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Contract Renewal Terms in China: Employer & Employee Guide

If you work in China or have employees there, you need to know about Contract Renewal Terms in China. Chinese law sets special rules for how and when contracts can be renewed, which can affect your job security or your company’s hiring plans.

According to the Employment Contract Law of the People's Republic of China, if an employment relationship continues after two consecutive fixed-term contracts, the employer must offer an open-term contract unless the employee chooses to have another fixed-term contract.

Understanding the renewal process helps you avoid mistakes and plan ahead. Whether you’re an employee wanting to know your rights or an employer handling contracts, learning these terms is important for fair and legal working relationships.

What Are Contract Renewal Terms In China?

Contract renewal terms in China set the rules and conditions for when and how an employment contract can be extended. These terms help protect your rights and clarify responsibilities during employment, including fixed-term labor contract renewals.

In China, once an employee has completed two back-to-back fixed-term contracts, they have the right to request an open-term contract when it’s time for renewal, unless they choose to continue with a fixed-term contract under employment law.

In Shanghai, interpretations of this rule have changed over time, but the current position of the Shanghai High People’s Court is that employees can independently request an open-term contract after their second fixed-term contract ends, even if the employer does not wish to renew.

Fixed-term contracts are the most common and last for a set period. Open-term contracts do not have an end date and are often given after an employee completes two consecutive fixed-term contracts with the same employer.

Renewal terms are important because they help both you and your employer plan ahead. They also explain how your salary (remuneration), benefits, and other rights will continue or change.

Clear renewal terms protect you from unexpected job loss and can lower the risk of disputes. Employers must follow strict legal rules when offering contract renewals.

Not renewing a contract properly can result in fines or having to give an open-term contract to the employee. Written agreements are usually needed to avoid misunderstandings.

Common Scenarios For Contract Renewal

You may face contract renewal at the end of a fixed-term labor contract. In many Chinese companies, contracts are fixed-term, often one to three years.

If you keep working after your contract expires without signing a new contract, the law may see your employment as continued, with unchanged terms. After two consecutive fixed-term employment contracts, you might have the right to an open-term contract.

This means there is no set end date, making your job more secure. If your work is project-based, your contract may end when the project is finished, and renewal depends on future project needs.

Employers often review performance, business needs, and legal requirements before renewing contracts. Both employer and employee should discuss and agree on terms like job position and remuneration before signing a new or extended contract.

Written confirmation avoids future confusion and protects against disputes.

Concerned about contract disputes? Read our guide on Contract Disputes in China: Common Issues and Resolutions.

Key Laws And Rules For Contract Renewal

Chinese law sets clear rules for how you must renew employment contracts. The law covers what kind of contracts are allowed, how often terms can be renewed, and the steps you need to follow to stay compliant.

Main Legal Requirements Under Chinese Labor Contract Law

The Labor Contract Law says that labor contracts in China can either be fixed-term, open-ended, or tied to completion of a specific task.

If you offer a fixed-term contract, you usually must provide a written labor contract. After two consecutive fixed-term renewals for the same employee, you are generally required to sign an open-ended contract if the employee asks for it and you wish to renew.

Judicial interpretations state that this rule does not apply if the employee requests a fixed term each time or if legal exceptions apply, such as serious employee misconduct. Records must be in writing, as oral agreements are not valid for renewals.

Notice Periods, Documentation, And Compliance Basics

Chinese law requires you to issue timely written notice if you will not renew a contract. The typical notice period is at least 30 days before the contract ends.

You must keep copies of all written labor contracts and renewal documents. Failure to provide a written contract can result in fines and even imply automatic open-term contracts after one year.

Renewal discussions should start before the contract's expiration date. You and your employee should both sign the renewal to make it valid.

Compliance checks often focus on whether timely notice and correct documentation are provided, so careful record-keeping is essential.

Renewal Process And Employer/Employee Rights

Renewing a labor contract in China involves detailed procedures and clear rules for both employers and employees. Fixed-term employment contracts, open-ended contracts, and termination dates each have specific impacts on your rights and obligations throughout the employment relationship.

Steps For Renewing A Contract

To renew a fixed-term labor contract, you must begin the process before the contract’s expiration date. Both sides, you or your employer, can propose a renewal.

Written notice is usually required. Employers often provide renewal forms for you to review and sign.

Make sure you clarify and agree to new contract terms, including position, compensation, and working hours. Once both parties approve the conditions, a new contract is signed.

If no new agreement is reached by the end of the term, the labor relationship will end unless special rules apply.

When Renewal Is Required By Law

Chinese law may require renewal in some cases. For example, if an employee continues working after the termination date without a new written contract, the law considers the employment relationship to be ongoing, and default terms may apply.

Employers must offer contract renewal unless they have a legally valid reason not to, such as serious misconduct or redundancy. If performance is satisfactory and work continues, the employer usually cannot refuse renewal arbitrarily.

If an employer refuses to renew without legal grounds, employees might be entitled to compensation as stated by labor law.

Rights And Obligations For Both Parties

Both you and the employer have specific rights and responsibilities during the renewal process. You have the right to fair negotiations and to know any changes made to the new contract.

Employers must provide clear information regarding changes in contract terms and cannot hide important details. They need to respect the legal process and not pressure you into accepting unfair terms.

Both parties must sign the written labor contract within a legal time frame. If obligations are not met, penalties or compensation could be involved, protecting your rights under the law.

What Happens After Two Fixed-Term Contracts (Open-Term Contract Rules)

After you complete two consecutive fixed-term employment contracts with the same employer, you may be entitled to an open-ended employment contract if you choose to renew again. This type of contract does not specify an end date, increasing your job security.

Certain exceptions apply. If you ask for only a short-term contract or violate company rules, the employer may offer another fixed-term contract instead.

