High on the list of priorities for companies doing business in China is hiring employees to help grow their business. With the growing availability of local talent in China and the many benefits they bring to the company, foreign invested enterprises in China often put emphasis on building up their local teams. In their haste, FIEs occasionally overlook the importance of proper HR management practices, not knowing that Chinese labor laws provide many protections and generally favor the employee. Foreign employers will often focus their attention on the employee labor contract. Unbeknownst to them, the employee handbook in China is a crucial document for HR management and essential for protecting the company in the event of a labor dispute.
While labor contracts in China outline the rights, interests, and obligations of each party to the labor contract, the employee handbook serves as a code of conduct for employees on the job. In the event of a labor dispute, courts will rely heavily on the contents of both documents in determining the outcomes of the dispute.
Labor disputes have been on the rise in China with the number of arbitration cases reaching 1,094,788 in 2020, a 22.4% increase from just two years prior, according to an analysis by AnJie Broad Law Firm. The data shows employees also have a relatively high success rate of 28% compared to employers who succeeded in just 10% of cases, with the remaining cases (62%) resulting in partial success by both parties.
Within this context, many companies are putting more focus on their HR management practices and paying more attention to their employee handbook.
What goes in an Employee Handbook in China?
Employers can use the employee handbook to provide necessary clarification and set standards specifically for their needs and management practices. Certain workplace benefits, like flexibility in working hours and location, also have their rightful place in the employee handbook if the company wishes to include them. Including statements on the company culture, values, and mission help provide context and understanding among employees regarding the policies included in the handbook.
It’s important to note that the employee handbook cannot circumvent PRC Labor Law and Labor Contract Law but instead should supplement it. For example, the employee handbook cannot reduce the rate of overtime pay stipulated by law, but it can state that only overtime work approved by a manager is permitted and subject to overtime pay per PRC labor law.
The provisions of an Employee Handbook in China generally include:
- Company value system and culture
- General workplace conduct and behavior
- Workplace and worker safety
- Employee remunerations and bonuses
- Working hours and handling of overtime
- Holiday and Leave procedures
- Employee confidentiality and non-disclosure
- Performance evaluation and disciplinary standards
Certain industries may require strict guidelines for employees to follow. For example, Restaurant businesses may have stricter policies for hygiene, manufacturing businesses may include policies related to employee punctuality and breaks during the workday, and high-tech companies may include provisions for the handling of company data and proprietary information.
Notably, the employee handbook can also supplement workers’ rights and benefits in particularly competitive job markets. For example, if the company has a beneficial Work from Home policy or provides additional paid leaves, the company can set detailed guidelines for the administration of such policies through the employee handbook.
Another crucial element of the employee handbook is clearly defining unacceptable workplace conduct and the severity of violations. The Labor Contract Law of the PRC states that employers can terminate a labor contract without notice or severance pay if “the employee seriously violates the rules and regulations of the employer”. Notably, the Labor Contract Law of the PRC does not stipulate what constitutes a “serious violation” of company rules can be defined by the company in the employee handbook.
Protecting against a labor dispute
A key strategy of any HR management plan should be to avoid a labor dispute when at all possible and provide the company with added layers of protection should they find themselves in a labor dispute.
A detailed and clearly written staff handbook helps to ensure clear communication between employers and employees. It provides employees with an understanding of the company’s policies and procedures helping to avoid confusion and misunderstandings between the employee and the employer.
It should also not be forgotten, if the company finds itself in a labor dispute or wish to bring a labor dispute against a former employee, the company faces a relatively high burden of proof for their claims. They must provide clear evidence that the employee was made aware of the conduct that was expected of them and unambiguous proof of said conduct.
For example, if an employer decides to terminate an employee seeks outside the normal working hours for another company, the company would likely lose the case unless it outlines the types of work which are prohibited under a non-compete clause.
Best Practices for an Employee Handbook in China
It’s generally not sufficient nor an advisable practice to simply translate the employee handbook from overseas for use in China. While it may serve as a good starting point for the employee handbook in China, it’s important that the handbook is made to comply with Chinese labor laws and adapted to the culture of the local team and strategy in China. Here are some best practices.
Keeping a signed copy of the employee handbook
Under the Labor Law of the PRC, employees shall receive a copy and agree to the contents of the employee handbook for them to be bound by the contents of the handbook. It’s highly recommended that the company keeps a copy of the employee handbook signed by the employee to leave no ambiguity as to whether the employee received and agreed to the contents of the employee handbook. In the event of a dispute, it would be in the interest of the employee to claim they never received a copy without any evidence to prove otherwise.
Avoid subjective and ambiguous rules
Rules within the employee handbook which are subjective and ambiguous will be scrutinized when referenced during a labor dispute. With the inclined protections of employees in China, any subjectivity and ambiguity will very likely fall in the employee’s direction.
A judge may also determine whether a certain provision of the employee handbook is considered to be fair and justified. The company should avoid unnecessarily convoluted language and instead be clear and precise and use language which can be easily understood by everyone.
Provide training on the contents of the handbook
Training employees on how to correctly practice the behaviors and follow the policies outlined in the employee handbook can often lead to significantly better results. For example, if the handbook prohibits staff from receiving gifts above RMB 200 in value from clients or vendors, the training should provide employees the opportunity to practice a polite rejection of gifts that violate the company policy.
Bilingual Employee Handbooks if the company hires non-Chinese speaking staff
The foundation of the employee handbook relies on employees understanding and agreeing to the contents of the handbook. If the company hires non-Chinese speaking staff, the company should provide bilingual employee handbooks to ensure they can be understood by all staff.
Link the employee handbook with labor contracts
Unilaterally terminating employment contracts in China can be a delicate task. Companies are on the hook for severance payment and potential damages for wrongful termination. Companies can significantly strengthen their contract by expressly linking the employee handbook to the labor contract. Employers should include a clause in the labor contract stating that the employee must comply with the contents of the employee handbook otherwise the employee may be disciplined or terminated.
Update the handbook as required
It’s important that the employee handbook be updated to reflect changes in Chinese Labor Laws and regulations as well as changes in the company size and strategy.
With Integra Group, You Benefit From our Collective Experience
Integra Group has decades of experience servicing foreign companies in China with their accounting, tax, and HR management practices. We assist our clients craft their employee handbook in China specifically for their needs and management practices. Find out more about HR services or contact us to speak to one of our HR professionals.