Terminating an employee hired through an Employer of Record is not as simple as asking the EOR to stop payroll. For the wider employment-law process, see HROne’s guide to terminating employees in China.
The EOR is normally the employee’s legal employer. It must review and implement the formal employment process. The client company provides the business reason, supporting evidence and operational instructions.
The proposed termination must be assessed under the employment contract, company policies, service agreement and applicable Chinese employment rules.
Timing, notice and severance depend on the legal route and facts. Employers should therefore involve the EOR before communicating any decision to the employee. HROne’s Ueco employee-exit case study illustrates the value of a documented, case-specific approach to a complex separation.
Two different types of EOR termination
“EOR termination” can describe two different events.
Terminating an EOR employee
The employee’s local employment relationship ends.
This may involve:
- Resignation
- Mutual termination
- Expiry or non-renewal of a fixed-term contract
- Employer termination with notice
- Employer termination for cause
- Economic redundancy
- Retirement or another statutory event
Terminating the EOR service agreement
The commercial agreement between the client company and EOR ends. Review the China EOR service agreement separately from each employee’s labor contract.
The employees may then:
- Transfer to the client’s new Chinese entity
- Transfer to another suitable employer
- Remain with the EOR under another arrangement
- Be lawfully terminated
- Resign
Ending the commercial service agreement does not automatically terminate the employees. A separate plan is required for each person.
Who decides and who implements termination?
The client company normally makes the underlying business decision because it manages the employee’s work.
The EOR, as legal employer, reviews and carries out the formal employment process. HROne’s China EOR service explains the employment support available to client companies.
| Responsibility | Client company | EOR |
|---|---|---|
| Business reason | Defines and documents it | Reviews whether it supports an available route |
| Evidence | Provides performance, conduct or restructuring records | Assesses gaps and required documents |
| Timing | Proposes the business timeline | Confirms a feasible employment timeline |
| Employee communication | Coordinates operational messaging | Issues or approves formal employer communications |
| Notice | Funds and supports the process | Calculates and administers applicable notice |
| Severance | Funds applicable costs | Calculates and pays through the employer process |
| Final payroll | Supplies attendance, bonus and expense inputs | Calculates and processes final pay |
| Access and property | Controls systems, equipment and handover | Coordinates employment-facing instructions |
| Separation documents | Supplies required operational facts | Issues formal employer documentation |
The client should not announce the employee’s departure, disable all access or instruct the employee to stop working before the EOR confirms the process.
Legal framework for termination in China
Articles 36–42 of China’s Labor Contract Law distinguish mutual separation, employee resignation, employer termination for statutory reasons and qualifying economic layoffs. Article 42 restricts the Article 40 and Article 41 routes for specified protected employees. Ending an EOR service agreement is not itself a statutory dismissal ground.
A contract allowing termination “at any time” cannot override mandatory employee protections. The EOR must assess the reason, evidence, contract, recognized service, employee status and applicable local procedure before issuing formal documents.
The Supreme People’s Court website also provides an English translation of the Labor Contract Law.
Main termination routes
Employee resignation
An employee may generally resign by providing the legally required written notice. A shorter notice period may apply during probation.
The EOR should receive the resignation directly or confirm it in writing. A verbal statement reported by the client manager may not be sufficient.
The parties should confirm:
- Last working day
- Handover requirements
- Outstanding leave
- Expenses
- Bonus or commission treatment
- Company property
- System access
- Final payroll
The client should avoid pressuring an employee to submit a “voluntary” resignation. A resignation obtained through coercion may later be challenged.
Mutual termination
The employee and EOR may agree to end the employment relationship through a written settlement.
This can provide greater certainty when unilateral termination grounds are weak or disputed.
The agreement should address:
- Termination date
- Settlement payment
- Statutory severance, where applicable
- Outstanding salary
- Bonus or commission
- Unused leave
- Expenses
- Company property
- Confidentiality
- Handover
- Separation documentation
- Release language, subject to applicable limitations
Mutual termination requires genuine agreement. The employee must have an opportunity to understand and consider the terms.
Expiry of a fixed-term contract
A fixed-term contract may end when its agreed term expires, but non-renewal should not be treated as an informal administrative event.
Before expiry, review:
- Renewal history
- Whether an open-ended contract issue may arise
- Required notice or local practice
- Employee-protection circumstances
- Statutory severance
- Work permit implications for foreign employees
- Handover and replacement planning
The client should begin the review well before the contract end date.
Termination for cause
Chinese law identifies circumstances in which an employer may terminate without advance notice, such as certain serious misconduct or serious violations of lawful employer rules.
This route requires careful evidence.
