Employment relationships in China are governed by a comprehensive legal framework designed to protect employees’ basic rights and interests, including timely payment of wages, overtime compensation, social insurance, maternity protection, and remedies against unlawful termination. In practice, many labor disputes arise from unpaid wages, improper wage deductions, failure to pay social insurance, or illegal dismissal. This FAQ provides a concise overview of common legal issues employees may encounter in China and the key remedies available under Chinese law.

1. What can employees do to quickly protect their rights if their wages are in arrears?

For disputes involving unpaid wages, employees may seek remedies through several channels.

First, employees may file a complaint or report with the labor inspection authority, which may order the employer to pay the outstanding wages within a specified period.

Second, in arbitration or litigation proceedings, where the statutory conditions are met, employees claiming unpaid labor remuneration may apply for advance enforcement so that payment can be enforced before the case is finally concluded.

In addition, where a mediation agreement concerning unpaid wages is based on clear facts and a definite relationship of rights and obligations, both parties may jointly apply to the people’s court for judicial confirmation within 30 days from the effective date of the mediation agreement. Once confirmed by the court, the mediation agreement becomes legally enforceable. If either party fails to perform, the other party may directly apply to the people’s court for enforcement without initiating a new lawsuit, thereby significantly improving the efficiency of rights protection.

2. How should overtime pay be calculated if the employer arranges overtime but does not provide compensatory leave?

Where an employer arranges for an employee to work beyond normal working hours, it shall pay wages at no less than 150% of the employee’s normal wage.

Where an employee is required to work on a rest day and no compensatory leave is arranged, the employer shall pay wages at no less than 200% of the employee’s normal wage.

Where an employee is required to work on a statutory public holiday, the employer shall pay wages at no less than 300% of the employee’s normal wage.

It should be particularly noted that, for overtime worked on statutory public holidays, the employer may not refuse to pay statutory holiday overtime wages on the ground that compensatory leave has been arranged.

3. May an employer deduct wages at will?

An employer may not arbitrarily withhold or deduct an employee’s wages.

Wage deductions are permitted only where expressly provided by laws or regulations, or where lawfully agreed in the employment contract. Examples include withholding and paying individual income tax, social insurance contributions, and housing provident fund contributions that should be borne by the employee.

If an employee causes economic losses to the employer due to the employee’s own fault, the employer may, in accordance with the employment contract, require compensation and deduct the relevant amount from the employee’s wages. However, the monthly deduction may not exceed 20% of the employee’s monthly wage, and the remaining wage after deduction may not be lower than the local monthly minimum wage standard.

4. What special protections are available to female employees during pregnancy, maternity, and breastfeeding?

To protect the health and basic livelihood of female employees during pregnancy, maternity, and breastfeeding, Chinese law provides special protections.

First, an employer may not reduce a female employee’s wage, dismiss her, or terminate her employment or service contract on the ground that she is pregnant, giving birth, or breastfeeding.

Second, female employees are entitled to maternity leave. They may take 15 days of leave before childbirth. In the case of difficult childbirth, maternity leave shall be increased by 15 days. In the case of multiple births, maternity leave shall be increased by 15 days for each additional baby.

Third, for a female employee breastfeeding a baby under one year old, the employer shall arrange one hour of breastfeeding time during each working day.

5. Under what circumstances may an employee claim “N+1” compensation?

The commonly used term “N+1” refers to the economic compensation and payment in lieu of notice that an employer may be required to pay when terminating an employment contract.

“N” refers to the employee’s years of service with the employer. For each full year of service, the employer shall pay one month’s wage as economic compensation.

“+1” refers to one additional month’s wage as payment in lieu of notice. This applies where the employer terminates the employment contract under any of the following three statutory circumstances but fails to give the employee 30 days’ prior written notice:

1. The employee is ill or suffers a non-work-related injury and, after the statutory medical treatment period expires, is unable to perform the original work or other work arranged by the employer;
2. The employee is incompetent for the job and remains incompetent after training or adjustment of work position;
3. The objective circumstances on which the employment contract was based have materially changed, making it impossible to perform the contract, and the parties fail to reach an agreement on amending the employment contract after consultation.

6. Can an employer refuse to pay social insurance for employees?

No. Paying social insurance for employees is a statutory obligation of the employer. This obligation cannot be waived by any agreement signed between the employer and the employee.

Social insurance includes basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance.

If an employer fails to complete social insurance registration or fails to declare the amount of social insurance contributions payable as required, it may face administrative penalties. If the employee suffers losses as a result of the employer’s failure to pay or underpayment of social insurance contributions, the employer may also be liable for compensation.

7. Can an employee receive more salary by “voluntarily” waiving social insurance?

Some employees may be attracted by the idea that receiving higher take-home pay without social insurance contributions is more beneficial. This is a serious misconception.

To reduce labor costs, some employers may ask employees to sign a written undertaking to voluntarily waive social insurance. Such practice is unlawful, and the undertaking is legally invalid.

Participation in social insurance and payment of social insurance contributions are not only statutory obligations of the employer but also important rights enjoyed by employees under the law. An employee cannot release the employer from its statutory payment obligation by waiving social insurance.

Waiving social insurance may deprive employees of important financial protection in the event of illness, work-related injury, or unemployment. It may also affect the accumulation of pension benefits and, in some cities, may impact practical interests such as home purchase eligibility, household registration, and children’s education.

8. What should an employee do if the employer unlawfully terminates the employment contract?

If an employer unlawfully terminates or ends an employment contract, the employee has the right to claim compensation. The compensation standard is twice the statutory economic compensation.

Alternatively, the employee may choose not to claim compensation and instead require the employer to continue performing the employment contract.

Where the employment relationship has become difficult to maintain and the employee chooses to claim compensation, the employee should collect evidence proving that the employer unilaterally terminated the employment contract and the relevant facts. Such evidence may include a termination notice bearing the employer’s official seal, audio or video recordings of relevant conversations, and other supporting materials.

It should also be noted that, under Chinese law, in disputes arising from an employer’s decision to terminate an employment contract, the employer bears the burden of proving the legality of its termination decision.


For more question, please contact David Gao, a qualified international lawyer in Bejing, China.

Email: gaohexin@jingsh.com