An electronic labor contract in China is basically a legally binding contract. Compared to a typical paper labor contract, an electronic labor contract has been created through an electronic form, meaning that electronic signature technology is employed to make sure the identity of the signatory is legitimate and the content of their signature cannot be changed.
Last year, the Chinese government released the news that allowed to sign a labor contract with an electronic signature, and from that moment more and more companies started to use these kinds of contracts when outsourcing labor to China.
In this article, we will show you the benefits of electronic labor contracts and the aspects to consider when executing them in China.
With the use of an electronic labor contract, the paperwork involved with the hiring process is considerably reduced, which makes it easier to process. Because of this, the cost associated with processing electronic contracts between countries has become quite affordable.
Most of these electronic contracts are processed electronically because they are a lot easier to fill out than paper-based ones. For instance, a typical electronic labor contract would require information such as date of birth, work experience, skills, and contact information. Some contracts may also require previous education verification, such as a prior university or college course.
Under the terms of the electronic-form contract, the contracting parties shall perform all tasks necessary for the implementation of the agreement. First, the contracting parties shall conduct an evaluation of their operations in China. This evaluation shall take legal effect in terms of the contractual relationship between the two parties. Next, the parties shall enter into a contract with regard to the tasks and responsibilities.
As previously mentioned, an electronic-form contract is significantly simpler to process compared to paper-based contracts. This means that an employer shall ensure compliance with all of China’s labor laws, as well as complying with applicable local procedures regarding worker compensation.
Businesses have been able to save a lot of money through the use of electronic-form contracts. Electronic-form contracts may also help reduce paperwork, which increases efficiency.
An electronic labor contract and a paper form differ in a few ways. The electronic form is processed much faster than paper-based contracts because it contains no room for human error. Also, the electronic form is completely compliant with the law and can be processed with little or no delays. An electronic labor contract, unlike a paper-based one, does not contain any room for error; if the document contains an error, the party has the option of going back and fix the error before it becomes binding.
The electronic signature also decreases the chances of identity theft, which often occurs with traditional signatures. Paper-based contracts are difficult to keep track of, making them susceptible to stolen identities; electronic labor contracts, on the other hand, are easy to keep track of because they are digitally signed.
When it comes to hiring employees in China, the employment contract is the first priority an employer should prepare before hiring foreign or Chinese employees.
The elements to include in the electronic labor contract are actually the same as the normal one and there are both mandatory and optional elements.
Below we give you an introduction of each:
- Employee and employer information – Name, address, and ID number are elements that are mandatory in the labor contract, in order to easily identify both employee and employer.
- Remuneration – In this section, you should include all the elements that are part of the remuneration (salary, bonus, commissions, allowances).
- Employment period – Here you have to specify the type of employment contract (full-time, part-time, project).
- Working hours and leaves – In this section, you have to include the working hours per week as well as leaves (annual leave, sick leave, etc.).
- Social insurance – This is a statement specifying that the social benefits will be contributed by both parties as to the law mandates.
- Responsibilities – In this part, you have to specify what are the job responsibilities of the employee.
Within China’s impending Civil Code, the legitimacy of the electronic contract is endorsed and addressed in two statements:
- The statement that the digital exchange or email can be deemed as a contract in written form;
- The labor contract, whether it is in the form of letters or digital exchange, “shall be established at the time of execution of the letter of confirmation.”
But what are the main aspects to consider when executing labor contracts in China?
1) Select a contract management tool that is right for you
The employer can choose a suitable contract management program, either by developing their own or by buying a third-party electronic signing platform.
The electronic contract formation system should have the following functions: generation of legal contract text, support multiple methods for online negotiation and modifications, backup of information, verification of authenticity, access to the storage.
2) Identify the parties involved in the electronic labor contract
Before moving on to the contract’s terms, it’s critical to define and confirm the identities of the contract’s parties. An inbuilt identity registration and verification system is a key function to look for when selecting a contract management platform.
Facial recognition, cell phone authentication, bank card verification, security questions, and username/password verification are the most common forms of verification.
3) Negotiation of terms
Following the agreement on the basic content of the contract, both parties can begin negotiating the contract’s terms in compliance with the provisions of the PRC Labor Contract Law. Every contract should have the mandatory requirements as explained in the previous section.
4) Contract signature
Once both the employer and the employee have signed or sealed the labor contract, it will become effective. This can be achieved with an electronic signature or an electronic chop for electronic contracts.
5) Verification, encryption, and contract security
After completing the electronic contract, an auxiliary audit of the full text of the contract should be performed to ensure that it was not tampered with before being signed.
Employers may use a range of tools, such as auxiliary encryption or private technological features such as QR codes, time stamps, watermarks, and SMS alerts.
The regulations about electronic labor contracts in China are new, but more and more companies are adopting the practice of executing this type of contract.
We hope that this article was helpful to understand more about labor contracts in China. Feel free to contact us if you need more information about this!