The file may need:
- A valid and communicated employee policy
- Evidence that the employee received the policy
- Investigation records
- Relevant emails or system records
- Witness information
- The employee’s explanation
- Prior warnings, where relevant
- Proof that the conduct meets the stated standard
Poor performance is not automatically serious misconduct.
The client should not describe a case as “for cause” merely because a manager has lost confidence in the employee. HROne’s guide to termination for cause versus without cause in China explains the distinction.
Termination with notice or pay in lieu
Certain statutory circumstances may permit termination with written notice or payment in lieu of notice.
This is not a general right to terminate any employee without cause. The facts must fit an applicable legal basis, and procedural requirements must be satisfied.
Review HROne’s explanation of the China termination notice period and Article 40 before relying on this route.
Economic redundancy
A qualifying economic layoff may require additional legal conditions, thresholds, explanations and procedural steps.
A client reducing one EOR role should not automatically label the decision a statutory mass redundancy.
The EOR should examine:
- Number of affected employees
- Business circumstances
- Proposed selection criteria
- Consultation requirements
- Required authority reporting
- Protected employee categories
- Severance
- Available alternative roles
Employees with additional termination protection
Certain employees may have enhanced protection or restrictions on unilateral termination.
Examples can include employees who are:
- Receiving treatment for an occupational disease or work injury
- Within a statutory medical-treatment period
- Pregnant
- On statutory maternity leave
- Within a legally protected nursing period
- Approaching retirement after the required length of service
- In another protected situation under applicable law
Protection does not mean employment can never end. It means the employer must assess the available route carefully.
A manager should immediately tell the EOR if any protected circumstance may apply.
Notice period and pay in lieu
A 30-day notice rule is often mentioned in discussions of China termination. It does not apply to every employer-initiated termination.
Depending on the route, the process may involve:
- No advance notice
- Written advance notice
- Payment in lieu of notice
- A negotiated termination date
- Notice under the employment contract or local procedure
Notice and severance are different payments. Providing notice does not automatically remove a severance obligation.
The EOR should calculate each item separately and document the legal and contractual basis.
Severance calculation
N = recognized compensation months × applicable monthly wage. First confirm that a statutory compensation ground applies under Article 46; N is not payable in every departure.
- Service months: Article 47 counts each full service year as one compensation month. A remaining period of six months or more counts as one month; less than six months counts as half a month.
- Wage base and high-income cap: Article 47 uses the average wage over the preceding 12 months. When that wage exceeds three times the relevant local previous-year employee average, the wage base is capped at that three-times figure and compensation service is capped at 12 years. The 12-year cap is not a general cap for all employees.
- N+1: Under Article 40, a qualifying no-fault dismissal may use an additional month’s pay instead of 30 days’ written notice. This payment is separate from N. Article 20 of the Implementing Regulations uses the preceding month’s wage for this additional payment, so its wage base may differ from N.
- 2N: Articles 48 and 87 address unlawful dismissal. Where compensation rather than continued performance of the contract applies, the amount is twice the Article 47 compensation standard. Paying N+1 does not make an otherwise unlawful dismissal lawful.
Sources: Labor Contract Law, Articles 40, 46–48 and 87; Implementing Regulations, Articles 20 and 27. Review wage components, recognized service and local parameters before calculating. See how China severance pay is calculated for detailed rules and examples.
Unlawful termination risk
If an employer terminates without a valid basis or required procedure, the employee may challenge the decision.
Potential consequences can include:
- Reinstatement
- Compensation calculated by reference to statutory severance
- Unpaid salary or bonus claims
- Overtime or leave claims
- Social insurance issues
- Legal and administrative costs
- Management time
- Reputational damage
Using an EOR does not make a poorly documented termination lawful. The EOR can advise on process, but the client must supply credible facts and evidence. Review EOR risks in China before taking action.
Step-by-step China EOR termination process
1. Contact the EOR confidentially
Notify the EOR before discussing the proposed decision with the employee or wider team.
Provide the desired timeline, but treat it as provisional.
2. Identify the real reason
State the reason clearly.
Examples include:
- Resignation
- Mutual separation
- Documented misconduct
- Performance concerns
- Role elimination
- Business restructuring
- Contract expiry
- Entity transition
Do not change the stated reason repeatedly to obtain a faster result.
3. Collect the documents
The review file may include:
- Employment contract
- Job description
- Employee handbook
- Policy acknowledgments
- Attendance records
- Performance reviews
- Warnings
- Improvement plans
- Relevant correspondence
- Compensation history
- Bonus plan
- Leave records
- Employee-status information
4. Check protected circumstances
Confirm whether the employee is pregnant, on protected leave, receiving medical treatment, involved in a work-injury process or otherwise protected.
