Fixed vs. open-term employment contracts in China can be confusing if you’re new to working or hiring here.

In short, fixed-term contracts have an end date, while open-term contracts offer more job security because they don’t expire. But which one is better for you or your business?

The rules, benefits, and risks are different for each, so it’s smart to know what you’re signing. If you want to avoid costly mistakes or legal trouble, you’ll want to understand the basics. 

Learn which contract fits your needs? Read on for clear answers and helpful tips!

Fixed vs. Open-Term Employment Contracts in China: What’s the Difference?

In China, employment contracts are either fixed-term or open-ended. Fixed-term contracts last for a set period, while open-ended (or indefinite) contracts have no set end date. Employers are usually required to offer open-ended contracts in specific situations, such as after two back-to-back fixed-term contracts or when an employee has worked for the same employer for over ten years.

A fixed-term contract is an employment contract with a clearly stated start and end date. You sign this type of contract when your job is for a specific time or project.

Employers can usually only renew a fixed-term contract once. After the second renewal, if your employer wants to continue the employment relationship, they must offer you an open-term contract.

An open-term employment contract does not have a set end date. You and your employer agree to continue the employment until one party ends it according to law.

This type of contract is common after several renewals of fixed-term contracts or after you have worked for a long time at the same company. Fixed-term contracts are often used for temporary projects or to fill positions that will not be needed long-term.

Open-term contracts give you greater job security and typically involve stronger protections under Chinese labor law.

Main Pros and Cons for Employers and Employees

Fixed-term employment contracts give employers more flexibility. You can easily adjust your team and end contracts when a project is done. But, if you want to keep an employee after two fixed-term contracts, you must offer them an open-term contract, which means less flexibility.

For employees, fixed-term contracts can feel less secure because your job may end if the contract isn’t renewed. Still, you have rights to fair pay and working conditions.

Open-term contracts are better for long-term job security. You get more stability and can’t be let go easily without a good reason or compensation. For employers, open-term contracts mean stricter rules and higher costs if you need to end the job.

Fixed-Term Contract

• Key feature: Has a set start and end date
• Best for: Temporary needs

Open-Term Contract

• Key feature: No end date
• Best for: Long-term employment

‍Want to learn more about employment contracts and how they work in China? Check out our full guide: Employment Contract in China.

When To Use Fixed-Term or Open-Term Contracts in China

Choosing between fixed-term and open-term contracts in China depends on employment needs, project length, and legal requirements. Different rules apply for renewals, ending contracts, and severance pay.

Common Scenarios and Legal Requirements

Fixed-term contracts work best for jobs with a clear end date, such as projects lasting a set time. Many employers use fixed-term contracts when hiring new staff, interns, or temporary workers.

These contracts must clearly state the start and end dates. Open-term (open-ended) contracts have no set end date.

By law, you must offer an open-term contract if you have renewed a fixed-term contract twice with the same employee, or if the worker has been with you for at least ten years. You cannot keep giving fixed-term contracts over and over.

Labor protection rules, including minimum wage and work hour guidelines, apply to all contracts. However, open-term contracts are seen as giving employees more job security.

Curious about your responsibilities as an employer? Discover what you need to know here: China Employer Obligations.

Rules on Renewals, Termination, and Severance

You can only renew fixed-term contracts two times. After the second renewal, you have to offer an open-term contract if the employee stays.

If you want to end a fixed-term contract at its expiration, make sure you follow notice rules in the contract and the law. Terminating an open-term contract generally requires a legal cause or mutual agreement.

Employers must give proper notice and may need to pay severance. Severance pay is mandatory in most cases, including when you do not renew a fixed-term contract unless the employee does not want to renew.

Fixed-term Contract

• Renewals allowed: Twice
• Termination: Easier
• Severance pay: Usually required

Open-term Contract

• Renewals allowed: Not limited
• Termination: Harder
• Severance pay: Required if dismissed

Legal Requirements for Employment Contracts in China

Employment contracts in China must follow clear legal rules under the Labour Contract Law. These contracts set out rights and responsibilities about wages, hours, benefits, and job protection.

