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Jiangsu Amended its Regulations on Labour Contract

  • China
  • Employment law - HR E-Brief


On 1 May 2013 changes to the Jiangsu Regulations on Labour Contract came into force (the “New Regulations”). Employers should note the following key amendments:

1. Open-term Contract Entitlement

The New Regulations require an employer to inform an employee in writing of his/her entitlement to an open term labour contract 30 days prior to expiration of the second fixed-term contract or fulfilment of a consecutive period of 10 years working for the employer.

Importantly, where a labour contract has been renewed, either by an automatic extension of the term of the original contact, or where the original contract is amended in order to extend it by 6 months or more, then these extensions may be considered to be a second fixed-term contract, and therefore will trigger the 30 days prior notice requirement.

Finally, an employee with an open-term contract entitlement, who continues to work for an employer after expiration of their contract, will be deemed to have their contract concluded, even if prior to the expiration he/she did not request such conclusion or a termination of the employment relationship. Please be reminded that the sanction of double salary entitlement will apply if no written contract is concluded in time.

2. Consolidation of Working Period

In the event that staff are transferred between employers, for the purposes of identifying entitlements, an employee’s working period at the original employer will be consolidated into the working period at the new employer in the following situations:

  • Position adjustment by re-assignment;
  • Mergers & Acquisitions and restructurings etc.
  • Transfers amongst the employer’s subsidiaries or affiliated companies;
  • Conclusion of labour contracts with the employer and its affiliated companies in turn.

However, please note that if the employee has already been provided with severance pay for his/her working period at the original employer, then the new employer will not be required to consider the previous working period when calculating severance payment at the time of termination with the new employer.

3. Internal Rules and Regulations: Means of Publication

To publish its internal rules and regulations a company may use the ways as illustrated in the New Regulations, including via email, bulletin boards etc. However, companies should make sure they have sufficient evidence about the publication and the fact that individual employees actually could take notice.

4. Post-contractual Non-Competition Obligations

Where there is a non-competition obligation agreed, companies in Jiangsu must provide compensation payment at least in the amount of one third of the employees average monthly salary in the 12 months prior to termination.

The scope of a non-competition obligation must be restricted to what the employer actually produces or is engaged in before the employee’s termination.

5. Dismissal: Notification to Trade Union

Where an employer does not have an in-house trade union, the dismissal notification must be provided to the local trade union in district level.

6. Dismissal: Payment in lieu of notice

If an employer opts not to provide the statutory notice period in case of dismissal, payment in lieu of notice must be calculated based on the average monthly salary over the previous 12 months or the actual average monthly salary if the employee has worked for a period of less than 12 months.

7. Notice period for resignation: Longer resignation notice period for employees subject to non-competition obligations

With any employee subject to non-competition obligations, an employer is allowed to agree on a longer notice period for the employee’s resignation (up to 6 months). It is also possible to mutually agree on adjustments to the employees position and remuneration during the notice period.© Eversheds LLP, 2013

Eversheds Comments:

Companies based in Jiangsu should take note of the changes and review current HR practices to ensure they remain compliant, particularly in relation to the new notification requirements and open-term contract entitlements.

In addition, employers may consider taking advantage of the opportunity for agreeing a longer notice period in relation to non-competition obligations if it makes sense.