By Stephen O’Regan

Many employers in China are overlooking the importance of a staff handbook and instead are relying on an employment contracts, which often don’t include some key provisions. While an employment contract details important terms such as working hours, salary, main duties, and responsibilities, issues such as overtime rules, codes of conduct, performance standards, promotion standards, and KPIs are often omitted.

Staff handbooks are beneficial because they go into the finer, more individual rules that are necessary for all employees to know. The handbook provides explanations concerning mandatory terms and makes it easier to demonstrate and prove when an employee has broken a company rule. A staff handbook is an added layer of protection for the company and, while it is recommended for all foreign companies, it is especially crucial for companies with more than ten employees.

Staff handbooks should distinguish between major and minor breaches with clearly defined consequences for breaches. For example, minor breaches, such as showing up late, might be punished by implementing fines or warnings, or major breaches, such as passing on confidential information, would result in immediate dismissal. It is also important to mention how many minor breaches or warnings constitute a major breach. Providing bilingual handbooks is another way companies can ensure breaches and consequences are fully understood by all employees.

If properly constructed and implemented, staff handbooks that are signed by all employees provide defense for a company when a labor dispute arises. It is advisable to keep the length of the handbook to a reasonable size; no court would support a company if their staff handbook was too long and unreasonable to follow. Referencing the handbook in the labor contract can also strengthen the company’s defense if a breach occurs. Courts will also not support arbitrary rules that are made by the company just to protect itself.

A recent case illustrates the importance of a staff handbook. A manager who was dismissed brought arbitration against their former employer, claiming severance payment as well as an additional one month’s salary due to being fired without 30 days written notice. The employer claimed the manager seriously violated company rules by signing an agreement with a supplier run by a relative without informing the company in advance. The arbitration committee ruled in favor of the employer because the manager signed the  staff handbook, indicating that the manager in question was aware of this internal policy. Had there been no staff handbook the dismissal could have been deemed unfair, and the company could have been liable for severance compensation.

This example shows that it is important that all employees sign a copy of the handbook. Further, any changes made to the handbook should be detailed to every employee and signed.

The contents of the handbook will vary in each industry. Manufacturing companies should  focus on issues relating to promptness, break lengths, and safety requirements. Business process outsourcing companies, on the other hand, will be more concerned with confidentiality of their clients’ information, and the food industry will focus on hygiene.

In sum, regardless of the industry, companies should keep in mind the following considerations when drafting a staff handbook:

  • Company code of conduct
  • All internal rules, guidelines and the rights of both parties
  • Relevant KPI (Key Performance Indicators) and performance standards and assessment information
  • Nondisclosure agreement
  • Information about work environment
  • Work hours, overtime rules
  • Remuneration rules, social welfare rules, bonuses
  • Information about paid leaves
  • Behaviour standards, discipline procedures
  • Training information
  • Workplace security rules
  • Any other special rules relevant to the specific company/industry (manufacturing safety standards, hygienic food production standards, etc.)


About the Author

Stephen O’Regan is an International Business Advisory associate for Dezan Shira & Associates, Guangzhou. Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

Posted by Stephen O’Regan