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My Company Didn’t Pay Me, What Can I Do?

June 2, 2022

We got a lot of inquires recently: “My school didn’t pay me for two months, what can I do?”

Now, let us to explain what you should pay attention to:

1. Firstly you need to decide: should I stay or leave?

Generally speaking, an employee’s salary will be paid before 15^th of the following month. It means that when you find you can’t get your previous month’s salary, you have already worked up to 15 days the following month. This means you could be owed a full month’s salary plus the days worked from the current month. What should you do now, stay with the company/ school or leave the company/school, this is an issue!

If this is just a temporary situation, such as cash flow problems because of any emergency, you can choose to stay with them. Otherwise, you may consider finding a new job and leaving.

If you are worried about not getting your salary and choose to stay, then you are making the wrong decision. If the company is in financial difficulty, the longer you stay, probably the more you will lose.

If for some reason, you didn’t get the salary, staying with the employer won’t increase your chances of getting paid, to be honest. In other words, quitting is not a good reason for any employer to refuse to pay you. No situation is an excuse for not paying salary, as long as you did the job properly. You may check our previous post: What are the Rights of Employee in China? to know more about employee’s rights.

Transfer your job smoothly is your priority if you decide to leave, you can claim the unpaid salary later, don't have to over worry

2. Transfer your job smoothly is your priority if you decide to leave.

For most foreigners working in China, the most difficult part of getting a new job is the transferring of paperwork and visa. Some employers feel reluctant to issue a release letter and cancel the work permit even when the employee has informed them of their intention to resign in line with the law. Transferring job smoothly sometimes becomes the biggest concern for foreigners working in China.

So, try your best to maintain a good relationship and negotiate with your employer to transfer your job is a wise move.

We can see some consultants encourage foreigners to use Article. 38 of the labor contract law of the PRC as an argument to quit and ask for compensation later, we really think this is not a good idea

The reason we never mention Article.38 to foreigners is: unlike Chinese, foreigners need to go through more procedures (complicated and time sensitive) and to continue to work in China legally you need to have your work permit and visa, so we don’t want to complicate the issues while time is essential. So be careful if you want to use Article.38!

3. What about the salary unpaid?

Another important reason for employees unwilling to quit is that they are worried once they quit, there can’t claim the unpaid salary.

According to related laws, the time limit for hearing a labor dispute is one year, which means you can claim your salary your ex-employer owes you any time within one year. Once you settle in your new position, you can consult with your lawyer to file a labor arbitration.

Then another question comes: How can I prove the amount of the unpaid salary?

Usually, you don’t have to worry about that. For a case like this, all you have to do is to prove that you had a labor contract with them show the agreed salary，so a signed labor contract is enough.

You don’t have to prove that you have not been paid in full. It’s the employer’s duty to prove that they have make all the required salary payments.

If the amount you received is more than the amount written in the contract, then you have to prove it, such as the bank slip or payroll statement.

As we said previously, the most important thing is to transfer your work permit and visa to the new company on time. You don’t have to be worried about unpaid salary, technically, you don’t have to do anything before quitting, such as asking the previous employer to write a promise to pay you, or to ask them to provide a financial statement regarding how much they are supposed to pay.

The purpose of the labor law is to provide employees a legal way to get unpaid salary as the law will force the employer to do it and you don’t need to worry.

Useful link:

Ministry of Human Resources and Social Security of the People’s Republic of China

transfer job, unpaid salary

Anti-domestic Violence System in China

December 31, 2021

November 25^th of each year is International Day against Domestic Violence (the International Day for the Elimination of Domestic Violence), what are the protections that Chinese laws provide against domestic violence?

The Law of the People’s Republic of China against Domestic Violence, came into effect on March 1, 2016.

The Civil Code of the People’s Republic of China, came into effect on January 1, 2021.

1. What is domestic violence?

There are four types of domestic violence: physical, sexual, mental and economic control.

(1) Physical violence is an act that causes fear in the victim by beating or tying the victim, or restricting the victim’s personal freedom;

(2) Sexual violence is sexual assault by the perpetrator forcing the victim to accept sexual acts in a manner that he or she feels humiliated, fearful and resistant to, or maiming the victim’s sexual organs;

(3) Mental violence means mental torture by means of insults, verbal abuse, or neglect, refusing to divorce, etc., causing the victim to suffer humiliation, fear, sense of worthlessness, etc.

