Non-Renewal of Labor Contract in China: Can Foreigners Claim Severance Pay?
Here’s a scenario every foreign employee working in China should have on their radar: your fixed-term labor contract is approaching its expiration date, and your employer tells you they won’t be renewing. The question that follows is almost always the same — do I get severance pay?
The honest answer is: it depends on where you’re working. Chinese law doesn’t offer a single, explicit nationwide rule on this, and judicial practice varies sharply from one jurisdiction to another. Below is a practical breakdown of how the law applies and what you should watch for.
I. The Baseline: Chinese Law Applies — But the Details Are Local
One foundational point worth keeping straight: under Article 43 of China’s Law on the Application of Laws to Foreign-related Civil Relations, labor disputes involving foreigners are governed first by the law of the workplace. In other words — if you hold a valid work permit and you’re employed legally in China, any fight over your employer’s refusal to renew runs through Chinese law and, just as importantly, through the local court’s prevailing habits.
China’s Labor Law and Labor Contract Law don’t carve foreign employees out. But the Regulations on the Employment of Foreigners in China only go so far — they lock in five baseline protections aligned with Chinese standards: minimum wage, working hours, rest and leave, occupational safety, and social insurance. What they don’t spell out is economic compensation when a contract expires or gets terminated. That silence is exactly what leaves the door open for regional divergence.
II. How the Major Cities Actually Rule: Two Competing Camps
1. Shanghai: Contract Language Carries the Day — No Automatic Statutory Pay
Shanghai sees a huge slice of China’s foreign workforce, and its courts have settled into a fairly steady line over the last several years. The reasoning goes like this: beyond those five baseline rights, everything else hinges on what you and your employer actually put in writing. The economic-compensation provisions of the Labor Contract Law don’t kick in by default.
A few practical ripple effects:
- If your contract explicitly says “economic compensation will be paid upon non-renewal” or “relevant matters shall follow the Labor Contract Law,” you can claim per the agreement.
- If the contract is silent, or the wording is fuzzy, or it flat-out says “no compensation will be paid,” Shanghai courts generally won’t stretch to hand you statutory severance — even though the employer is the one walking away.
- The Shanghai High People’s Court flagged this in a retrial ruling: where the contract stipulated “the employer will not pay any compensation for terminating the contract for any reason,” the court held that without a clear contractual hook, the employee had no basis to claim — even in a scenario that might otherwise look like unlawful termination.
The takeaway if you’re Shanghai-based: your contract is doing the heavy lifting, not the statute.
2. Beijing, Guangdong, Jiangsu, Chongqing: Labor Contract Law Applies in Full
Most other major jurisdictions go the opposite direction. Courts in Beijing, Guangdong, Jiangsu, and Chongqing tend to put foreign employees on the same footing as Chinese hires and apply the Labor Contract Law wholesale. Their logic: if you’re legally employed, you get the same compensation rights — no carve-out.
Beijing is especially explicit about it. In 2023, the Beijing Municipal Bureau of Human Resources and Social Security released a bilingual (Chinese–English) Model Labor Contract for Foreigners — Article 18 expressly provides that “contract rescission, termination, and renewal shall comply with the Labor Contract Law and national/Beijing regulations.” That’s a policy-level nudge pushing both sides toward statutory standards. In practice, Beijing courts have repeatedly held that the Regulations on the Employment of Foreigners don’t displace the Labor Contract Law, so foreigners can claim non-renewal compensation or damages for unlawful termination under it.
Guangdong and Jiangsu track the same line. The Guangdong High People’s Court noted in a retrial ruling that legally employed foreigners have a valid claim to Labor Contract Law compensation. Jiangsu courts have clarified that an employer refusing renewal without a valid reason triggers statutory pay. Chongqing courts go a step further conceptually: the Labor Contract Law is a detailed supplement to the Labor Law and should naturally extend to foreign-related labor disputes — otherwise you’d be left with a legal gap that defeats the statute’s purpose.
III. What to Do Up Front (and Along the Way)
Given the split, here’s how to protect yourself across the contract lifecycle — signing, performance, and exit:
- Get the contract language right before you sign. This is make-or-break if you’re in Shanghai. Explicitly spell out the “compensation standard for non-renewal upon expiration” and how liabilities split on rescission/termination — don’t leave it ambiguous. Outside Shanghai, it still helps to reference compliance with theLabor Contract Lawin the contract; it reinforces your position even where the statute already leans your way.
- Know the local stance before you relocate. Before joining a new employer, run a quick check — either through a PRC labor lawyer or via the judicial document platforms — on how courts in that city actually treat foreign-employee non-renewal claims. The regional difference isn’t academic; it shows up in the award (or denial) of several months’ salary.
- Keep the paper trail alive. Hang onto your labor contract, work permit, payslips, and anything tied to renewal or termination — negotiation emails, the non-renewal notice, any written communication. If a dispute lands, those are the exhibits that carry the case.
