What the private sector requires of an employee

Practical experience with labor law

"For several years there has been no more visible discrepancy between the legal requirements and the legal reality", so the experience of Philip Lazare, partner at the Luther law firm in Shanghai.

Regardless of this, it is repeatedly heard, especially from the local private sector, that companies reimburse part of their salaries in order to save taxes and fees as "expenses" (for example against commercially available restaurant receipts). However, this is neither legal nor especially recommended for foreign companies.

The same applies to compliance with working hours and the performance of overtime. This, too, is little controlled at Chinese companies, as is evident not least from the "9/9/6" debate initiated by Alibaba founder Jack Ma. What is meant is work from 9 a.m. to 9 p.m., six days a week, which gives employees an illegal 72 hours a week. Chinese bosses often take this for granted. The German managing director of a Chinese company even spoke of "0/0/7" weeks at management level.

“So far, there is no regulation that expressly requires working time to be recorded,” says Lazare. “In a dispute in which the employee provides conclusive and credible evidence that he has worked overtime, the burden of proof would certainly be transferred to the employer. Without timekeeping he would have a difficult time. "

Terminations are becoming more explosive

Even in the context of the slowdown in economic growth in recent years, layoffs had developed into a conflict-laden field of personnel that is now becoming more explosive in the wake of the corona crisis and the associated slump in income.

Dismissals due to underperformance are, however, linked to the demands of the employer that can hardly be met and are often expensive in view of the employees' exaggerated severance plans. According to the law, the severance payment is one month's salary per year of employment, but not more than one year's salary. For periods of employment after January 1, 2008, the severance payment is capped at three times the average gross monthly salary at the place of work per year of employment.

In principle, proof or measurement of poor or underperformance is a prerequisite for termination. However, poor performance can only justify a termination if the employee has been given the opportunity to retrain and if the poor performance also continues in another position. A dismissal is only possible if all efforts on the part of the employer have not borne fruit and the underperformance persists - unless the employee can give other reasons for the lack of success. Even in the case of gross breaches of duty, the employer is often left behind if he cannot prove the misconduct in minute detail. Above all outside the metropolises, the principle “In case of doubt for the employee” prevails, which often leads to absurd decisions.

The rules of evidence for civil proceedings and thus also labor court proceedings issued by the Supreme Court on May 1, 2020 promise a certain relief. The court emphasizes, for example, that circumstances that can be derived from general life experiences do not have to be proven. The requirements for the introduction of electronic evidence (e.g. text messages, WeChat moments) have also been significantly reduced.

Documentation and clear announcements are everything

Often, however, companies tend to want to motivate a difficult employee with praise first. But it is precisely this praise that can later torpedo the dismissal. It is important to document in writing very early on if something goes wrong - for example in the form of regular employee appraisals, after which the employee has to sign that he has been informed of his weaknesses. He must also be given the opportunity to comment on the allegations.

The noticeable reduction or omission of a raise are also important signals. Otherwise, the employee can take the position: “You said it was okay - and I also got a higher salary. Then you can't suddenly speak of underperformance! ”Another prerequisite for being able to prove underperformance is the formulation of clear goals. "As an employer, we were often too careless about this," said a German company representative.

In principle, an employee handbook should be kept that the employee must sign. It is an important aid in being able to fire an employee due to misconduct or violations of the company's internal code of conduct. The employee must adhere to the company regulations, such as those stipulated in the manual. For example, he must follow the instructions, insofar as these are permissible, fulfill his obligations of loyalty, do not carry out any secondary employment with the competitor and, if necessary, comply with confidentiality obligations.

In addition, companies are advised to carefully follow the documentation of employment contracts and personnel files. It has often happened that employment contracts "disappeared" from the company and the employer was then not even able to provide evidence of the conclusion of a written employment contract.

Don't forget to renew employment contracts

Forgetting to extend a fixed-term contract is also a common mistake that can lead to significant additional costs. The employee is entitled to double the salary for the "contractless" period.

Additional Information:

In China, terminations often result in expensive severance payments

Dismissals for operational reasons are fraught with conflict

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