Many companies have to adjust their structures and departmental settings because of changes in the markets or industries, so their employment relationships with their employees need to be changed accordingly.

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Related provisions of the Labor Contract Law of the People’s Republic of China

Article 40 In the case of any of the following circumstances, the company may discharge the labor contract after it notifies the employee himself in writing 30 days in advance or after it pays the employee an extra month’s salary:

(3) The objective circumstance has altered significantly, on which the conclusion of the labor contract is based, which results in that the labor contract is unable to be performed. And no agreement concerning the modification of contents of the labor contract is reached after consultations between the employer and the worker.

Article 41 In the case of any of the following circumstances, if the employer needs to cut down above 20 workers, or if it needs to cut down less than 20 workers but which accounts for 10 percent or above of the total number of the workers, the employer shall make an explanation to the labor union or to all workers 30 days in advance. After it has solicited the opinions of the labor union or of the workers, it may have the reduction after reporting the plan to labor administrative department:

(1) It is under revitalization in accordance with the Enterprise Bankruptcy Law;

(2) Serious problems in production and business operation occurs;

(3) The enterprise has changed products, made significant technological renovation or adjusted the form of business operation, and it still needs to have reduction after the labor contract is altered; or

(4) The objective economic circumstance, on which the labor contract is based, has altered significantly and it is unable to perform the labor contract.


第四十条 有下列情形之一的,用人单位提前三十日以书面形式通知劳动者本人或者额外支付劳动者一个月工资后,可以解除劳动合同:


第四十一条 有下列情形之一,需要裁减人员二十人以上或者裁减不足二十人但占企业职工总数百分之十以上的,用人单位提前三十日向工会或者全体职工说明情况,听取工会或者职工的意见后,裁减人员方案经向劳动行政部门报告,可以裁减人员:

Source: Sophie & Denis (LegalTips)

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