(4) Economic control means any act that destroys the victim’s self-esteem, confidence and/or sense of self-worth through the strict control of the joint property and family income and expenditures of the victim, in an effort to control the victim.

2. What are the legal consequences for domestic violence?

1) Civil liability. Under the new Marriage law, domestic violence is one of the statutory grounds for divorce, and the victim could claim civil liability for damages from the perpetrator.

2) Administrative liability. According to the Law of the People’s Republic of China on Administrative Penalties for Public Security, any person who abuses a family member shall be detained for not more than five days or be given a warning.

3) Criminal responsibility. Serious domestic violence will constitute the crime of violent interference in the freedom of marriage, abuse, intentional injury, intentional homicide, insult and other crimes in criminal law.

what are the protections that Chinese laws provide against domestic violence?

3. What should a victim of domestic violence do?

(1) Dial 110 to call the police for help, the acknowledgment from the police shall be kept and, if necessary, the police may be required to issue a domestic violence warning.

(2) Timely medical treatment or identification of injuries. Properly retain medical records and files, etc., or visit an injury identification institution and retain the identification certificates.

(3) Apply to the court for a protection order.

4. What is a Protection Order?

Victims of domestic violence and those facing a real threat of domestic violence may apply with a local court for a Protection Order. Protection Orders do not need to be connected to a pending case, but are independent standing rulings that may offer some level of protection for up to 6 months.

Rulings on whether to grant a protection order are to be made within 72 hours—or within 24 hours in emergency situations and may include:

(1) Prohibitions on further abuse;

(2) Prohibitions on the offender harassing, following, or having contact with the applicant or their close family;

(3) Orders that the offender move out of the applicant’s residence;

(4) Other measures for the protection of the applicants’ personal safety

Anti-domestic violence, domestic abuse

FAQs Regarding Individual Income Tax for Foreigners in China

November 19, 2021

Q1: How can I pay my individual income tax (IIT) in China?

A: If you are working in China (more than 183 days a year), you have to pay individual income tax based on your revenue, no matter if earned within or outside of China.

Usually, your employer will be the withholding agent, meaning they will deduct the IIT from your salary and pay it to the tax authority on your behalf. You may also check our previous post: Individual Income Tax in China – How to Pay in 2019?

Related provisions in Law of the People’s Republic of China on Individual Income Tax:

Article 1 Individuals who have domiciles within China, or who have no domicile within China but have resided in China for accumulative 183 days or more in one tax year shall be resident individuals. Resident individuals shall pay individual income tax on their income gained within or outside China.”
Article 9 With respect to individual income tax, the income earner shall be the taxpayer, and the paying entity or individual shall be the withholding agent.

You can ask the tax bureau print out your tax statement to check if your employer has paid your IIT properly

Q2：How can I know my employer has paid my IIT properly?

A：You can ask the local tax bureau (in the same district of your employer) to print out your tax statement by showing them your original passport.

Q3: What consequences if my IIT has not been paid properly?

A: As explained, it’s your employer’s duty to withhold your IIT and they have to be responsible for that. So even if it turns out that your IIT has not been paid properly, it’s not your fault and hence, no consequences for you.

Q4: Can my IIT be refunded?

A：If it’s found that you have paid more tax when final settlement is handled, you can file a tax return. However，IIT is not refundable, while the amount in your personal pension account could be refunded if you decide to leave China. Don’t confuse IIT with social insurance.

Related provision in Law of the People’s Republic of China on Individual Income Tax:

Article 11 Individual income tax on the comprehensive income gained by a resident individual shall be calculated on an annual basis; the withholding agent, if any, shall withhold and remit tax on monthly basis and on per-payment basis; final settlement, if required, shall be handled between March 1 and June 30 of the year following the receipt of the income.

IIT, Tax

Is the Customer List a Trade Secret?

October 16, 2021

Amy worked in sales at Dashan Company. She was responsible for the promotion and sales of the Company’s products in South China, and directly responsible for signing sales contracts with the customers. During this period, Amy entered into an agreement with Dashan which specified an obligation to keep the Customer List confidential, as well as a commitment to confidentiality. After Amy left Dashan, she joined another company which sold similar products. In a relatively short period of time, Amy signed a number of sales agreements with Dashan’s old customers on behalf of her new employer in South China. Dashan sued Amy and demanded her to “stop infringing, apologize and compensate for damages” on the grounds that their trade secrets had been infringed upon.

