instead of 30 days’ written notice. | Only where Article 40 conditions are met and the employer chooses payment in lieu; not a universal exit price. |
| 2N | Compensation at twice the statutory economic compensation standard for unlawful termination. | Article 87 remedy where continued performance is not requested or cannot occur; not N plus 2N. |
Confirm the calculation, service history and applicable caps using the severance guide linked in the route table. This process guide does not duplicate that calculation. The Shanghai government’s N+1 explanation also distinguishes economic compensation from payment in lieu of notice.
Mass layoffs and economic redundancy in China
Article 41 applies to a qualifying economic reduction of 20 or more employees, or fewer than 20 who represent at least 10% of the workforce. Its grounds include bankruptcy reorganization, serious production / business difficulties, specified changes after contract variation, and other qualifying material changes in objective economic circumstances.
Explain the situation to the trade union or all employees 30 days in advance, hear their views, and report the layoff plan to the labor administrative department before implementing it. Reporting is not an approval that establishes every individual dismissal’s legality. Check Article 42 protected employees and pay statutory economic compensation.
Give retention priority to employees with longer fixed-term contracts, open-ended contracts, or no other employed household member and dependent elderly relatives or minors. If recruiting again within six months, notify those laid off and give them priority on equal terms. See the detailed mass layoff rules.
City practice notes: Shanghai, Beijing and Shenzhen
| City | Economic layoff reporting | Arbitration / evidence practice | Official sources |
|---|---|---|---|
| Shanghai | The rule effective August 16, 2026 requires a written plan, company / union or staff-representative materials, representative details and consultation records. At least 30 days must pass between explaining the situation and delivery of the report. Confirm city / district jurisdiction, including the Pudong exception. | Keep the consultation chronology and report receipt alongside the substantive dismissal evidence. The authority can require correction of an unlawful plan; receipt is not a determination of an employee’s claim. | Shanghai HRSS reporting notice |
| Beijing | Article 41 reporting applies. The district service entry identifies the local reporting framework; confirm the receiving district’s current checklist and submission method before filing. | Published arbitration cases emphasize clear, reasonable recruitment conditions disclosed in advance and evidence of non-compliance. A case outcome is fact-specific, not a rule validating every similar dismissal. | Beijing district reporting entry; Beijing HRSS arbitration cases |
| Shenzhen | The national Article 41 reporting duty applies. Confirm the current district receiving office, materials and filing channel directly before action; this guide does not assert an unconfirmed local checklist. | Submit evidence within the arbitration committee’s designated period. The official FAQ explains that unexplained or unjustified late submission can lead to exclusion, or acceptance with a reprimand. | Labor Dispute Mediation and Arbitration Law; Shenzhen HRSS evidence-deadline FAQ |
Fixed-term contract expiry and non-renewal
A fixed-term labor contract may end when its term expires, but employers should not assume that expiry eliminates severance or procedural obligations.
Under Article 46, the employer generally owes economic compensation when a fixed-term contract expires and the employer does not renew it. An exception may apply where the employer offers renewal on terms equal to or better than the existing contract and the employee refuses.
| Expiry scenario | Likely employer obligation | Evidence to retain |
|---|---|---|
| Employer does not offer renewal | Severance is generally required | Contract, expiry date, non-renewal decision and severance calculation |
| Employer offers less favorable terms and employee refuses | Severance is generally required | Existing terms, proposed terms and employee response |
| Employer offers equal or better terms and employee refuses | Severance may not be required | Written renewal offer, term comparison and written refusal |
| Employee is in a protected period | The contract may need to continue until the protected condition ends | Medical, maternity, work injury or other protected-status records |
Official guidance confirms that an employer that decides not to renew a fixed-term contract generally must pay economic compensation for non-renewal, subject to the statutory exception.
Employers should begin renewal reviews well before the expiry date. A late decision can leave insufficient time to assess protected status, obtain approvals and prepare a compliant renewal offer.
