China: Termination and Renewal of Employment Contracts — Key Employer Risks in 2025

Termination of an employment contract is often viewed as the most straightforward statutory method of ending an employment relationship. In practice, however, even legally “simple” terminations may involve overlooked risks.

With the promulgation and implementation of the Interpretation of the Supreme People’s Court on the Application of Law in the Trial of Labor Dispute Cases (II) (“Judicial Interpretation (II)”) in 2025, the rules governing the termination and renewal of employment contracts have been further clarified. Against this backdrop, this article summarizes common questions relating to employment contract termination and renewal, with the aim of helping employers manage employment relationships in a compliant and orderly manner.

1. Employer notification obligations upon contract expiration

Termination upon expiration of an employment contract is generally considered one of the safer forms of unilateral termination. Nevertheless, employers remain obligated to clearly notify employees that the contract will terminate.

With respect to the timing of notice, current judicial practice and regional enforcement standards indicate that most jurisdictions no longer require employers to provide 30 days’ advance notice. While some older regulations still reference a 30-day notice period, recent case law shows that this requirement is not typically enforced in practice. This approach applies in regions including Shanghai, Zhejiang, Guangzhou, Shenzhen, Chengdu, and Nanjing.

However, certain regions continue to impose advance notice requirements:

Beijing
Under the 2021 revision of the Beijing Labor Contract Regulations, employers must notify employees in writing at least 30 days before the expiration of the employment contract whether it will be terminated or renewed, and must complete termination or renewal procedures through consultation. If the employer fails to provide timely notice, it must pay compensation based on the employee’s average daily wage in the previous month for each day of delay.

Jilin Province
Under the Jilin Province Labor Contract Regulations (revised in 2024), employers are likewise required to provide written notice at least 30 days prior to expiration. Unlike Beijing, the regulations do not specify a separate penalty for failure to give notice. Instead, they provide that any unlawful termination may result in compensation at twice the statutory economic compensation standard under Article 47 of the Labor Contract Law. As a result, the legal risk associated with failure to provide notice may, in practice, be higher than in Beijing.

2. Continued employment after contract expiration

Where an employer neither terminates nor renews a fixed-term employment contract upon expiration but continues to employ the employee, courts have historically differed on whether termination remains permissible and what liabilities may arise.

Judicial Interpretation (II) clarifies this issue. It provides that where an employee continues working after contract expiration and the employer raises no objection for more than one month, and the employee requests renewal of the employment contract on the original terms, the people’s court will support the request. If the employee instead requests an indefinite-term employment contract on the same terms, the court will also support that request.

Importantly, this situation is not treated as an automatic renewal of the contract. In addition to seeking confirmation of renewal, the employee may also claim double wages for the period during which no written employment contract was executed. If the situation continues for more than one year, an indefinite-term employment contract will be deemed to exist by law.

3. Circumstances where an employment contract may not be terminated upon expiration

(1) Statutory extensions

Where an employment contract expires and any of the circumstances set out in Article 42 of the Labor Contract Law apply, the contract must be extended until those circumstances cease.

It is also important to note that Article 5 of the Notice of the Ministry of Labor on Several Issues Concerning the Implementation of the Labor Contract System provides that an employment contract terminates at 12:00 midnight on the final day of the contract term. Although issued in 1996, this rule remains in effect. Accordingly, if a statutory extension event arises on the expiration date—even outside normal working hours, such as a sudden illness accompanied by a valid medical certificate—the employer may still be legally required to extend the contract.

If an employer refuses to extend the contract solely because prior termination notice was issued, it may face a risk of being deemed to have unlawfully terminated the employment relationship. As a practical measure, employers are advised to provide reasonable buffer periods and advance notice of non-renewal to reduce dispute risk.

In addition, under the Trade Union Law, the employment contracts of grassroots trade union chairpersons, vice chairpersons, and members are automatically extended for the duration of their term of office. Where the remaining contract term is shorter than the term of office, the contract must be extended accordingly.

(2) Mandatory renewal as an indefinite-term employment contract

Under the Labor Contract Law, an indefinite-term employment contract must be concluded—unless the employee requests a fixed-term contract—where the employee proposes or agrees to renew and any of the following conditions apply:

1. The employee has worked for the employer continuously for ten years;
2. Upon the initial implementation of the employment contract system or the restructuring of a state-owned enterprise, the employee has worked continuously for ten years and is less than ten years from statutory retirement age;
3. The employment contract is renewed following two consecutive fixed-term employment contracts, and none of the statutory termination grounds under Articles 39 or 40 apply.

Judicial practice nationwide has long been consistent with respect to the first two scenarios. With respect to the third (“second fixed-term”) scenario, Shanghai historically applied a more restrictive approach. From 2025 onward, however, Shanghai courts have aligned with the national standard and now require employers to conclude indefinite-term employment contracts in such circumstances. Recent district and intermediate court decisions confirm that this standard is now being applied consistently.

Judicial Interpretation (II) further clarifies what constitutes “two consecutive fixed-term employment contracts,” including circumstances such as extending contract terms by more than one year or changing the contracting entity to reduce the apparent number of renewals. These provisions strengthen protections for employment stability.

In addition, where an employee is assessed as having a Grade 1–6 work-related disability, the employment relationship must be maintained in accordance with the Work-Related Injury Insurance Regulations.

4. Whether special categories of employees may enter into indefinite-term employment contracts

(1) Labor dispatch employees

Article 5 of the Interim Provisions on Labor Dispatch requires labor dispatch agencies to enter into fixed-term employment contracts of no less than two years with dispatched employees. This has led to differing views as to whether dispatch agencies are required to enter into indefinite-term employment contracts under Article 14 of the Labor Contract Law.

In practice, judicial approaches differ by region:

• Indefinite-term contracts required
  Courts in Beijing, Shenzhen, Hangzhou, and Chengdu generally hold that dispatch agencies remain obligated to enter into indefinite-term employment contracts with dispatched employees where statutory conditions are met, as the law does not prohibit such arrangements.
• Termination upon expiration permitted
  Courts in Jiangsu (including Nanjing, Suzhou, and Wuxi) continue to permit termination upon expiration and do not require dispatch agencies to enter into indefinite-term employment contracts without mutual consent.

In Shanghai, courts have traditionally held that dispatched employees lack a legal basis to demand indefinite-term employment contracts and that renewal requires mutual agreement. Although Shanghai’s broader approach to indefinite-term contracts changed in 2025, at least one July 2025 judgment of the Jing’an District People’s Court maintains the prior position with respect to labor dispatch, and further developments remain to be seen.

(2) Foreign employees

Article 17 of the Regulations on the Administration of Employment of Foreigners in China provides that employment contracts with foreign employees may not exceed five years and must terminate upon expiration, although renewal is permitted following completion of the required approval procedures. As this is a mandatory rule, courts have consistently supported employers’ refusal to enter into indefinite-term employment contracts with foreign employees absent specific statutory exceptions.

Anjie Broad, China, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact china@transatlanticlaw.com

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