After hearing the case, the court decided that Amy’s use of Dashan’s Customer List constituted an infringement of their trade secrets, and ordered Amy to stop the infringement and compensate for the corresponding losses.

Are all Customer Lists trade secrets? Obviously not. Then, here’s the question: Under what conditions does the Customer List constitute a trade secret?

The Customer List is a trade secret. In addition to the required elements for a trade secret （you may check our previous post: The Protection of Trade Secrets in China for more information regarding trade secret) , the following requirements should be met for a Customer List to be considered a trade secret:

1) The Customer List should be specific

The list should be specific and distinct from the general list of customers which are available from public sources.

2) The content of the Customer List should be comprehensive

The content of the Customer List should include the client’s name, contact, type and habit of the client’s need, operational situation, affordability of prices and other related information. Please note that a list of individual customer names does not constitute a trade secret.

A Customer List should be specific, comprehensive, stable and confidential, In addition to other required elements to be a trade secret

3) The Customer List should be stable

The clients listed should be acquired after considerable effort and input from human resources and finance in terms of materials and time. They should be regular clients with unique trading habits during a relatively fixed period of time.

4) The Customer List should be confidential

The list containing client information should be protected through reasonable confidentiality measures taken by the right holder, which cannot be obtained by others through public channels.

Generally speaking, Customer Lists can be identified as trade secrets and protected by the law only if the above requirements are met. In this case, Amy’s work in Dashan provided her access to the Customer List, which included specific product, quantity, price, settlement method, etc. This Customer List is not generally known to other companies, and is not readily available to other companies due to the confidentiality measures taken by Dashan. As a result, the court ultimately found that Amy’s use of the Customer List of her former employer constituted an infringement of Dashan’s trade secrets.

How to Execute the Contract in China Properly?

September 22, 2021

Once both parties agree on all the terms and conditions of the contract, then comes the next step—signing the contract.

To execute a contract properly is as important as preparing the contract. A contract can only be binding once it’s properly executed. Or in other words, a contract is invalid if it’s not executed correctly.

Then what’s the common practice to execute a contract in China? What do the related regulations say?

1. Company seal

According to the law, if the party is a company, the right way is for the company to affix their seal on the contract. Usually, the company will affix the company seal on the last page of the contract ( You may read our post: FAQ About Corporate Seals in China to know more). Sometimes，the company will affix cross-page seal in addition to the seal on the last page. Though it’s not required by the law, it’s a pretty common practice if anything important is involved. In this way, it’s not easy for anyone to change the content of the contract by replacing any page thereof.

the company will affix cross-page seal in addition to the seal on the last page to officially execute the contract

The Company seal is required if the party to the contract is a company, while the signature is not important under such circumstances. In practice, the legal representative or a duly authorized representative of the company would affix his/her signature in the contract at the same time, though it’s not a must according to the law. However, the validity of a contract only affixed with the signature of the legal representative or a duly authorized representative would be challenged. In addition, a shareholder of a company is not necessarily a duly authorized representative, only the legal representative has the authorization or anyone with a proper POA (Power of Attorney).

2. Signature of individual

If any party is an individual, then his/her signature needs to be affixed to validate the contract. Also, a cross-page signature is highly recommended for the same purpose.

3. Copy of identification

To avoid any possible confusion, it’s highly recommended to include each party’s detailed information in the contract, and attach a copy of the identification. For an individual, the ID number should be included, as it’s unique for each person. For a company, the company name, registered address and the credit code（tax number）should be included. As we have emphasized multiple times, no matter what English name the party calls themselves, a Chinese citizen’s only official name is the name on his/her ID card, as a Chinese company’s only official name is the name on its business license. Make sure the company seal and the company name in the contract match the one on the business license.

binding contract, contract

The Way out for Training Centers

September 2, 2021

On the 1^st of August 2021, we shared the Opinions on Further Easing the Burden of Homework and Off-campus Training on Students in Compulsory Education Stage released on the 24th of July 2021, by the General Office of the CPC Central Committee and the General Office of the State Council. Since then, we keep getting queries from foreign teachers or training center owners regarding how the new policy will affect their job or business…One month has elapsed now, so we assume we can talk about it a little bit.

a number of K12 education institutions, have transformed into quality education and vocational education

1. How to adjust the operation?

Actually, from the “double reduction” rumors to the official release of the opinions, a number of K12 education and training institutions, have rapidly transformed into quality education, vocational education or other fields. For example, New Oriental Training Schools in Tianjin and Xi’an changed its scope of business in June-July to expand language skills, arts, sports, science and technology training and parent-oriented family education consulting services.

