How a U.S. Import-Export Company Managed a Sensitive Layoff with HROne
Helping a long-term EOR employee reach a fair and compliant termination outcome under Shanghai employment practice.
Industry
Import & Export Trade
Region
United States
Company Size
Enterprise
HROne Services Used
• Employer of Record (EOR)
• HR Compliance
• Employee Relocation Support
• HR Compliance
• Employee Relocation Support
THE CHALLENGE
A long-term employee facing redundancy
A U.S.-based import-export company had one employee in China under HROne’s EOR arrangement. The employee had been engaged through multiple fixed-term contracts for nearly 10 years.
Due to internal restructuring, the overseas client decided to make the role redundant. During the process, the employee raised a concern based on China’s Labor Contract Law: employees who have worked for the same employer for 10 consecutive years may, in certain situations, request an open-ended employment contract when renewing the employment relationship. The Labor Contract Law does contain this general rule under Article 14.
However, this case involved a Shanghai-based EOR and labor dispatch-style arrangement. Under China’s labor dispatch rules, dispatching employers are required to sign fixed-term employment contracts of at least two years with dispatched employees; Shanghai Human Resources and Social Security Bureau also states that a labor dispatch entity should sign a fixed-term contract of more than two years with dispatched workers.
For the client, the key challenge was not simply “whether to terminate.” It was how to handle a sensitive redundancy carefully, avoid misunderstanding around open-ended contract rules, and protect both the employer’s compliance position and the employee’s legitimate concerns.
Due to internal restructuring, the overseas client decided to make the role redundant. During the process, the employee raised a concern based on China’s Labor Contract Law: employees who have worked for the same employer for 10 consecutive years may, in certain situations, request an open-ended employment contract when renewing the employment relationship. The Labor Contract Law does contain this general rule under Article 14.
However, this case involved a Shanghai-based EOR and labor dispatch-style arrangement. Under China’s labor dispatch rules, dispatching employers are required to sign fixed-term employment contracts of at least two years with dispatched employees; Shanghai Human Resources and Social Security Bureau also states that a labor dispatch entity should sign a fixed-term contract of more than two years with dispatched workers.
For the client, the key challenge was not simply “whether to terminate.” It was how to handle a sensitive redundancy carefully, avoid misunderstanding around open-ended contract rules, and protect both the employer’s compliance position and the employee’s legitimate concerns.
THE SOUTION
Shanghai-specific review before communication
HROne first reviewed the case based on the employee’s contract history, the EOR arrangement, and the applicable Shanghai employment practice. Because the employee had nearly 10 years of service, the concern was reasonable and had to be handled with care.
Instead of relying on a generic interpretation, HROne’s CRM team reconfirmed the position with the local labor authority in Shanghai. Based on the Shanghai-specific guidance for this type of labor dispatch-style EOR arrangement, the case was not treated as automatically requiring an open-ended employment contract solely because of the employee’s length of service.
After confirming the local position, HROne communicated with the employee clearly and respectfully. The team explained the difference between the general open-ended contract rule and the treatment of this specific Shanghai EOR arrangement, helping the employee understand why the case could not be interpreted in the same way as a standard direct-employment relationship.
At the same time, HROne understood the employee’s emotions. After all, the employee had served the company for nearly a decade. HROne therefore worked as a bridge between the overseas employer and the employee, helping both sides move away from confrontation and toward a practical resolution.
Instead of relying on a generic interpretation, HROne’s CRM team reconfirmed the position with the local labor authority in Shanghai. Based on the Shanghai-specific guidance for this type of labor dispatch-style EOR arrangement, the case was not treated as automatically requiring an open-ended employment contract solely because of the employee’s length of service.
After confirming the local position, HROne communicated with the employee clearly and respectfully. The team explained the difference between the general open-ended contract rule and the treatment of this specific Shanghai EOR arrangement, helping the employee understand why the case could not be interpreted in the same way as a standard direct-employment relationship.
At the same time, HROne understood the employee’s emotions. After all, the employee had served the company for nearly a decade. HROne therefore worked as a bridge between the overseas employer and the employee, helping both sides move away from confrontation and toward a practical resolution.
THE RESULTS
A compliant and fair exit for both sides
From a strict statutory perspective, the termination compensation could have been handled based on standard economic compensation rules. Under the Labor Contract Law, economic compensation is generally calculated based on the employee’s years of service, with one month’s salary for each full year of service.
However, HROne helped the employer consider the employee’s long service history and the sensitivity of the situation. After communication with the overseas client, both sides reached a more balanced outcome: the employee received an N+1 compensation package.
The client was able to complete the layoff in a compliant and professional manner, while the employee received a respectful exit and a better compensation outcome. The case showed HROne’s value not only as an EOR provider, but also as a local employment partner that understands Shanghai labor practice, communicates carefully, and protects the interests of both parties.
However, HROne helped the employer consider the employee’s long service history and the sensitivity of the situation. After communication with the overseas client, both sides reached a more balanced outcome: the employee received an N+1 compensation package.
The client was able to complete the layoff in a compliant and professional manner, while the employee received a respectful exit and a better compensation outcome. The case showed HROne’s value not only as an EOR provider, but also as a local employment partner that understands Shanghai labor practice, communicates carefully, and protects the interests of both parties.
THE KEY OUTCOMES
• Managed a sensitive redundancy involving a nearly 10-year EOR employee
• Carefully reviewed the case under Shanghai-specific employment practice
• Reconfirmed the local position with Shanghai labor authority before taking action
• Supported the employee in receiving an N+1 compensation package
• Protected both the employer’s compliance position and the employee’s dignity
• Carefully reviewed the case under Shanghai-specific employment practice
• Reconfirmed the local position with Shanghai labor authority before taking action
• Supported the employee in receiving an N+1 compensation package
• Protected both the employer’s compliance position and the employee’s dignity
“HROne handled a sensitive termination with both legal precision and empathy. Their team helped us understand the Shanghai-specific requirements, communicate clearly with the employee, and reach a fair outcome for both sides.”
Client Representative
U.S. Import-Export Company
DISCLAIMER
This case study reflects a specific EOR and labor dispatch-style arrangement handled in Shanghai. It should not be interpreted as a general rule applicable to all employment relationships in China.
The treatment of open-ended employment contracts, fixed-term contracts, redundancy, and severance may vary depending on the city, employment structure, employee tenure, contract history, and local practice.
Companies should seek case-specific HR or legal guidance before making termination decisions.
The treatment of open-ended employment contracts, fixed-term contracts, redundancy, and severance may vary depending on the city, employment structure, employee tenure, contract history, and local practice.
Companies should seek case-specific HR or legal guidance before making termination decisions.
