The expiration of an employment contract is a common situation in the workplace, yet many employees are unsure how to respond when it happens.

To help employees better understand their rights and relevant regulations, the Shanghai Municipal Human Resources and Social Security Bureau released a reference guide addressing frequently asked questions:

- Can a new probation period be agreed upon when an employment contract is renewed?

- Should the employment contract be extended if the medical treatment period has not ended?

- How should unused annual leave be handled?

- Is compensation required if the employer decides not to renew a contract?

- After working for 10 consecutive years, is an open-ended employment contract required?

 

Can a new probation period be agreed upon when an employment contract is renewed?

Case:

Mike is an animation designer at a gaming company. His three-year employment contract is about to expire, and the company has decided to renew his contract for another five years. Under the new contract, Mike will be promoted to department head. According to the company's internal rules, newly appointed personnel must undergo a two-month probation period. However, Mike already had a two-month probation period when he first joined the company. He is wondering whether a new probation period can be agreed upon when the contract is renewed?

Answer:

No. A probation period allows an employer, during an agreed trial period, to assess whether the employee meets the requirements of the role. It is intended for mutual understanding and a two-way selection process.

The Labor Contract Law of the People's Republic of China stipulates that an employer can agree on only one probation period with the same employee. This is because, in principle, an employment contract governs the entire employment relationship, rather than the rights and obligations of a single position.

Although the employee's job position has changed, the employer has already observed the employee's personal qualities and work capabilities through the employee's actual performance at work. Therefore, even for a promotion, agreeing upon another probation period is not permitted under the law.

 

Should the employment contract be extended if the medical treatment period has not ended?

Case:

Jane joined a cosmetics company on Feb 1, 2023, with a three-year employment contract. Recently, she sought medical attention for back pain and was diagnosed with acute nephritis, requiring immediate treatment and rest. Her doctor issued a one-month sick leave certificate. However, her employment contract is due to expire at the end of this month, Jan 31, 2026. Should her employment contract be extended?

Answer:

Yes. If an employment contract term expires but the medical treatment period has not ended, the contract should be extended until the medical treatment period is over. The contract shall not be terminated solely due to expiration until the medical treatment period has concluded.

In this case, although Jane's employment contract is set to expire, the sick leave certificate confirms that she is undergoing medical treatment. Accordingly, her employment contract should be extended until her treatment period ends.

Calculation rules for the medical treatment period

The length of the medical treatment period is based on the employee's length of service. It is three months in the first year of service and increases by one month for each subsequent full year, up to a maximum of 24 months.

The period is calculated cumulatively from the first day of sick leave. Every 20.67 consecutive or cumulative days of sick leave are considered one month of the medical treatment period, excluding statutory holidays and rest days.

How should unused annual leave be handled?

Case:

David is a packaging designer at a pet food company. As his employment contract is set to expire at the end of this month, the company decided not to renew it. David pointed out that he has 10 days of unused annual leave this year, and the company should compensate him for this. However, the company said that since the contract is expiring and will not be renewed, the annual leave entitlement is forfeited. Is this claim correct?

Answer:

No. According to the Measures for the Paid Annual Leave for Employees, when an employer terminates or ends an employment contract with an employee, the employer should calculate the number of untaken annual leave days based on the proportion of the year the employee has worked and pay wages for the corresponding days. However, if the annual leave is less than a full day, no payment is required.

The calculation method:

Remaining annual leave = (calendar days elapsed ÷ 365) × annual leave entitlement for the year − leave already taken

or

Remaining annual leave = (D ÷ 365) × A − T

Where:

D = number of calendar days elapsed in the current year

A = employee's total annual leave entitlement for the year

T = number of annual leave days already taken

The employer should arrange for the employee to use any unused annual leave before leaving the company. If the employer fails to do so due to reasons such as work handover, they are required to compensate the employee for the untaken annual leave at 300 percent of the employee's daily wage, which includes the wage paid for standard working hours.

 

Is compensation required if the employer decides not to renew a contract?

Case:

Emma works as a copywriter at a gaming company. Her three-year fixed-term employment contract is set to expire at the end of this month. Earlier this week, she informed both the HR department and her direct supervisor of her willingness to renew the contract, but the company has decided not to do so. She wants to know whether the employer is required to pay economic compensation if an employee seeks renewal but the employer refuses.

Answer:

Yes. If the employee wishes to renew an expiring contract but the employer refuses, and the fixed-term employment contract is terminated, the employer shall pay economic compensation.

According to the Labor Contract Law, except in cases where an employee refuses to renew the employment contract despite the employer maintaining or improving the conditions stipulated in the original contract, an employer is required to pay economic compensation if a fixed-term employment contract is terminated under circumstances specified by law.

Article 44 of the Labor Contract Law:

An employment contract shall be terminated under any of the following circumstances:

(1) The term of the employment contract expires;

(2) The employee is entitled to basic pension insurance;

(3) The employee dies, or is declared dead or missing by a people's court;

(4) The employer is declared bankrupt in accordance with the law;

(5) The employer has its business license revoked, is ordered to close, is disbanded, or the employer decides to dissolve in advance;

(6) Other circumstances prescribed by laws and administrative regulations.

Tip:

Economic compensation shall be paid based on the number of years the employee has worked for the employer, at a rate of one month's wage for each full year. For a period of six months to one year, it shall be counted as one year; for a period of less than six months, half a month's wage should be paid as economic compensation.

Key reminder:

When calculating the economic compensation period for the termination of an employment contract upon expiration, if the employment relationship began before Jan 1, 2008, the compensation period is calculated from Jan 1, 2008.

In addition, the monthly wage is calculated based on the employee's average monthly wage income in the 12 months before the termination of the contract.

After working for 10 consecutive years, is an open-ended employment contract required?

Case:

Jack started working at a pharmaceutical company in Jan 2016 and has worked continuously for 10 years. His employment contract is now approaching its expiration. When renewing the contract, Jack proposed signing an open-ended employment contract. Should the employer agree?

Answer:

Yes. According to the Labor Contract Law, the employer must offer an open-ended contract if:

1.The employee has worked for the employer for 10 consecutive years.

2.The employee is in their 10th consecutive year with the employer and is within 10 years of the legal retirement age, when the employer first implements the employment contract system, or undergoes state-owned enterprise restructuring.

3.The employer and employee are signing a contract for the third consecutive time, and the employee has not violated any provisions under the Labor Contract Law.

Under these circumstances, unless the employee requests a fixed-term employment contract, the employer is required to offer an open-ended employment contract.

Reminder:

The "10 consecutive years of employment" is calculated from the employee's date of hire and includes years of service prior to the implementation of the Labor Contract Law.

 

Source: Official WeChat account of the Shanghai Municipal Bureau of Human Resources and Social Security (ID: "shrsjwx")