In addition, there have been a number of fast-moving teaching and training institutions to launch aesthetic education, science and technology, etiquette training and other quality education products. Others have shifted their focus to tutoring on civil service examination or post-graduate entrance examination，language training, study abroad, drama, puzzles, reading, etc. In a phrase, “as a useful complement to out-of-school education”.

2. Language training

a. In the field of language training, English，Japanese and Russian are considered to be included in the curriculum of compulsory education, while other languages are not.

b. English language training has always been the main sector in language training and shall continue to be. However we must ask: how to identify what English training courses are considered to be discipline and non-discipline courses? In a discussion with an expert in this industry, the expert shared with us his personal opinions. This expert said that in the screening of discipline and non-discipline training in compulsory education, attention should be paid to the actual training content and form. If the objective of the course is to improve the score in tests, with repeated mechanical training as the main form and written work as a means of consolidation, and the national curriculum materials coincide with the content of the course, the course shall be managed in accordance with the subject category training. If the purpose of the course is to develop the students’ interests and hobbies, with students’ favorite training activities, the course shall be managed as non-disciplinary training.

“Simply put, if it’s about the history of words, grammar, reading comprehension, homework consolidation etc., the course belongs to the discipline; if there is no word, grammar, written homework, repeated exercises, but instead just English drama, oral hosting which students like, the course will be treated as non-disciplinary management.”

According to some official sources, a detailed instruction opinion shall be out soon to clarify all the confusion.

3. Vocational Education

Last but not the least, vocational education has been encouraged by the Government in recent years. In Hainan FTP, vocational education is opened to foreign direct investment. Maybe it’s a time to think about it?

language training

Things to Consider Before Setting up a Company

August 8, 2021

Many people are planning to start their own business and they always ask us: can your firm help us to set up a company? The answer is sure, however, when I ask them: where are you going to locate your office? or Who is going to be the legal representative? There is no response. From their expression，I can tell they have no clue at all.

In my opinion, no matter what kind of business plan you may have, the first thing you need to do is some homework to understand what is needed to set up a company in China. We actually have explained some concepts in our previous posts: FAQs Regarding Setting Up a Company in China or Why Is a Business License so Important in China? let’s talk more.

1. Choose the right company name

The first thing you need to do is to figure out the company name. In China, a typical company name consists of company name, main industry, entity type and the city name. For example, “Guangzhou highland trade limited liability company”. Guangzhou is the city where the company is located, trade is the main business of the company, limited liability company is the entity type, highland is the name chosen by the shareholders. Or you can say, “Highland (Guangzhou) trade limited liability company”, put the city name behind the company name. However, once you choose the format of the company name, you can’t change it unless approved by the relevant authority.

In the above mentioned company name, Highland is the only part that can be decided by the shareholder. This part of the company name has to be unique and can’t be identical or similar to any existing name in the same city and industry. So we usually suggest that our clients prepare at least three names in advance.

2. Who should be the shareholder?

According to related PRC laws, either overseas entities or individuals can set up a company in China. As we are aware, most of our individual clients have their overseas company incorporated already. Here’s the question now, company or individual, which option is better?

In my opinion, for the purpose of cost control and to save time, individuals are a better option. All they have to do is to show their original passport to the authority when applying for company registration. In some cities, the shareholder themselves don’t have to show up at all. However, if you use your overseas company as the shareholder, then you need to provide a legalized copy of the company’s certificate of incorporation (which means they have to have the certificate of incorporation notarized in local notary office and then certified by Chinese embassy or consulate in their home country), the procedure usually takes a couple months and cost a few thousand RMB. Of course, maybe there are some other factors that need to be considered, mainly tax, so it’s highly recommended to consult with the accountant in your home country to have a better idea.