Mandatory Clauses, Probation, and Notice Periods

You are required to sign a written employment contract when hiring staff in China. The contract must include your job title, job duties, working hours, monthly wage or hourly wage, overtime rules, social insurance, and employment term.

Chinese law also requires clauses on workplace safety and protection against occupational hazards. If the contract is missing key terms, it may not be valid.

A probation period can be included but must follow specific limits based on contract length:

• Contracts less than 1 year: up to 1 month probation
• Contracts of 1–3 years: up to 2 months
• Open-ended contracts: up to 6 months

During probation, the employee usually receives at least 80% of the agreed wage but not less than the local minimum wage. Either party can end the contract during probation but must give at least three days’ notice.

After probation, longer notice periods often apply, usually 30 days, except in cases of serious misconduct.

Social Insurance and Employee Benefits

Employers must contribute to five types of social insurance for employees:

• Pension insurance
• Medical insurance
• Work injury insurance
• Unemployment insurance
• Maternity insurance

You and your company must also contribute to the housing fund. These payments are mandatory and based on your monthly wage.

Failure to pay social insurance can result in fines or legal penalties. Employees are protected by minimum wage laws, overtime payment rules, and work hour limits—typically 8 hours per day and 40 hours per week.

Benefits often include paid leave and protection from unsafe working conditions. Labor law also gives you the right to join or form a trade union and take part in collective bargaining.

These legal requirements are not optional and must appear in every valid employment contract in China.

Have questions about Chinese labor law? Get expert advice from Labor and Employment Lawyers in China.

Tips for Employers and Employees

When you select an employment contract in China, it affects your rights, job security, and flexibility. Understanding the rules for both fixed-term and open-term contracts helps reduce legal risks and misunderstandings.

Choosing the Right Contract Type and Avoiding Disputes

Fixed-term contracts offer clear start and end dates. These are better when the job is project-based, seasonal, or for a limited time.

Remember, after two consecutive fixed-term contracts, you usually must offer an open-term contract. Open-term contracts do not have a set end date and are harder to terminate.

They provide more job stability for employees, but employers should be cautious as ending these contracts often needs a strong legal reason. To avoid disputes, always use a written contract.

Ensure terms like salary, job duties, and notice periods for ending the contract are clearly stated. Review the contract with a local legal expert to make sure it meets Chinese labor laws.

Use this checklist:

• Confirm contract type and term
• Include basic employment details
• List pay, working hours, and duties
• Set clear rules for contract changes and termination

Need help understanding how to end an employment relationship legally? Learn more about the process here: China Employment Law: Employee Termination.

Final Thoughts

Choosing between fixed vs. open-term employment contracts in China is a big decision for both employers and employees. Fixed-term contracts are great for short projects or trial periods, but open-term contracts give more long-term security and legal protection.

Understanding the rules, benefits, and risks of each contract type helps you avoid problems and make smarter choices. If you have more questions or need expert help, contact China Legal Experts for guidance on employment contracts and Chinese labor law.

Frequently Asked Questions

What type of contract is not legally enforceable?

Verbal employment contracts are generally not legally enforceable in China. Written contracts are required by law.

If a contract is not in writing or does not meet the legal standards, you may not be able to use it to protect your rights.

Are contracts enforceable in China?

Yes, contracts in China are enforceable if they follow Chinese law and include all required details. Courts can order both sides to follow the contract or pay damages if there is a breach.

What is the contract Act in China?

The main law governing contracts in China is the Contract Law of the People’s Republic of China, which was replaced by the Civil Code in 2021. This law covers the formation, execution, and termination of contracts.

What are the labor conditions in China?

Labor conditions in China require that employers follow national standards on pay, work hours, overtime, and social insurance. There are specific rules for rest periods, safety, and welfare benefits. These conditions are enforced by labor authorities.

What contract is legally binding?

A contract is legally binding in China if it is in writing, signed by both parties, and follows all legal requirements. Both fixed-term and open-term employment contracts are valid if they include the key details required by law.

Is China in a free trade agreement?

China has signed several free trade agreements with countries and regions such as ASEAN, Australia, and South Korea.

These agreements can affect trade and business possibilities, but they do not change the basic rules for employment contracts within China.