China's employment legislative regime has undergone targeted revisions that took effect in early 2025. The State Council and relevant labour authorities have issued updated implementing rules that tighten requirements on employment contracts, social security contributions, and termination procedures. Foreign employers operating in China – whether through a wholly foreign-owned enterprise (WFOE) or a joint-venture structure – face concrete new obligations. Failure to act before the applicable compliance deadline exposes businesses to administrative penalties, invalidated employment contracts, and heightened dispute risk before Chinese labour arbitration bodies.
China's updated employment regulations introduced stricter requirements for written employment contracts, revised social security contribution rules, and tightened termination procedure obligations. The changes apply to all foreign-invested employers operating in mainland China, including WFOEs and representative offices. The primary compliance deadline runs until the end of the first quarter following the effective date of each implementing measure, meaning most foreign employers should treat the end of Q2 2025 as their operational target.
This alert identifies which business categories are affected, sets out the threshold criteria that trigger compliance obligations, and lists the immediate actions international companies should take now.
What has changed and when it took effect
The revised employment legislative regime addresses three distinct areas. Each has a separate effective date, but the practical deadlines converge for most foreign employers.
Employment contracts. Updated rules require that every employment contract specify a probation period in strict compliance with the revised statutory scale. Contracts that were silent on probation – or that set a probation period inconsistent with the contract duration – are now treated as non-compliant. Labour authorities have signalled active enforcement. Employers who fail to correct existing contracts within the permitted rectification window risk the probation period being deemed void, which affects termination rights during that period.
Social security. Revised social security contribution rules extend mandatory coverage to certain categories of workers previously treated as independent contractors or short-term staff. The State Administration for Market Regulation (SAMR) and social insurance authorities have clarified that platform-based and project-based engagements meeting specific continuity and control criteria must be reclassified. Foreign employers who relied on contractor structures to reduce social security exposure should audit those arrangements without delay.
Termination procedure. The dismissal notice period has been recalibrated under the revised implementing measures. Employers must now provide written notice aligned with updated statutory thresholds based on length of service. The collective agreement obligations have also been reinforced: where a collective agreement is in place, its termination provisions prevail over the statutory minimum unless they are less favourable to the employee. Employers who hold collective agreements that pre-date the revision should review them for consistency.
For corporate structuring and related compliance obligations in China. The same regulatory cycle has introduced parallel changes under company and registration law that may affect how employment terms interact with the corporate constitution of a WFOE or branch entity.
Who is affected: threshold criteria and business categories
The changes apply broadly, but their practical impact is most acute for three categories of foreign employer.
WFOEs and joint ventures with a domestic workforce. Any foreign-invested entity employing individuals under Chinese employment law – regardless of headcount – must comply. There is no minimum employee threshold. Even a two-person representative office is within scope if those employees hold employment contracts governed by Chinese labour legislation.
Employers using flexible or platform-based staffing. The reclassification rules targeting social security coverage are triggered by a combination of factors: exclusivity of service, duration of engagement, and the degree of operational control the employer exercises. Where all three indicators are present, the engagement is treated as an employment relationship for social security purposes. A significant share of foreign employers in the technology, logistics, and professional services sectors currently operate arrangements that meet these criteria.
Employers with existing collective agreements. Companies that negotiated collective agreements before 2025 must assess whether those agreements remain compliant with the revised termination procedure rules. Where a collective agreement sets a dismissal notice period shorter than the revised statutory minimum, the statutory minimum prevails. Where it sets a longer period, the longer period applies. Either way, the document must be reviewed.
The China International Economic and Trade Arbitration Commission (CIETAC) and local labour arbitration committees have both issued guidance indicating that disputes arising from non-compliant employment contracts will be resolved on the basis of the new rules. Even where the underlying contract pre-dates the revision. This means legacy documents carry current-law risk.
To discuss how these changes affect your workforce in China, contact us at info@ferrazwhitmore.com.
What to do now: immediate actions for foreign employers
International companies should treat the following five actions as priorities.
- Audit all employment contracts. Review every contract for probation period compliance, notice period provisions, and alignment with the updated social security rules. Flag contracts that pre-date 2025 and assess whether a written amendment – signed by both parties – is required before the rectification window closes.
- Reclassify contractor arrangements that meet the continuity and control criteria. Instruct HR and finance teams to identify platform-based and project-based engagements where exclusivity and control indicators are present. Where reclassification is required, calculate the social security back-contribution exposure and regularise the position before an inspection occurs.
- Review and, where necessary, renegotiate collective agreements. Where a collective agreement is in force, compare its termination procedure provisions with the revised statutory framework. Amendments to a collective agreement require a specific negotiation and registration process under Chinese labour legislation – allow sufficient lead time.
- Update internal HR procedures for dismissal notices. Ensure that HR teams apply the revised dismissal notice periods consistently. A single termination handled on the old notice period is sufficient to generate a labour arbitration claim. The China International Court system and local labour arbitration bodies are actively processing such claims.
- Document compliance steps contemporaneously. Chinese labour enforcement relies heavily on employer-held documentation. Maintain records of every contract amendment, social security enrolment, and notice issued. Where an employee declines to sign a contract amendment, document the offer and refusal.
Detailed guidance on the employment law obligations of foreign-invested entities is available through our dedicated employment law services for China. For a parallel view of how comparable regulatory cycles have affected foreign employers in the Gulf region, see our alert on employment regulation changes in the UAE.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our Asia-Pacific practice supports foreign employers operating in China on employment law compliance, WFOE structuring, workforce restructuring, and labour dispute resolution before Chinese arbitration bodies including CIETAC. We work with international companies, institutional investors, and in-house legal teams who need results-oriented counsel across civil law and common law systems. The firm's employment law practice covers 15 practice areas, and our attorneys have advised on employment contract audits, social security compliance reviews, and collective agreement negotiations in high-growth markets. Engaging a lawyer in China with cross-border experience is particularly valuable when legacy contracts, reclassification risk, and enforcement timelines converge simultaneously. As an international law firm serving China-based operations, Ferraz & Whitmore brings both regulatory depth and practical enforcement experience. To discuss your compliance position, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.
Published: April 06, 2026
Author: Anna Chen – Senior Associate, Asia-Pacific, Middle East & CIS
Anna Chen is a Senior Associate at Ferraz & Whitmore focusing on cross-border transactions, market entry, and dispute resolution across Asia-Pacific, Middle Eastern, and CIS jurisdictions. She supports international clients in navigating regulatory and commercial challenges in high-growth and emerging markets.