Clear, legitimate and consistent internal company policies are an essential aspect of employee management tools in China. Whilst the labour contract governs the labour relationship between the employee and employer, the internal company policy establishes fundamental provisions to manage the daily routine, responsibilities and obligations of the employees. In practise, the internal company policies are formulated as the employee handbook and company procedures, which include items such as (but not limited to): overtime rules, code of conduct, performance and promotion standards, reimbursement, business travel, special leave, vacation days, rest and working time, disciplinary actions, terminations and so forth.

A necessary requirement

Internal company policies in China are required to be formulated for employees under the Labour Law (2009) and Labour Contract Law of the People’ Republic (2014) and labourers as employees of a company are obliged by the Labour Law (2009) to adhere to such policies. Although, the employee handbook, whether formulated or amended, is required to be presented to the workers’ congress for a discussion and vote, and the company shall further solicit opinions from the workers’ representatives.

If there is no workers’ congress, a staff conference shall be called. Equally, if the implementation of a provision is deemed inappropriate, the employer reserves the right to raise an issue. For foreign companies operating in China, a well-translated Chinese version of the employee handbook is advisable, since internal policies and procedures shall be clearly understood by all employees and any labour suit brought to the labour tribunal will require the Chinese translation of the employee handbook.

Once the employee handbook is formulated, it is required to be disclosed to all current and new onboarding employees. Keeping records of employee handbook training or disclosure is encouraged; this can be recorded via employees signing of a training form, retaining notice of the employee handbook, or signing a commitment of compliance to the handbook when entering into the labour contract.

The employee handbook matters

Internal company policies in China can serve as a basis for judicial organs to handle labour dispute cases. For example, a well-written employee handbook can stipulate breaches of minor and major misconduct, as well as appropriate disciplinary measures. Therefore, if an employee is terminated and a well-written employee handbook is implemented, there is a documented procedure and supporting evidence demonstrating the process of the termination, such as first warning, second disciplinary action and third termination or there is a serious breach of misconduct in conflict with policies in the employee handbook which leads to an immediate termination.

Generally, the employee handbook and company policies and procedures play a more significant role in employee management than the labour contract. It is advisable for companies to seek professional labour lawyers to draft employee handbooks accordingly to the laws and regulations of PRC, rather than implementing a general employee handbook. For foreign companies, it is vital to retain a Chinese version of the company policies and procedures to ensure all employees clearly understand.

If you would like more information about the employee handbooks, labour law or other related corporate matters, send us an email at talktous@horizons-advisory.com, and we’ll have a Horizons professional contact you.

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