5. Assess available routes
The EOR should compare the legal basis, evidence, notice, cost, timeline and dispute risk for each realistic option.
6. Calculate estimated cost
Prepare an estimate covering:
- Salary through the termination date
- Notice or pay in lieu
- Statutory or negotiated severance
- Bonus or commission
- Unused leave
- Approved expenses
- Social insurance and housing fund
- Individual income tax
- Contractual benefits
- Service or legal fees
7. Agree on communications
Decide:
- Who will attend the meeting
- Who will lead the conversation
- What documents will be presented
- What the employee will be told
- How questions will be escalated
- When the wider team will be informed
Formal employer notices should normally come from or be approved by the EOR.
8. Plan operational handover
The client should prepare:
- Knowledge-transfer requirements
- Customer or supplier handover
- Equipment return
- Access changes
- Confidential-file protection
- Email and data retention
- Replacement coverage
Access restrictions should be proportionate and coordinated with the employment process.
9. Complete final payroll
Final payroll should account for all approved salary, deductions, expenses and termination-related payments.
The client must submit complete information before the final payroll is closed.
10. Issue separation documents and retain records
The EOR should complete the applicable employer documentation and statutory offboarding processes.
The client should retain operational records, while the EOR maintains the employment records within its responsibility.
Ending or changing the EOR provider
If the client is ending its relationship with the EOR rather than eliminating the employees’ roles, create a separate transition plan.
Plan one of three routes for each employee:
- Transfer to the client’s new China entity: Plan the entity transition, including employee agreement, new documentation, recognized service and payroll continuity.
- Transfer to another service provider: Coordinate the provider change with the employee and both employing entities; confirm contracts, accrued rights and benefit continuity.
- Lawfully end employment: The EOR must assess a valid statutory route or an agreed separation and complete applicable payments and documentation.
Employment generally cannot be transferred automatically merely by changing the commercial vendor.
Review:
- Employee consent
- Continuity of service
- Severance exposure
- Accrued leave
- Benefits continuity
- Payroll cutoff
- Work permits
- Data transfer
- New contracts
- Final and opening payroll
- Service-agreement notice
The goal is to prevent gaps in pay, benefits and documentation.
China EOR termination checklist
Before proceeding, confirm:
- The EOR has reviewed the proposed decision.
- The legal route has been identified.
- Supporting evidence is complete.
- Protected circumstances have been checked.
- Notice requirements have been calculated.
- Severance has been estimated.
- Bonus and commission treatment has been reviewed.
- Final payroll inputs are ready.
- Employee communications are approved.
- The operational handover is documented.
- Equipment and access plans are coordinated.
- Separation documents have assigned owners.
- Work permit consequences have been checked where relevant.
- Employee data will be retained or deleted appropriately.
- The client has budgeted for possible dispute costs.
Conclusion
China EOR termination requires cooperation between the client and the legal employer.
The client supplies the business reason, evidence and operational plan. The EOR evaluates the employment route, prepares the required documentation and implements the formal process.
Neither party should treat termination as an immediate payroll instruction.
Early review creates more options. Late involvement—particularly after a manager has announced the decision—can increase cost, delay and dispute risk.
This article provides general information, not legal advice. The appropriate route and payments depend on the employee’s circumstances, applicable local rules and the signed agreements. Obtain advice on the specific case before acting.
Companies using or evaluating an EOR can review HROne’s China EOR service, read the complete China EOR guide or contact HROne before taking action.
Frequently Asked Questions
Can I terminate an EOR employee at will?
No. A client’s request does not by itself end the employee’s labor contract. The EOR must assess a lawful termination ground or a genuinely agreed separation, supporting evidence, employee protections and required procedures. Giving notice or paying severance alone does not create a valid dismissal ground.
Who pays severance when an EOR employee is terminated?
Where statutory severance is due, the EOR’s employing entity has the employer obligation to pay the employee. Funding and reimbursement between the client and provider depend on their signed service agreement. Confirm that agreement and the approved calculation before proceeding; commercial terms cannot remove mandatory employee rights.
What happens to employees if I end the EOR service agreement?
Ending the service agreement does not automatically end employment. Plan for each employee to move to your new China entity, transfer to another suitable provider, or have employment lawfully ended. Employee agreement, documentation, recognized service, accrued benefits and final and opening payroll must be addressed for the chosen route.
How does an EOR handle notice and final pay?
The EOR reviews the termination route, confirms applicable notice or pay in lieu, and prepares formal employment documents. It then calculates final salary and other amounts due using complete client inputs, including attendance, leave, bonuses and approved expenses. Confirm the payment timetable and separation documents before communicating the exit.
