In the United States, most employers reserve the right to hire or terminate at-will employees how they choose. They often do not have to cite a reason for the termination either, although they cannot terminate employees in retaliation for engaging in an activity protected by law.
However, this process is different when U.S. businesses operate in China. And business owners must be aware of this process to prevent complex business disputes
What warrants termination without severance pay?
Under Chinese business laws, there are very specific situations and processes required to terminate an employee. For example, employers can only terminate an employee in China without notice or severance pay if the employee:
- Violated company policies
- Disregarded their position and duties
- Engaged in activities that damaged the business
- Entered into a deal or contract with another business
- Is suspected in a criminal investigation
And even in these situations, U.S. business owners must take great care to ensure they follow the correct legal processes. It can be helpful to document evidence of these actions so that business owners can proactively protect their company.
What about termination with severance pay?
Additionally, there are specific circumstances where employers can terminate an employee as long as they give them a 30-day notice or a month’s salary in reimbursement. These situations include:
- If the employee suffered a severe injury outside of work and cannot complete their duties
- The employee is unable to work, even after relocation or additional training
- The employee consistently performs poorly at work and in reviews
These situations are similar to the reasons for termination in the United States. However, all terminations in China require great care.
Regardless of the situation, employers must be careful
The Society for Human Resources Management offers U.S. business owners some helpful tips to consider when terminating an employee in China, such as:
- Does the business owner understand the laws and procedures for termination?
- Does the business have a record of the employee’s performance?
- Are all due wages paid, and the proper release forms completed?
Business owners should consider these questions carefully to reduce the risk of a dispute.
Navigating these situations can be incredibly complex. It might be beneficial for business owners to consult experienced counsel in these matters, in order to safeguard their company and their expansion into China.