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Fixed-Term vs Open-Ended Employment Agreements in China

Modified on: Tue, 10 Feb, 2026 at 11:07 AM

When hiring employees in China through RemotePeople, employment agreements generally fall into one of the following categories:

Open-ended (“unlimited”) employment agreements – our standard approach for Chinese nationals. This type of employment agreements can not have a probation period.
Fixed-term employment agreements – required for expatriates and available, though less common, for Chinese nationals
Permanent employment agreements – rarely used and only available under strict statutory conditions

Below is an overview of how these structures work in practice and why we typically recommend open-ended agreements for local hires in China.

Why we generally use open-ended agreements for Chinese nationals

For Chinese nationals, RemotePeople’s default structure is a project-based, open-ended employment agreement with no fixed end date. This approach reflects both local market practice and the way Chinese labor law treats long-term employment relationships.

Open-ended agreements offer several practical advantages:

Simpler, cleaner administration

With no contract expiry or renewal cycle to manage, open-ended agreements reduce ongoing administrative complexity and help avoid inadvertent compliance issues linked to repeated renewals.

Greater legal certainty

Chinese labor law is highly protective of employees and tends to view repeated fixed-term contracts as evidence of a continuing employment relationship. Open-ended agreements align more closely with this framework and reduce the risk of reclassification by courts.

More predictable severance outcomes

In standard termination scenarios, severance under an open-ended agreement is generally easier to forecast:

Less than 6 months’ service → 0.5 month of salary
6 months or more → 1 month of salary per year of service

This predictability is one of the main reasons open-ended agreements are commonly the most cost-effective option over time.

Fixed-term employment agreements in China

Expatriate hires

For expatriates in China, fixed-term employment agreements are mandatory and must align with immigration and work-permit requirements. RemotePeople structures these agreements accordingly.

Chinese nationals

Fixed-term employment agreements are also permitted for Chinese nationals, and we can support them where required. Probation periods are allowed within statutory limits:

1-year agreement → up to 1 month probation
2-year agreement → up to 2 months probation
3 years or more → up to 6 months probation

That said, fixed-term agreements in China should be approached with care, as they do not eliminate severance obligations and often result in higher termination costs.

Severance under fixed-term agreements

Under standard termination scenarios:

Less than 6 months’ service → 1 month of salary
6 months or more → 2 months of salary per year of service

In addition, the non-renewal of a fixed-term contract typically still triggers economic compensation (severance). Early termination will also generally require severance.

In certain circumstances—such as where termination is not supported by a clear, objective reason—courts may award significantly higher compensation for fixed-term agreements than for open-ended agreements.

How we typically approach the decision

For Chinese nationals

In most cases, an open-ended employment agreement is the preferred structure. It offers lower and more predictable severance exposure, aligns with local labor practice, and simplifies contract management.

Fixed-term agreements may be considered where there is a genuinely time-bound project or a specific business need for a defined end date, with the understanding that:

Severance remains payable
Standard severance levels are higher than for open-ended agreements
Non-renewal still usually involves economic compensation

For expatriates

Fixed-term agreements are required and are structured in line with both labor and immigration rules.

Note: For more information on open-ended agreements in China, please refer to the link below to determine which option best suits your needs: What are open-end employment agreements in China? : Horizons Help Center

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