Wrapping Up
There’s no unified judicial interpretation in China yet on severance when a foreign employee’s contract runs out, and the regional split isn’t going away in the near term. The safest play is the one that travels well across jurisdictions: agree clearly up front, document as you go, and enforce in line with the rules where you’re sitting. If the situation in front of you looks like it’s drifting toward a dispute, a brief conversation with counsel who knows the local labor bench can usually tell you whether you’ve got a real claim — and what it’s worth — before things get expensive.
Contacts:
Saway Wang
Tel: +86 18017682422
Email: sawaywang@billionslawyer.com
Comprehensive Guide to China’s Five Insurances and One Fund for Foreigners
Understanding China’s Mandatory Employee Benefit System
China’s social security system is built around the mandatory framework known as “Five Insurances and One Fund” (五险一金), a cornerstone of social protection in Mainland China. This statutory requirement consists of five social insurance programs and the Housing Provident Fund, forming a comprehensive social security package designed to safeguard employees.
All businesses operating in China—including foreign-invested enterprises—must comply by enrolling eligible Chinese and foreign employees who hold valid work permits. Failure to participate in China’s social security system may lead to serious penalties, such as fines equivalent to 100%–200% of overdue payments and additional legal consequences.
Employers should ensure full adherence to the Five Insurances and One Fund to avoid non-compliance risks and contribute effectively to China’s social security framework.
1. The Five Social Insurances: Coverage and Contributions
(1) Pension Insurance (养老保险)
A key component of China’s social security system, the Five Insurances and One Fund (五险一金), includes Pension Insurance (养老保险), which is mandatory for most employees. Here’s what employers and workers need to know:
- Purpose
Pension Insurance provides retirement pensions and survivor benefits to eligible participants.
- Contributions
-Employer: Contributes 16% of the employee’s monthly salary (based on the national baseline; rates may vary by province, e.g., 14% in Guangdong).
-Employee: Contributes 8% of their monthly salary.
- Eligibility for Foreign Employees
Foreign nationals working in China with valid permits must enroll. Upon permanent departure from China, employees can apply to withdraw the balance of their personal account, which consists of their personal contributions (8%) plus any accrued interest. The portion contributed by the employer (16%) enters the national social pooling fund and is non-refundable.
（2）Medical Insurance (医疗保险)
- Coverage: Hospitalization, outpatient services, chronic disease treatment, and designated drug costs.
- Contribution:
- Employer: 6–10% of salary (varies by city; e.g., Beijing: 9.8%, Shanghai: 10%)
- Employee: 2% + fixed fee (e.g., ¥10/month in Shanghai)
- Critical Note: Foreign employees leaving China may transfer medical insurance to home country systems if a bilateral social security agreement exists (e.g., with Germany, South Korea). Absent such agreements, only personal account balances are refundable.
(3) Unemployment Insurance (失业保险)
- Benefits: Up to 24 months’ living allowance post-involuntary termination (amount = local minimum wage × 70–90%).
- Contribution:
- Employer: 0.5–1.5% (e.g., Shanghai: 0.5%)
- Employee: 0.5%
- Foreign Employee Access: Benefit eligibility typically requires ≥1 year of contributions. Few foreign nationals claim this due to visa-linked employment termination.
(4) Work-Related Injury Insurance (工伤保险)
- Coverage: Medical costs, disability compensation, and survivor pensions for occupational injuries/illnesses.
- Contribution: 0.2–1.9% of salary (employer-only; industry-risk adjusted).
- Claim Process: Employers must report injuries to the HRSSBwithin 30 days. Foreign employees enjoy equal claim rights.
(5) Maternity Insurance (生育保险)
- Benefits: 98–128 days paid leave (region-dependent), prenatal care, and delivery cost coverage.
- Contribution: 0.8–1.2% of salary (employer-only).
- Foreign Employee Eligibility: Applies regardless of nationality. Male employees’ spouses may claim partial benefits.
2. Housing Provident Fund (住房公积金)
- Purpose: Facilitates home purchases, construction, renovations, or mortgage/rent payments.
- Contribution:
- Employer and Employee: Each contribute 5–12% of employee’s monthly average salary(locally capped; e.g., Shanghai 2024 cap: ¥31,068/month).
- Foreign Employee Policy:
| City | Enrollment Requirement | Contribution Basis |
| Shanghai | Mandatory | Actual salary |
| Beijing | Mandatory | Actual salary |
| Shenzhen | Voluntary | Negotiated (min. 5%) |
| Suzhou | Mandatory | Actual salary |
- Withdrawal for Departing Foreigners: Full account balance (employee + employer contributions + interest) is withdrawable upon permanent departure after presenting:
- Cancelled work permit
- Exit-entry administration departure record
- Tax clearance certificate
3. Critical Compliance Deadlines & Procedures for Foreign Employees
- Enrollment Timeline: Employers must register employees within 30 daysof work permit issuance.
- Pension Withdrawal Process:
[Step 1]: Cancel work permit/residence permit
[Step 2]: Obtain tax clearance certificate
[Step 3]: Submit withdrawal application + original passport at local Social Security Bureau
[Step 4]: Funds transferred within 15 working days (avg.)
- Medical Insurance Personal Account Refund: Requires separate application at Medical Insurance Management Center.
