For foreign nationals working in Shanghai, navigating the termination of a labor contract requires a clear understanding of both employees' and employers' rights and obligations under the law.

1. Resignation certificate

An employer must issue a written certificate of revocation or termination of the labor contract after the employment relationship with an employee ends. This is a legal obligation of the employer, not a right of the employer over the employee. If the employer violates this obligation, it must bear the corresponding legal liability.

According to the Regulation on the Implementation of the Employment Contract Law of the People's Republic of China, the certificate of revocation or termination of the labor contract issued by the employer must specify the term of the labor contract, the date of revocation or termination, the job position, and the length of service with the company.

Some employers may think that completing the resignation procedures alone is sufficient and that a written certificate is unnecessary. That is not true. A written certificate plays an important role in unemployment and re-employment.

Unemployment support

The certificate serves as proof that the employee is unemployed and as the basis for registering unemployment and claiming unemployment insurance benefits.

Re-employment

When hiring a new employee, an employer will verify that any previous employment contracts have been revoked or terminated and review relevant documents confirming that the employee has no ongoing employment relationship with another employer. This helps prevent dual employment and potential labor disputes.

If the former employer fails to issue the revocation or termination certificate as required, the employee may be unable to transition smoothly to the new job.

If the employer causes losses to the employee by failing to provide the written certificate, it must bear corresponding liability for compensation.

2. Liquidated damages for employees' resignation

Under Article 22 of the Labor Contract Law of the People's Republic of China, if an employer provides specialized funding for an employee's professional training, the employer may enter into an agreement with the employee specifying a required service period.

If the employee resigns before the end of the agreed service period, the employee shall pay liquidated damages to the employer as specified in the agreement.

Under the law, the amount of liquidated damages must not exceed the training expenses paid by the employer. Additionally, the liquidated damages claimed by the employer shall not exceed the portion of the training expenses that should be allocated to the unperformed portion of the service period.

An agreement on the service period between the employer and the employee does not affect the employee's remuneration during the service period.

Article 22 provides that an employer and an employee may include provisions in their employment contract regarding confidentiality, specifically to protect the employer's trade secrets and intellectual property.

For an employee with confidentiality obligations, the employer may include non-compete clauses in the employment contract or confidentiality agreement with the employee and agree to provide the employee with monthly economic compensation during the non-compete period following termination of the employment contract.

If the employee breaches the non-compete clauses, the employee shall pay liquidated damages to the employer as agreed.

Article 25 provides that, except in the circumstances outlined in Articles 22 and 23, employers shall not agree to impose liquidated damages on employees.

Therefore, employers may agree with employees on liquidated damages, and employees shall pay such damages if they violate the agreement.

3. What to do about tax and permits of foreign employees leaving China?

As per the Shanghai Municipal Tax Service, taxpayers without a Chinese domicile who leave the country before March 1 of the following fiscal year can finalize their tax settlement before leaving. They should bring their identification to the tax bureau where their employers are registered.

According to the Shanghai Municipal Commission of Science and Technology (Shanghai Municipal Bureau of Foreign Experts Affairs), if the contract is terminated early, the employer must apply to cancel the work permit within 10 working days of the termination date. The cancellation application is submitted and processed online through the employer's account on the Service System for Foreigners Working in China.

If the contract expires simultaneously with the employee's work permit, the system's cancellation channel will be closed. In this case, the staff responsible for managing work permits must contact the Shanghai Municipal Bureau of Foreign Experts Affairs. Since the employer handles work permit procedures instead of the employee, it is advisable for the employer to reach out directly to the bureau through its hotline at 400-820-5114.

For visa and residence permit matters, the employee may contact the exit and entry bureau via their hotline: 12367. For other matters, please contact 12345.

Disclaimer: This article is for general reference only and does not constitute legal advice. For specific cases, please consult the competent authorities or a qualified legal professional.

Updated Sept 22, 2026

Sources: Official WeChat account of the Shanghai Municipal Bureau of Human Resources and Social Security (ID: "shrsjwx"); official WeChat account of the Ministry of Human Resources and Social Security (ID: "rsbwwx")