Automatic termination events
Article 44 identifies events that may automatically terminate a labor contract, including:
- Expiry of the labor contract
- The employee beginning to receive basic old-age pension benefits
- The employee’s death or legal declaration of death or disappearance
- The employer entering bankruptcy
- Revocation of the employer’s business license
- An order requiring the employer to close or dissolve
- The employer deciding to dissolve early
- Other circumstances specified by law or administrative regulation
Automatic termination does not remove the employer’s administrative obligations. Final salary, severance where applicable, unused leave, benefits, company property, employee files and termination documentation still require review.
Which employees are protected from termination?
Article 42 restricts termination under the ordinary Article 40 and Article 41 routes for employees in specified protected circumstances.
Protected categories can include employees who:
- Are undergoing diagnosis or medical observation for a suspected occupational disease
- Suffered a work-related injury or occupational disease and have been confirmed to have lost all or part of their working capacity
- Are within the statutory medical treatment period for illness or non-work-related injury
- Are pregnant, on maternity leave or within the breastfeeding period
- Have worked continuously for the employer for at least 15 years and are less than five years from statutory retirement age
- Fall within another protected category established by law or administrative regulation
Protected status should be checked before any termination announcement. Employers should not assume that protected employees can never leave under any circumstance, but the available routes and risks require case-specific review.
For pregnancy-related leave and protection, see HROne’s guide to maternity leave in China. For work injury protection, review HROne’s China work injury insurance guide.
Must an employer notify the trade union?
Under Article 43, an employer intending to terminate a labor contract unilaterally should notify the trade union of the reasons in advance where the employer has an applicable trade union.
If the trade union considers that the proposed termination violates laws, administrative regulations or the labor contract, it may request that the employer correct the decision. The employer should consider the trade union’s opinion and communicate the outcome in writing.
Trade union notification is distinct from the broader consultation requirements that apply to an Article 41 mass layoff.
The termination file should include:
- The notice sent to the trade union
- The legal and factual termination basis
- The supporting evidence provided
- The trade union’s response
- The employer’s consideration of the response
- The written final outcome
What is unlawful termination in China?
A termination may be unlawful where the employer lacks a lawful ground, cannot prove the stated ground, uses an invalid company rule, ignores protected status, fails to complete a mandatory procedure or terminates for a discriminatory or prohibited reason.
Examples include:
- Dismissing an employee because management no longer likes the person
- Using poor performance without proving incompetence, training and reassignment
- Terminating during probation without stated recruitment conditions
- Relying on handbook rules that were never lawfully adopted or communicated
- Calling a redundancy an Article 40 objective-circumstances termination without genuine consultation
- Terminating a protected employee under Article 40 or Article 41
- Announcing termination before completing required trade union procedures
- Inventing or altering evidence after the employee is dismissed
What remedies can apply after unlawful termination?
Under Articles 48 and 87 of China’s Labor Contract Law, an employee may seek continuation of the labor contract after an unlawful termination. If the employee does not request continued performance, or continued performance is no longer possible, the employer may be required to pay compensation at twice the statutory economic compensation standard.
Potential employer exposure can include:
- Reinstatement
- Back pay or wage-loss claims
- Double statutory compensation
- Payment of unpaid salary, overtime, leave or benefits
- Correction of social insurance records
- Legal and management costs
- Disruption to restructuring or employee relations
Employers should not assume that offering N+1 automatically cures an unlawful termination. Payment does not replace a valid legal basis unless the employee accepts a properly documented mutual termination agreement.
What happens if the employee disputes the termination?
