Understanding how to effectively manage a local team and make HR rules clear from the beginning is important for companies operating in China. Having a well-structured and practical employee handbook can be very helpful in this respect. It is a valuable document to have in managing everyday employment situations between employees and employers, and an important source of information and evidence when handling cases of labour disputes.
The EU SME Centre recently published a practical new guide, Preparing an Employee Handbook in China, which explains in detail the essential elements that should be included and gives examples on how to make accurate social insurance calculations. Below they provide an overview of what your standard employee handbook should contain.
Rules about the general behaviour of employees should be included, covering discipline, company property and disciplinary punishment. Regulations on discipline at work cannot be included in the employment contract, but can be included in the employee handbook. Forbidden behaviour such as harassment or discrimination should be clarified in this section.
Standards for recruitment procedures
Detailed recruitment procedures and standards should be elaborated in the employee handbook. First, it should provide guidelines for both parties (employer and candidate/employee) about the overall recruitment procedure and requirements; and second, it may serve as the basis for additional labour-related procedures. A definition of ‘unqualified’ should also be incorporated into the employee handbook, which depends on the position and business scope, and must to be defined on a case-by-case basis.
This section should clarify the rules concerning workplace security and general safety, safe production, fire prevention and accident handling, depending on the type of industry.
Working hours and overtime
Under current Chinese employment laws and regulations, there are three types of working hour systems – standard, comprehensive and non-fixed. The employee handbook should clarify the type of working hour system that is followed by the company. In addition, it should also include details of employees’ entitlement to overtime payments for work exceeding statutory working hours, however, it should be noted that the calculation varies under the different working hour systems.
Holidays and leave
This section should provide an introduction to the public holidays in China, rules on paid annual leave and other types of leave, and internal approval procedures for leave application.
Under current Chinese labour-related laws and regulations, an employer assumes the liability to pay employees’ salaries and overtime payments for work performed and must contribute to the statutory social insurance fund. From the employees’ point of view, they want to be correctly paid for the work performed, receive bonus pay and other kinds of benefits where applicable and, at the same time, they want to structure their salary package in a legal way to optimise their individual income tax burden.
Staff performance assessment procedures
Elaborates the procedures in areas including legal termination by an employer, salary and position adjustment, performance assessment standards and signed/agreed performance assessments. Staff performance assessments are one of the most important functions in HR management and therefore need to be incorporated into the employee handbook.
Confidentiality and non-compete
This should include information on the scope of confidential information, employees that will be subject to confidentiality, the consequences of breaching a confidentiality agreement and a brief introduction on non-compete terms.
In accordance with China’s New Employment Contract Law, an employer can stipulate in the employment contract that the employee should keep confidential the information of the employer such as commercial secrets and intellectual property. Furthermore, the employer can state that employees with a confidential liability must abide by the non-compete obligations.
Since the New Employment Contract Law was enforced in 2008, it is not easy for an employer to unilaterally terminate an employment contract before its expiration. In accordance with Chinese regulations, there are 14 legal reasons under which an employer can unilaterally terminate an employment contract; otherwise, it will be deemed an illegal termination. It is therefore very important to provide greater details on these legal reasons in the employee handbook in order to apply them in a broad way.
This covers information on the All-China Federation of Trade Unions (ACFTU), formation of a labour union, rights and responsibilities of a labour union, labour union fees and company obligations for setting up a labour union.
For more detailed information on each element mentioned above and China’s social insurance regulations, purchase the EU SME Centre’s guide, Preparing an Employee Handbook in China, available on the website.
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