However, if both parties agree, or if you meet the criteria—such as completing two fixed-term contracts and continuing the employment relationship—the open-ended contract becomes the default by law.

This protects your long-term rights and stabilizes your labor relationship in China.

Want to know who can sign contracts in China? Read Who Holds Contract Signing Authority in Chinese Companies?

Non-Renewal, Termination, And Legal Risks

When a labor contract in China ends, you may consider non-renewal, but you need to follow legal steps to avoid disputes and financial penalties. Employers must have valid reasons, provide required compensation, and understand the risks of improper procedures.

Valid Reasons For Non-Renewal

You can choose not to renew a fixed-term contract when it expires. Common valid reasons include restructuring, poor performance, or changes in business needs.

Personal preferences or discrimination are not valid reasons. Not giving a reason can lead to contract disputes or labor arbitration.

The law expects decisions to be based on clear, business-related grounds. A thorough record showing valid reasons helps protect you against claims.

If you lack documentation, you may face legal responsibilities, such as paying extra compensation or having to reinstate the employee.

Severance Pay And Employee Protections

If you do not renew a contract for reasons not caused by the employee, you must pay economic compensation. This is usually one month’s salary for each year the person worked for your company.

Severance pay is still required unless the employee does not want to renew, or is at fault for gross misconduct. Failing to pay can lead to labor arbitration or litigation.

Legal responsibilities in these disputes often include both the unpaid amount and additional penalties. Employees are protected by strict rules, and violations can trigger remedial measures from local authorities.

If you are found in breach, you may face legal consequences, including being ordered to pay back pay or compensation.

Common Mistakes And Legal Risks

One frequent mistake is failing to give written notice before a contract ends. If you do not follow notice rules, the employee may claim extra compensation.

Another risk is not accurately calculating severance. Underpaying can result in contract disputes or fines.

Not keeping clear records of performance, restructuring plans, or employee conduct also puts you at risk. Disputes often go to labor arbitration or even litigation.

If you lose, you may be required to pay compensation and legal costs. Avoid legal risks by reviewing each case carefully, keeping documentation, and consulting legal counsel when facing complex situations.

Best Practices For Contract Renewal In China

Renewing employment contracts in China involves following legal steps and keeping clear records. You need to focus on compliance, proper documentation, and good communication with your employees.

Tips To Ensure Compliance And Avoid Disputes

Always sign written contracts before any work starts. This protects both you and your employees and helps avoid future disputes.

Check how many times a fixed-term contract has been renewed. According to Chinese law, if you renew a fixed-term contract twice in a row, you must offer an open-term contract next time unless the employee requests otherwise.

During renewal, review benefits, social security, and insurance arrangements. Make sure you continue to meet all legal requirements for employee benefits and payments.

This is especially important for employees in a state-owned enterprise, where strict rules often apply. Verify the length of the service period, including any probation period that may affect renewal rules.

If you want to change key terms during renewal, you must discuss and agree on those changes with your employee. Keep up with local labor laws, as requirements can change.

Giving specific training to your human resources team on contract law lowers the risk of mistakes.

Effective Communication And Documentation Strategies

Document every step of the renewal process. Use written notices for contract expiry, discussions, and agreements.

Keep records of all changes related to benefits, social security, and insurance. Create simple timelines for sending renewal notices.

This is especially helpful if you have a large number of employees or operate as a state-owned enterprise.

Checklist for documentation:

• Written contract renewal notice
• Records of meetings and communications
• Signed agreement on new terms, if any
• Proof of social security and insurance coverage

Explain any changes in benefits or terms in clear language. Give advance warning about changes to the probation period or service period.

Make sure your employee understands every part of the renewal. Keep communication open.

Always answer your employee’s questions and provide documents in a format they can understand. This reduces confusion and helps create a smoother renewal process.

Curious about trade agreements in China? Check out Trade Related Contract and Agreements in China.

Conclusion

Understanding contract renewal terms in China is vital for both employers and employees to ensure compliance and avoid legal risks. Knowing the legal requirements, renewal process, and rights of each party helps prevent disputes and protects your interests in the Chinese workplace.

By following best practices and staying informed about Chinese labor law, you can confidently navigate contract renewals and maintain strong, compliant working relationships.

For more guidance on related topics, explore our additional resources below—or consult China legal experts for tailored advice and support.

Frequently Asked Questions

What is the renewal period of a contract?

The renewal period means the time when you can sign a new contract to continue your employment. Most times, it happens right before your current contract ends. The new term can be fixed, open-ended, or based on when a specific task finishes.

What is the legal notice period in China?

Employers must follow the law when it comes to giving notice. In most cases, you must get 30 days' written notice before your contract ends, or pay one month’s salary in lieu of notice. This applies unless the contract ends naturally at the agreed time.

What is contract renewal procedure?

Usually, your employer should discuss renewal with you before your contract expires. Both sides must sign a written agreement if you agree to renew.

If you work more than a year after your contract ends without signing a new one, the law treats it as open-ended.

What is the effective date of a contract renewal?

The effective date of renewal is the day after your previous contract ends. If you and your employer both sign the new contract on time, there is no gap in employment.

Dates should be clearly stated in the renewal document.

What is the validity period of a contract?

The validity period is how long your contract is legally in effect. In China, this can be a fixed period, an open-ended term, or last until a certain project finishes. The dates should always be written clearly in your contract.

What are the rules for auto renewal contracts?

Some contracts have automatic renewal clauses. This means your employment continues under the same terms if neither you nor your employer objects before the contract ends.

You or your employer must give clear notice if you do not want the contract to renew automatically.

Also Read These Related Articles:

• China Real Estate Contracts: What You Need To Know
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• Differences Between Western and Chinese Contracts

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