| Stage | Statutory timing / deadline | Who initiates | Employer evidence to prepare |
|---|---|---|---|
| Mediation | Optional. If no agreement is reached within 15 days of the mediation organization receiving the request, a party may seek arbitration. | Either party; mediation need not be exhausted before arbitration. | Chronology, claims, notices, proposed settlement and payment records. |
| Labor arbitration | General limitation: one year from knowing or being expected to know of the rights infringement, subject to interruption / suspension and statutory exceptions. Adjudication normally takes 45 days from acceptance, extendable by up to 15 days for a complex case with approval. | The employee commonly challenges dismissal; either party may bring an eligible labor claim. | Contract, lawful rules and disclosure, evidence supporting the stated reason, protected-status checks, consultation / union records, service proof and payroll. |
| First-instance court proceedings | For a non-final arbitration award, either party generally has 15 days from receipt to sue. Special rules apply to final awards; do not assume all awards allow the same challenge. | The party entitled to challenge the award. | Award and proof of receipt, arbitration file, pleaded claims and the complete evidence record. |
| Second-instance appeal | For an appealable first-instance judgment, the ordinary domestic appeal period is 15 days from service. Court hearing duration follows the applicable procedural rules and is not a promised completion time. | A party dissatisfied with an appealable judgment. | Judgment and service proof, identified errors and supporting evidence, subject to court evidence rules. |
The Labor Dispute Mediation and Arbitration Law (Articles 14, 27, 43 and 47–50) contains important exceptions. During an ongoing employment relationship, wage-arrears claims are not subject to the ordinary one-year period; after employment ends, the law requires filing within one year of termination. For a final arbitration award, an employee generally has 15 days to sue; an employer has a distinct 30-day application to the intermediate court to set it aside on limited statutory grounds. Obtain advice promptly rather than waiting for mediation to finish.
The ordinary judgment appeal deadline is in Article 171 of the Civil Procedure Law (2023 revision). Preserve evidence when the dispute first emerges and follow the tribunal or court’s specific directions.
What documents are needed before termination?
The required file depends on the termination route, but employers should generally collect and review:
- The signed labor contract and amendments
- The employee handbook and relevant policies
- Evidence that the employee received the applicable rules
- Job descriptions and recruitment conditions
- Attendance and leave records
- Performance evaluations
- Training and reassignment records
- Warnings and disciplinary notices
- Investigation reports and supporting evidence
- Medical, maternity or work injury records where relevant
- Employee communications and responses
- Trade union notices and feedback
- Internal termination approvals
- Severance and final payroll calculations
- The draft termination notice or agreement
Records should be created during the employment relationship, not reconstructed shortly before arbitration.
HROne’s guide to China HR documentation requirements explains how contracts, attendance, performance and payroll records should connect across the employee lifecycle.
What should an employee termination notice in China include?
A unilateral termination notice should be specific enough to explain the legal and factual basis without including unverified allegations.
It may include:
- The employer and employee names
- The labor contract being terminated
- The legal termination ground
- The material facts supporting that ground
- The effective termination date
- Notice or payment-in-lieu treatment
- Severance where applicable
- Final payroll arrangements
- Handover and property-return requirements
- The timing for the termination certificate
The stated reason should match the evidence and internal approval record. Employers may face difficulty replacing the original ground with a different justification after a dispute begins.
How should employers conduct the termination meeting?
The meeting should be planned, respectful and consistent with the approved termination route.
- Confirm the decision is approved. Legal basis, evidence, protected status and payment calculations should already be reviewed.
- Select appropriate attendees. Usually include HR and the relevant manager, with legal support where needed.
- Explain the decision clearly. Avoid improvising new reasons or debating unverified allegations.
- Provide the written documents. Give the employee the termination notice or proposed mutual agreement.
- Explain payments. Cover final salary, severance, notice, leave, bonus and payment timing.
- Discuss handover and property. Provide a practical list and deadline.
- Allow questions. Record substantive concerns without pressuring the employee to agree immediately.
- Document delivery. Keep evidence showing when and how the documents were provided.
Managers should not announce a termination by chat message, deactivate the employee’s access without explanation or tell the employee to stop attending work before HR has approved the process.
What must be included in final payroll?
Final payroll should be reviewed separately from the legal termination decision. Depending on the circumstances, the employee may be owed:
- Salary through the final working day
- Overtime and allowances
- Payment in lieu of notice
- Statutory severance
- Additional settlement compensation
- Unused annual leave payment
- Earned commission
- Bonus under the applicable plan
- Approved expense reimbursement
- Other contractual payments
The employer should also confirm:
- Individual income tax withholding
- Social insurance and housing fund cutoffs
- Supplementary insurance coverage
- Equity or incentive-plan treatment
- Any lawful deductions
- The payment date and payslip
Deductions for company property, alleged damage, training costs or uncompleted notice periods should not be made automatically. Each deduction requires a lawful and documented basis.
