Creating a Company Rulebook in China

Posted by Reading Time: 3 minutes

Sept. 6 – The company rulebook in China clarifies an employer’s expectations and, if necessary, makes it easier to demonstrate that an employee has broken a company rule and can be legally dismissed. As a guideline, we would normally suggest that any company with more than 10 employees consider creating a company rulebook.

Contents of the company rulebook vary based on the industry in which the company is involved. For example, companies in the manufacturing industry will generally be more concerned about issues relating to promptness, length of breaks, and safety of employees. In a similar strain, those in the business process outsourcing market will be particularly concerned about the confidentiality of their clients’ information, while those in the food industry will pay close attention to hygiene, etc.

The company rulebook should be bilingual, with the Chinese version considered valid. If a company has a trade union, the terms included in the rulebook shall be agreed with the union itself. Finally, the labor contract template should include a clear reference to the rulebook. This strengthens the company’s case if it needs to dismiss an employee based on rulebook infractions in the future.

We discuss some additional key points to consider when creating your company rulebook below.

Is the rulebook reasonable?
A company may devise hundreds of rules in their rulebook, making it extremely hard for the employees to keep “in compliance,” however this also increases the workload of the HR division to supervise these rules. Also, if a dispute arises and a judge considers that the company has set arbitrary rules in order to find reasons to dismiss employees, then the employee is more likely to receive a sympathetic judgment. The employer should be prepared to explain exactly why each of the regulations should be included in the rulebook.

Is the severity of each infraction described in the rulebook?
A rulebook should differentiate between a serious breach and a minor breach when determining how many warnings a company must give an employee before dismissing that person. Serious breaches can constitute immediate dismissal. Minor breaches are generally dealt with by issuing an official warning letter to the employee.

The rulebook may stipulate that after a specified number of official warnings, the employee is deemed to have committed a serious breach of the rulebook. In this way the company may gain the right to dismiss the employee without compensation, although we would like to stress that ultimately the decision on whether or not the infringements warrant dismissal could be challenged by the employee in a court.

Do you have evidence that your staff have read and agreed?
Each employee should sign a document confirming that they have received a copy of, read, and understood the rulebook. If you amend the rulebook in the future, have the employees confirm once more.

It may also be advisable to provide a draft of the amended rulebook to employees, giving them a chance to provide comments and feedback for the company’s consideration (although there is no obligation to adopt any suggested adjustments). This not only improves the position of the company legally in the event of a dispute, but will ensure that employees read the rulebook more carefully.

Portions of this article came from “Human Resources and Payroll in China (Third Edition)” which is available on the Asia Briefing Bookstore. A firm understanding of China’s laws and regulations related to human resources and payroll management is essential for foreign investors who want to establish or are already running foreign-invested entities in China. This guide aims to satisfy that information demand, while also serving as a valuable tool for local managers and HR professionals who may need to explain complex points of China’s labor policies in English.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email china@dezshira.com, visit www.dezshira.com, or download the company brochure.

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