The first thing you need to do is some homework to understand what is needed to set up a company in China

3. Legal representative & Supervisor

For a start-up, having a board of directors is not necessary. However, a company needs at least two candidates for the following titles: Executive Director, Manager and Supervisor. The Executive Director can be the same person as the Manager, but neither the Executive Director nor the Manager can be the Supervisor. In addition, a Legal Representative should be assigned by the shareholders, as the person to represent the company externally. Either the Executive Director or the Manager can be the Legal Representative of a company.

As we already explained in What is a Legal Representative?, a Legal Representative is the person who represents the company externally. So the Legal Representative, should be the individual client or someone he/she trusts. In most cities the Legal Representative’s presence is not required in the local counterpart of Administration for Market Regulation, however, the Legal Representative’s signature is required when the bank account is opened. This factor being considered, the Legal Representative should to be someone in the territory of China when the incorporation procedure proceeds. Afterwards, the Legal Representative doesn’t have to stay in China regularly but he/she will need to leave the company seal with someone he/she trust.

4. Office

Unlike in HK, virtual offices are not allowed in mainland China. So the first thing you need to think about is: Do I have enough budget to rent an office? Or is there any alternative?

There are three options:

Rent an office in an office building, this is the most common way;

Rent a shared space in some office building. Usually you can register your company in the shared space. However, if you want to use the company to apply for work permit for yourself or any one, you need to double check.

Rent a commercial apartment. There are two kinds of apartments, one is for living, another is for commercial purpose. The usage of a commercial apartment is more flexible, you can choose to live there (you can even cook there, as long as you don’t use open fire); you can use it as an office, or you can do both.

5. Business or industry

A company can do many types of business, as long as it’s outside of the negative list or they get related permission. However, it has to choose one industry as its main industry, and this will be mentioned in the company’s name. Other industries, will be covered in the “business scope” of the company. According to related laws, permission from the competent authority is required for certain business, such as training, wine importing, and food production. The business license will be granted as per the shareholder’s application, but the company needs to meet certain requirements to get permission to do certain types of business.

6. Budget and possible revenue

As we explained, there is no requirement or time frame for minimum registered capital contribution any more, you can start your business with limited funds. The threshold to start a company is pretty low now. However, it doesn’t mean there is no need to prepare funds to operate your business. You should calculate your budget carefully and prepare accordingly. Of course, you will get some business after the company is set up, more or less. But don’t count on any revenue which is not in your bank account yet. Usually, I will tell my clients: suppose there is no revenue in one year, and prepare one year’s operation fund before you start your company, including but not limited to: rent, employee’s salary and social insurance.

business license, incorporate your company, set up company in China

What Else Could Be included in an Employment Contract?

July 2, 2021

In our previous blog: Employment Contract—Specify Terms as Could, we mentioned that an employment contract has to contain some “essential clauses” and employers actually have not so much choice in specifying such clauses.

However, the company is still entitled to specify some clauses for their benefit.

1. Additional clauses:

Such as training, confidentiality, liquidated damages, non-compete, termination, handover, etc.

2. The company could specify that in order to prevent the employee’s resistance at the time of rescission or termination of the labor contract (such as not receiving termination or terminating the labor contract instruments, etc.), it may be agreed in the labor contract to terminate or termination the terms of service of the written notice of the labor contract (such as “when party A’s relevant written documents and notices cannot be delivered directly Party B confirms that the home address entered in the labor contract is the mailing address”).

The company may specify a number of other matters in the employment contract, such as "the management rights of the company".

3. In order to prevent disputes in the adjustment of pay, you can add a clause to the labor contract such as “pay change” (if the job is adjusted because party B is not competent for the job, the salary will be adjusted appropriately accordingly).

4. In order to prevent the difficulty of proof in the event of a labor dispute, it is suggested to add attachments after the labor contract:

(1) Company rules and regulations;

(2) The undertaking of the worker (if the background information provided to the individual includes the Certificate of Authenticity of the medical examination);

(3) Job duties or job requirements and relevant assessment criteria (as far as possible in order to be used as evidence in the event of a labor dispute due to non-conformity of the probation period to the termination of the labor contract).

5. In addition to the above terms, the company may also, in accordance with the provisions of the law, agree on a number of other matters according to the actual situation, such as “the management rights of the company”.

employment law