Chinese labor law rests on two statutes: the Labor Law and the Labor Contract Law. Together they require every employment relationship to be documented in writing within 30 days of the start date, cap the workweek at 40 hours, set fixed overtime premiums, mandate employer contributions to five social insurance programs plus a housing fund, and allow termination only on specific statutory grounds with severance calculated by years of service. The rules apply to roughly 800 million workers and shape production costs for anyone sourcing from China.
Written Contracts and Probation
A written labor contract must be signed within one month of the employee’s start date. Miss that window, and the law requires the employer to pay double the monthly salary for each month the contract remains unsigned, starting from the second month and running up to one year.1Supreme People’s Court of the People’s Republic of China. Labor Contract Law of the People’s Republic of China The penalty is steep enough that most employers get the paperwork done.
Three contract types are recognized. Fixed-term contracts have defined start and end dates. Task-completion contracts run until a specific project finishes. Open-ended contracts have no expiration and carry the strongest job protection. The employer must offer an open-ended contract once a worker has ten consecutive years of service or is renewing after two consecutive fixed-term contracts, unless the worker prefers to stay on a fixed term.2International Labour Organization. Labor Contract Law of the People’s Republic of China
Probation length is tied to contract length. A contract of three months to one year allows up to one month of probation. Contracts of one to three years allow up to two months. Contracts of three years or more, including open-ended ones, allow up to six months. Task-completion contracts and fixed-term contracts under three months cannot include probation. Each employee gets one probation period, regardless of later renewals or role changes.3Shanghai Municipal Government. Labor Contract Law of the People’s Republic of China
Working Hours and Overtime
The standard workweek is 40 hours, split as eight hours a day over five days. Overtime is legal but capped. In normal circumstances an employer can extend the workday by one hour. In special situations the extension can reach three hours, but total monthly overtime cannot exceed 36 hours.4Ministry of Commerce People’s Republic of China. Labour Law of the People’s Republic of China
Overtime pay is fixed by statute:
- Weekday overtime pays at least 150% of the regular hourly wage.
- Rest day overtime pays at least 200%, if the employer cannot arrange a substitute day off.
- Statutory holiday overtime pays at least 300%, with no option to substitute a day off.
The tech industry’s “996” schedule — 9 a.m. to 9 p.m., six days a week — spread widely for years despite the 36-hour monthly cap. In 2021 the Supreme People’s Court published typical labor dispute cases confirming that 996 arrangements violate existing overtime limits. Signed employee consent does not save them.
Comprehensive and Flexible Work Hour Systems
Two alternative systems exist for jobs that don’t fit the 8-to-5 pattern, and both require advance approval from the local labor bureau. The comprehensive system averages hours over a week, month, or quarter, as long as the cycle averages 40 hours per week. It fits transportation, shipping, mining, and seasonal tourism. Overtime premiums apply only to hours exceeding the cycle’s total.
The flexible system covers senior managers, field sales staff, long-distance transport workers, and similar roles. Employees under this arrangement generally do not earn weekday or rest day overtime, though rules vary by city. Some municipalities still require the 300% premium for statutory holiday work under a flexible schedule. Approval for either system is normally valid for one calendar year, and the employer must reapply after it lapses.
Social Insurance and the Housing Fund
Every employee must be enrolled in five mandatory social insurance programs and a housing provident fund. Both sides contribute a percentage of salary, and the employer’s share is much larger. Approximate employer rates:
- Pension insurance: roughly 16% of salary.
- Medical insurance: 5% to 12%, depending on the city.
- Unemployment insurance: 0.5% to 1%.
- Work injury insurance: 0.5% to 2%, higher for hazardous industries.
- Maternity insurance: 0.5% to 1%, now merged with medical insurance in most cities.
The housing provident fund requires both employer and employee to contribute between 5% and 12% of salary.5Guangzhou International. Notice of Guangzhou Housing Provident Fund Management Center on Issues Concerning the Adjustment of Housing Provident Fund Contributions Added up, the employer’s share across all six can push total labor costs 30% to 45% above the base salary.
The contribution base is capped at 300% of the local average wage. Workers earning above that ceiling contribute on the cap. Workers earning below 60% of the local average generally contribute on the 60% floor. Both thresholds are set locally and recalculated each year.
Ending an Employment Relationship
Termination is more restrictive than in most Western jurisdictions. An employer can end a contract only on specific statutory grounds, such as serious misconduct, criminal conviction, or a major change in the objective circumstances under which the contract was signed. Off those grounds, severance is owed.
Severance pays one month’s salary for each full year of service. Six months or more but less than a year counts as a full year. Less than six months earns half a month’s pay. The monthly figure used in the calculation is the worker’s average monthly pay over the twelve months before the contract ended.6Supreme People’s Court of the People’s Republic of China. Labor Contract Law of the People’s Republic of China
High earners hit a cap. If the worker’s monthly salary is more than three times the local average monthly wage, the severance rate is limited to three times that local average, and the total years counted cannot exceed twelve.6Supreme People’s Court of the People’s Republic of China. Labor Contract Law of the People’s Republic of China Skipping the required 30-day written notice adds another month’s salary on top of severance.7Shanghai Municipal People’s Government. What Does N+1 Mean for Terminated Employees in China
Mass layoffs are procedurally heavier. Cutting twenty or more workers, or a number equal to at least ten percent of the total workforce, requires the employer to explain the situation to the trade union or all employees at least 30 days in advance, listen to their opinions, and report the layoff plan to the local labor administration.2International Labour Organization. Labor Contract Law of the People’s Republic of China Skipping any of these steps can invalidate the layoffs.
