If a labor dispute goes to arbitration in China, one of the first things the arbitrator will ask for is your employee handbook. If you have one that’s properly adopted and communicated, you have a foundation for your defense. If you don’t, you’re relying entirely on the statutory framework — which is heavily tilted toward the employee.
Here are the clauses that matter most and why they need to be in writing.
Working Hours and Attendance
Chinese labor law caps standard working hours at eight per day and forty per week. Overtime is capped at three hours per day and thirty-six hours per month, with premium pay rates escalating from 150% on regular workdays to 200% on rest days and 300% on statutory holidays.
The handbook should specify your company’s working hour arrangement. If you use a standard schedule, state the start and end times and the break period. If you use a flexible schedule or a comprehensive working hour system — which requires prior government approval — state that and reference the approval documentation.
Attendance rules should be clear and specific. What constitutes late arrival and how is it measured? How many late arrivals within what time period constitute a disciplinary issue? What’s the procedure for requesting leave and what documentation is required? If you’re going to discipline someone for attendance problems, the rules they violated need to be in the handbook.
Performance Management
This is where foreign companies most commonly run into trouble. Chinese labor law doesn’t recognize “poor performance” as a standalone ground for dismissal. Unsatisfactory performance can be grounds for termination only after the employer has provided training or adjusted the employee’s position, and the employee still can’t perform the work.
The handbook should define how performance is assessed — the evaluation criteria, the assessment period, the rating scale, and the consequences of different ratings. A performance improvement plan process should be described in detail, with specific timelines and measurable objectives.
Without these documented processes, you can’t credibly claim that an employee was unable to perform after receiving reasonable support, because you can’t prove what the standard was or what support was provided.
Disciplinary Rules
The most important section of any Chinese employee handbook is the disciplinary rules. This is what allows you to dismiss an employee for serious violation of company rules under Article 39 of the Labor Contract Law.
The rules must define what constitutes misconduct and classify it by severity. Minor infractions — occasional tardiness, a single instance of unapproved absence from the workplace — should be treated progressively, with documented warnings leading to more serious consequences if repeated. Major infractions — theft, fraud, violence, serious insubordination, significant damage to company interests — should be defined as grounds for immediate dismissal.
The classification matters because it has to be reasonable. A handbook that says “any violation of any rule is grounds for immediate dismissal” will be disregarded by an arbitrator as unreasonable. A handbook that distinguishes between levels of misconduct and applies proportionate consequences is more likely to be accepted as a valid basis for termination.
Each disciplinary action should be documented. Written warnings should be delivered to the employee with an opportunity to respond. The handbook should describe the investigation procedure that precedes any disciplinary decision.
Confidentiality and Intellectual Property
China’s labor law allows employers to include confidentiality obligations in employment contracts and handbooks, and these can survive the termination of employment.
The handbook should define what constitutes confidential information — technical data, customer lists, financial information, business plans, and so on — and describe the employee’s obligations to protect it during and after employment. If your company uses non-disclosure agreements, reference them and require acknowledgment.
For companies that create intellectual property, the handbook should address ownership of employee-created IP. By default, inventions created in the course of employment or mainly using the employer’s resources belong to the employer, but a clear statement in writing eliminates ambiguity. This is particularly important for companies that allocate R&D or design work to their China entity.
Non-Competition
Non-competition restrictions in China can be enforced, but they’re limited. They can only apply to senior management, senior technical personnel, and other personnel with access to trade secrets. The maximum period is two years after termination. And — this is the part most foreign companies don’t know — the employer must pay monthly compensation during the restriction period at a rate that’s not less than the local minimum wage and typically at 30% or more of the employee’s average salary.
The handbook should reference the non-competition obligation, but the actual agreement should be a separate signed document. Trying to impose non-competition through a handbook without a separate signed agreement and without paying compensation won’t survive an arbitration challenge.
IT and Data Security
A specific section on use of company information systems, email, and internet access is increasingly important as data security regulations tighten in China. The handbook should state that company systems are for business use, that monitoring may occur, and that unauthorized disclosure of company data is a disciplinary matter.
If your company handles personal information of Chinese citizens, reference your compliance with China’s Personal Information Protection Law and the employee’s obligations under it. This matters because violations carry personal liability for responsible individuals, not just corporate liability.
Acknowledgment Is Everything
A handbook that an employee never received is worthless. Every employee should sign a written acknowledgment confirming they received the handbook, had an opportunity to review it, and agree to comply with its terms. The acknowledgment should be dated and retained in the employee’s personnel file.
For existing employees, updates to the handbook should follow the same democratic procedure as the original adoption, and employees should acknowledge receipt of the updated version. Changes unilaterally imposed without consultation aren’t enforceable against dissenting employees.
