What should I know before signing a labor contract

A labor contract is a legally binding document that safeguards the rights and obligations of both employers and employees.

Below is a clear and practical guide outlining key points to consider before signing a labor contract.

What types of labor contracts are used in China?

In China, labor contracts are categorized into three types:

Fixed-term contracts

These contracts specify a clear start and end date for employment and are established through mutual agreement between the employer and the employee.
Open-ended contracts
These have no fixed end date and are also based on mutual agreement between the employer and the employee.
However, the employer must offer an open-ended contract if:

• The employee has worked for the employer for ten consecutive years 
• The employee is in their tenth consecutive year with the employer and is within ten years of the legal retirement age, when the employer first signs a contract or undergoes state-owned enterprise restructuring 
• The employer and employee are signing a contract for the third consecutive time, and the employee has not violated provisions under the Labor Contract Law of the People's Republic of China

If the employer fails to sign a written contract within one year from the employee's first working day, it is automatically deemed an open-ended contract.
Task-based contracts
These end upon completion of a specific task or project, as agreed by both parties.

What should a valid labor contract include?

According to the Labor Contract Law of the People's Republic of China, a labor contract must include the following legally mandated clauses:

• The employer's name, address, and legal representative or principal responsible person
• The employee's name, address, and ID card or other valid identification number
• Contract duration
• Job description and work location
• Working hours, rest days, and leave
• Remuneration details
• Social insurance
• Labor protection, working conditions, and occupational safety measures

Additional clauses may cover probationary periods, training, confidentiality, supplementary insurance, and other benefits.

When must the labor contract be signed?
The Labor Contract Law requires a written contract to be signed within one month of the employee's first working day, regardless of any probationary period.

Are electronic labor contracts valid? What should employers provide?

If an electronic contract is used, the employer must:

• Promptly notify the employee to download and save the contract
• Explain how to access and download it
• Provide necessary guidance to ensure the employee can view, download, or print the complete contract using standard devices

Upon request, the employer must provide at least one free printed copy, stamped to confirm it matches the electronic version.

Should employees keep a copy of their labor contract?
Yes. A labor contract takes effect once both parties have signed or stamped it. Both the employer and the employee must retain one copy.
If the employee does not have a copy, it may complicate future dispute resolution.
Employees are advised to request a signed copy for their own records. If the employer refuses, the issue may be reported to the local labor supervision authority, which can require the employer to comply.

Is an open-ended contract mandatory after 2 fixed-term contracts?
Under Article 14 of China's Labor Contract Law, once two consecutive fixed-term employment contracts have been signed, the employer is prohibited from opting for another fixed-term contract or terminating the employment relationship. If the employee requests or agrees to renew or establish an open-ended employment contract, the employer is obligated to comply.
When an employer has signed two consecutive fixed-term labor contracts with an employee and the employee qualifies for an open-ended contract, the employer is legally required to inform the employee of their right to choose such a contract.
This obligation not only protects the employee's rights, but also ensures that the employer fulfills their legal responsibilities.
If an employee believes that the employer has failed to fulfill this obligation, resulting in the employee missing the opportunity to sign an open-ended labor contract, the employee may seek redress through legal channels such as labor arbitration or litigation.

When is a labor contract considered invalid?

A labor contract is deemed invalid, or partially invalid, if it is established through fraud, coercion, or by taking advantage of someone in a vulnerable situation, resulting in an agreement that does not reflect their true intent.
Contracts also lose validity if an employer attempts to waive its legal obligations or strip employees of their rights, or if the agreement violates mandatory provisions of laws or administrative regulations.
In case of disputes over the validity of a labor contract or part of it, confirmation must be sought from a labor dispute arbitration organization or a court.
It is important to note that if only part of a contract is ruled invalid, this does not affect the legal force of the remaining terms. The valid sections of the agreement will continue to apply.

When should an employer arrange social insurance for an employee after they start working?

According to Article 58 of the Social Insurance Law of the People's Republic of China, employers must register their employees for social insurance with the relevant social insurance agency within 30 days of the employer's start date.

How is the social insurance for urban employees in Shanghai paid? What are the contribution rates?
Social insurance contributions for employees should be paid by both the employer and the employee according to the prescribed contribution rates. The employee's portion is then deducted and paid by the employer on their behalf. The specific contribution rates are shown in the table below.
Contribution Rates for Urban Employees' Social Insurance in Shanghai:

(Sources: Official WeChat account of the Ministry of Human Resources and Social Security at "rsbwwx", VCG, IC)
Source: Intl Services Shanghai