Companies with their own China entity can use HROne’s China payroll outsourcing service to support final payroll, statutory deductions and employee payment records.
What exit documents must the employer provide?
Review non-compete after termination and record whether a restriction is activated or waived, who sends the notice and who pays monthly compensation.
Under Article 50 of China’s Labor Contract Law, the employer must issue proof of termination or ending of the labor contract and complete the required procedures for transferring the employee’s personnel file and social insurance relationship within the statutory period.
Common offboarding documents and records include:
- Termination or separation certificate
- Final payslip
- Severance calculation
- Payment receipt or bank record
- Social insurance transfer or deregistration records
- Housing fund transfer records
- Personnel-file transfer documents where applicable
- Company property return form
- Handover acknowledgment
- Confidentiality and post-employment reminder
- Immigration cancellation documents for foreign employees where applicable
The employer should retain terminated labor contracts for the legally required recordkeeping period.
Terminating foreign employees in China
Terminating a foreign employee in China may involve employment, payroll and immigration procedures at the same time. In addition to the labor-law termination process, employers should review the employee’s work permit, work-type residence permit, final payroll and any required sponsorship or cancellation procedures.
Work permit and residence permit cancellation should be coordinated with the termination timeline to avoid compliance and practical issues for both parties. For detailed immigration procedures, see HROne’s China work permit and visa guide.
Terminating an employee hired through an EOR
The client makes the business request and supplies the operational reason; the EOR’s employing entity assesses whether a lawful route is available. The legal employer should authorize, sign and issue the employment notice or agreement through its authorized representative. A client manager should coordinate with the EOR before announcing a dismissal.
The legal employer owes the employee the applicable statutory severance, notice payment and final payroll. Whether the client reimburses those amounts, and who bears dispute costs or commercial termination fees, depends on the actual service agreement. This guide does not state unconfirmed HROne contract allocations.
- Provide the labor contract, job description, agreed recruitment conditions and acknowledged handbook / policies.
- Supply contemporaneous performance, training / reassignment, misconduct or business-change records and employee communications.
- Confirm service dates, payroll and bonus details, annual leave, protected status, union arrangements and proposed timing.
- Keep the approved route, calculations, signatures, delivery evidence and final handover records together.
For termination handled by your China EOR, involve the employing entity early. Read how an EOR handles employee terminations for the operational sequence.
Termination cases handled by HROne
These summaries use HROne’s published case pages. Outcomes depend on the facts; they are not promises about future disputes.
Di Bella Coffee
Situation: A client wanted immediate dismissal following a one-day unexplained absence.
Route / approach: HROne contacted the employee and clarified the situation before the parties used a mutual termination agreement.
Published result: The public account describes resolving the exit and avoiding an improper immediate dismissal; it publishes no compensation figure. Read the Di Bella Coffee termination case.
Echelon
Situation: A long-running employment relationship had little remaining work, and the client wanted to end it.
Route / approach: Following legal review and communication, the employee voluntarily resigned.
Published result: The published account reports no compensation claim or arbitration. It does not establish a general right to require resignation or avoid severance. Read the difficult exit settled peacefully.
Ueco
Situation: An EOR client faced a contested employee departure.
Route / approach: HROne reviewed documentation and employee rights and helped negotiate an agreed separation.
Published result: The public page describes resolution through discussion; it does not disclose a compensation amount or court ruling. Read the complex employee exit.
Singapore Cable Company
Situation: Performance concerns prompted a proposal for a document committing the employee to automatic termination.
Route / approach: HROne advised against that proposal; after reviewing costs, the client chose an N+1 package.
Published result: The published case reports completion of the exit but does not identify the statutory article used. N+1 alone does not establish a lawful dismissal ground. Read the Singapore Cable Company exit case.