- Penalties for Non-Compliance:
- Late contributions: 0.05% daily interest on arrears
- Evasion: Fines up to 3× underpaid amounts (Social Insurance Law, Art. 86)
4. Practical Recommendations for Employers
For foreign nationals enrolled in China’s social security system—specifically the Basic Pension Insurance as part of the Five Insurances and One Fund—who permanently leave China (ceasing both work and residence), certain provisions allow for the withdrawal of their pension contributions. Below is a structured overview of the process and key considerations:
- Eligibility and Process
Qualified individuals may apply to withdraw the accumulated balance from their personal pension account, which includes their individual contributions plus any interest earned.
Required documents usually include:
– Valid passport
– Proof of termination of employment in China
– Evidence of permanent departure (e.g., cancellation of work permit/residence permit, or exit visa)
It is important to note that the portion of contributions made by the employer cannot be withdrawn and remains in the national social pooling fund.
- Key Practical Tips:
– Verify Local Policies: Contribution bases, rates, and withdrawal procedures can vary by city. Always consult the local Human Resources and Social Security Bureau (e.g., via 12333.gov.cn)for updated rules.
– Check Bilateral Social Security Agreements: To prevent dual social security contributions, confirm whether a totalization agreement exists between China and the employee’s home country (e.g., Germany, South Korea, Japan).
– Retain Contribution Records: Keep full records of all social security contributions for at least 15 years, as this is the standard statutory audit period in China.
Understanding these rules is essential for any foreign employee participating in China’s social security system and complying with the Five Insurances and One Fund requirements.
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
Can Foreigners Purchase Property in China？
KEY TAKEAWAYS:
- To purchase property in Shanghai, Guangzhou and Shenzhen, foreign buyers must have worked in the city for at least one year, while Beijing, Hangzhou, Wuhan only requires the foreign buyer to work in the city without a time limit.
- The Nanjing, Suzhou governments have lifted restrictions on foreigners buying property in their city.
- Additionally, most cities require that the foreign buyers and his/her families do not own any other property in China.
- The property must meet certain requirements before it can be sold to a foreign buyer.
1. Qualifications of Shanghai
- The foreign buyer shall have signed the labor contract with a Shanghai company for a period of more than one year;
- Shall have continuously paid individual income tax or social security in Shanghai for at least one year (the foreigners with permanent resident ID card are exempt from this requirement)
- Possess a work visa or resident permit for work;
- The foreign buyer and his/her family must not own any other houses in China.
- The purchased house must be only for self-occupation.
- The foreigner buyer is limited to purchasing one house at most.
- For further information, please contact 021-962269.
2.Qualifications of Beijing
- Possession of work visa, journalist visa, or permanent resident ID card (regardless of the duration);
- Temporary accommodation registration form issued by the police station;
- Only one house can be purchased.
- Check whether your eligibility to buy a house in Beijing on the website of Beijing House Qualification Verification Platform(http://gfzg.zjw.beijing.gov.cn/login.aspx)
3. Qualifications of Guangzhou
- Employment contract or certificate from Guangzhou company that confirms your employment for at least one year;
- Resident Permit that is valid for at least one year;
- Work visa or work permit；
- The buyer and his/her family do not own any other houses in China.
- The purchased property is only for self-occupation.
4. Qualifications of Shenzhen
- Work permit which has been valid for more than one year, unless the foreigner holds a permanent resident ID card.
- The buyer and his/her family do not own any other houses in China.
- The purchased property is only for self-occupation.
- Only one house can be purchased.
5. Qualifications of Suzhou
- Suzhou government has lifted restrictions on foreigners buying houses in Suzhou starting in 2023. There are no other qualification requirements, such as work visa or social security, for foreigners to buy a house in Suzhou.
- However, foreigners are limited to purchasing a maximum of three houses, each less than 120㎡. There are no restrictions of quantity on houses larger than 120㎡.
6. Qualifications of Hangzhou
- Work or study in Hangzhou (no requirements for the period)
- Hold a resident permit in Hangzhou
- The buyer and his/her family do not own any other houses in China.
- Only one house can be purchased.
(2) For other districts
- No restrictions
7. Qualifications of Nanjing
Nanjing government has lifted restrictions on foreigners purchasing houses in Nanjing starting in 2023. There are no additional qualifications, such as work visa, purpose, amount.
8. Qualifications of Chengdu
- If the house is less than 144㎡ and located in the district of Tian fu, High-tech Zone South Park, Jinjiang, Qingyang, Jinniu, Wuhou, Chenghua
The buyer must have continuously paid social security for at least six months
- If the house is more than 144㎡ or located in districts other than those mentioned above.
No restrictions
9. Qualifications of Wuhan
- Work or study in Wuhan (no requirements for the period)
- Individuals are limited to purchasing only one house for self-occupation.
10. Requirements of the Property
Foreigners purchasing a new property must confirm that it has a valid permit to be sold to foreigners. If purchasing a secondary property, they must check if the transaction can be approved by the local National Security Bureau.
If you need any legal advice or legal service of purchasing real estate in China, please feel free to contact us.
Saway Wang
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
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