Non-Compete and Confidentiality
Non-compete agreements are enforceable, but only against senior managers, senior technical staff, and other employees with access to trade secrets.8Shanghai Municipal People’s Government. Do Employees Still Need to Comply With a Non-Compete Agreement The post-employment restriction cannot run longer than two years.2International Labour Organization. Labor Contract Law of the People’s Republic of China
Compensation is mandatory in exchange. The employer must pay the former employee monthly during the entire non-compete period. If the agreement is silent on the amount, courts have supported claims for 30% of the employee’s average monthly salary from the twelve months before departure. Stop paying, and the worker can void the agreement. If the employee breaches, they owe the liquidated damages set in the contract, and there is no statutory cap on that figure.
A common mistake is folding non-compete pay into regular wages. Courts have ruled that labeling part of an active-employment salary as “non-compete compensation” is invalid. The payments must happen after the employment relationship ends.
Labor Dispatch Limits
Labor dispatch is China’s version of agency staffing. A dispatch agency technically employs the workers and assigns them to the client company. Under the Interim Provisions on Labor Dispatching Activities, dispatched workers cannot exceed 10% of an employer’s total workforce, counted as direct hires plus dispatched workers combined. Employers already above the threshold cannot add new dispatched workers until they come back into compliance.
Dispatch is limited to three categories of positions: temporary roles lasting no more than six months, auxiliary roles that support the main business line, and substitute roles covering employees on leave. Narrow exemptions from the 10% cap apply to resident representative offices of foreign enterprises, foreign diplomatic offices in China, representative offices of foreign financial institutions, and international ocean-going crews.
Trade Unions
China operates a single-union system. Every union at every level must be affiliated with the All-China Federation of Trade Unions (ACFTU). Independent unions are not legally recognized. The Trade Union Law directs unions to represent worker interests and protect their rights while also supporting the broader economic objectives of the enterprise.9National People’s Congress of the People’s Republic of China. Trade Union Law of the People’s Republic of China Enterprise unions negotiate collective contracts covering wages, hours, and benefits, and once signed those contracts apply to all employees, not just union members. Management must consult the union before decisions that affect worker livelihoods, such as changes to compensation or working conditions. Workers who have tried to organize outside the ACFTU have faced legal consequences.
Disputes: Arbitration First
Labor disputes follow a mandatory arbitration-first path. Before a worker can sue in the People’s Court, the claim has to go through a Labor Dispute Arbitration Commission. Mediation is available as an optional first step, but arbitration itself is not optional.
Timing is strict. A worker has one year from the date they knew or should have known about the violation to file an arbitration claim. There is one exception: disputes over unpaid wages during an ongoing employment relationship have no limitation period, but the worker must file within one year after employment ends.10Supreme People’s Court of the People’s Republic of China. Law of the People’s Republic of China on Labor-Dispute Mediation and Arbitration
Small-value claims move on an expedited track. For unpaid wages, work-related injuries, or social insurance disputes where the amount does not exceed the local annual minimum wage, arbitration is final and the employer generally cannot appeal. Employees keep the right to appeal to the People’s Court within 15 days. For everything else, either side can appeal within 15 days.
Minimum Working Age
The minimum working age is 16. The Provisions on the Prohibition of Using Child Labor bar any employer, whether a government agency, private company, or individual business, from hiring anyone younger.11Supreme People’s Court of the People’s Republic of China. Provisions on Prohibition of Child Labour Violations carry heavy administrative fines and can result in business license revocation.
Workers aged 16 and 17 are classified as juvenile workers and get extra protections. They cannot perform hazardous work, including tasks involving toxic chemicals, heavy physical labor, or high-altitude operations.12International Labour Organization. China Compendium of Hazardous Child Labour Lists Employers must arrange regular health examinations and register juvenile workers with the local labor department.
Forced Labor and U.S. Import Restrictions
The framework above governs China’s formal labor market, but the practices reaching Xinjiang have driven a parallel regime at the U.S. border. The International Labour Organization’s Committee of Experts has documented two coercive systems in the Xinjiang Uyghur Autonomous Region: arbitrary detention of Uyghurs and other ethnic minorities followed by placement in labor-intensive industries like textiles and electronics, and state-directed transfers of rural workers into manufacturing, mining, and agricultural processing under conditions independent observers describe as involuntary.
U.S. law has long prohibited importing goods made with forced labor under 19 U.S.C. § 1307.13Office of the Law Revision Counsel. 19 USC 1307 – Convict-Made Goods Importation Prohibited The Uyghur Forced Labor Prevention Act, signed in December 2021, created a rebuttable presumption: goods produced wholly or in part in Xinjiang, or by entities on a federal watch list, are presumed made with forced labor and barred from entry.14U.S. Congress. Uyghur Forced Labor Prevention Act To release a detained shipment, the importer must provide clear and convincing evidence that the goods were not produced with forced labor. U.S. Customs and Border Protection publishes the UFLPA Entity List, which currently includes 144 companies and organizations whose products fall automatically under the presumption.15Federal Register. Notice Regarding the Uyghur Forced Labor Prevention Act Entity List
Enforcement volume is significant. Through late November 2025, CBP had stopped over 65,700 shipments valued at roughly $3.9 billion. About 24,200 were denied entry, and about 39,800 were released after importers produced sufficient documentation.16U.S. Customs and Border Protection. Uyghur Forced Labor Prevention Act Apparel and textiles, electronics, and base metals have been hit hardest, with apparel accounting for nearly 28,000 stopped shipments alone. Because the presumption applies to goods “produced wholly or in part” in Xinjiang, a finished product assembled in Guangdong can still be detained if a component such as polysilicon originated in the region. Supply chain mapping has to reach that deep to avoid detentions.