Checklist for terminating employees in China
| Stage | Employer action |
|---|---|
| 1. Identify the route | Confirm whether the case involves mutual termination, resignation, misconduct, no-fault termination, layoff, expiry or another statutory event. |
| 2. Review evidence | Confirm that contemporaneous records prove the proposed ground. |
| 3. Check protected status | Review medical treatment, work injury, pregnancy, maternity, breastfeeding and retirement-related protection. |
| 4. Review procedure | Confirm notice, consultation, training, reassignment, union notification or government reporting requirements. |
| 5. Calculate payments | Prepare salary, notice, severance, leave, bonus and expense calculations. |
| 6. Obtain approval | Secure HR, legal, finance and management approval before communication. |
| 7. Prepare documents | Draft the notice, mutual agreement, payroll statement and handover documents. |
| 8. Conduct the meeting | Explain the decision consistently and provide the approved written documents. |
| 9. Complete final payroll | Process payments and statutory deductions accurately and on time. |
| 10. Complete offboarding | Recover property, close access, issue the termination certificate and transfer statutory records. |
| 11. Retain evidence | Keep the complete termination file in case of labor arbitration or regulatory review. |
Common mistakes when terminating employees in China
- Assuming employment is at will
- Terminating first and looking for a legal ground afterward
- Using “not a good fit” as a probation termination reason
- Relying on a handbook rule the employee never acknowledged
- Treating poor performance as immediate misconduct
- Skipping training or reassignment before an incompetence termination
- Using N+1 as a substitute for a lawful termination ground
- Failing to check pregnancy, medical treatment or work injury status
- Ignoring trade union notification requirements
- Treating several individual dismissals as a way to avoid Article 41
- Assuming fixed-term expiry requires no severance
- Miscalculating the severance wage base
- Failing to pay unused annual leave or earned commission
- Announcing termination before the legal employer or EOR approves it
- Failing to issue the termination certificate and transfer records
Key takeaways for employers terminating employees in China
Terminating employees in China requires a lawful statutory ground or a valid mutual agreement. Before communicating a termination decision, employers should confirm the legal route, supporting evidence, protected employee status, notice or consultation requirements, severance and final payroll obligations.
The termination reason, evidence and procedure should be consistent from the initial internal review through the termination notice and final offboarding. Employers should avoid announcing a dismissal first and attempting to establish the legal basis afterward.
This article provides general employer information. Termination requirements vary by legal ground, employee status, local practice and case-specific facts. Employers should obtain case-specific legal review before implementing a termination.
Frequently Asked Questions
Can I immediately terminate an employee in China?
Only where a lawful immediate-dismissal ground, such as a proven Article 39 ground, applies and required procedures are followed. Probation, an unwanted role or an offer of N+1 does not itself establish that ground.
On what grounds can you terminate an employee in China?
Employer routes include genuine mutual agreement, proven Article 39 grounds, the limited Article 40 no-fault grounds, qualifying Article 41 economic layoffs and Article 44 termination events. Each has different evidence, protection and payment requirements.
What is the notice period in China?
For Article 40 employer termination, provide 30 days’ written notice or one additional month’s wage instead, plus applicable severance. Ordinary employee resignation under Article 37 requires 30 days’ written notice, or three days during probation. Article 39 and Article 41 follow different procedures.
Can you terminate an employee during probation in China?
Yes, but only within the grounds allowed by Article 21. For failure to meet recruitment conditions, retain clearly disclosed conditions and evidence of non-compliance, act during probation and explain the reason. Probation does not create at-will employment.
Do you pay severance after a mutual termination agreement?
Statutory economic compensation is required when the employer proposes the mutual termination under Articles 36 and 46. Record who initiated it, the statutory amount and any additional settlement separately. Employee-initiated exits require their own factual and legal assessment.
How long does an employee have to file for labor arbitration?
The general limitation is one year from knowing or being expected to know of the rights infringement. Interruption, suspension and statutory exceptions can affect it, including special rules for wage arrears during employment. Obtain case-specific advice on the deadline promptly.
