A failed PIP in China: can the employer dismiss the employee?

1. Prove the job shortfall before relying on a rating

Start with the job description, agreed duties, applicable targets, assessment period and underlying work records. Check whether the standards were reasonable, communicated in advance and applied consistently. Separate the employee’s work from missing resources, changed instructions and market or organizational factors. A manager’s low score alone does not explain what the employee could not perform.

In the Supreme People’s Court’s Guiding Case No. 18, a bottom rating in a forced distribution did not establish inability to perform. The court also rejected reliance on an earlier transfer caused by a department’s dissolution as proof of reassignment for incompetence. Both the rating and the reason for a job change need scrutiny.

For policies directly affecting employees’ interests, review Article 4 procedures: employee discussion, equal consultation with the union or employee representatives, and publication or notification. Keep the applicable version and its adoption records. Article 44 of the SPC Labor Disputes Interpretation (I) places the burden of proof on the employer in disputes arising from its dismissal decision.

2. Check what the PIP actually delivered

A document headed PIP does not automatically satisfy the statutory training or reassignment requirement. Examine the measures actually provided: relevant instruction, coaching records, training materials, attendance, tasks and opportunities to apply the learning. Simply repeating a target and warning that failure means dismissal may leave the training stage unproved.

Article 40(2) uses training or reassignment; it does not require both in every case. If relying on reassignment, record why the new role addresses the identified shortfall, its duties, support and the employee’s response. Review contractual changes, pay and applicable local practice separately. This provision is not a general permission to impose an arbitrary demotion or pay cut.

There is no fixed 30-, 60- or 90-day PIP duration in Article 40(2) that automatically makes dismissal lawful. Set a review period suited to the work cycle and the improvement measures. Preserve real records as the process unfolds; do not backdate training, rewrite earlier objectives or treat a predetermined exit as a genuine improvement opportunity.

3. Reassess the work, then check protected status

The file should show the initial inability, the training or reassignment, and the continued inability afterwards. Compare later work against the relevant standard and keep the data, assessment method, feedback and employee explanations. An acknowledgement of receipt is different from agreement with an assessment; refusal to sign is not itself proof of incompetence.

Before using Article 40, screen every Article 42 restriction. These include specified occupational-health examination or observation circumstances; occupational disease or work injury at this employer with confirmed full or partial loss of working capacity; a statutory medical treatment period; pregnancy, maternity and nursing; and at least 15 years’ continuous service with this employer with fewer than 5 years to statutory retirement. Other protections prescribed by laws or administrative regulations must also be checked. A failed PIP does not remove those restrictions.

4. Complete the applicable notice, union and payment steps

Only if the substantive conditions are met and no applicable restriction prevents this route should the employer consider Article 40 notice: 30 days’ prior written notice to the employee, or an additional month’s wages in lieu. Statutory severance under Articles 46 and 47 is a separate obligation. The extra month does not purchase a right to dismiss without a valid ground.

Article 20 of the Implementing Regulation uses the employee’s previous month’s wage standard for the additional month. Severance follows a different statutory calculation, including service, average wages and applicable caps. Have payroll identify each basis separately rather than treating all exit payments as one interchangeable amount.

Article 43 requires prior notification of the reason to the union and a written response to its views. Interpretation (I), Article 47 addresses an employer with a union that omits that step, subject to its stated exception where the procedure is corrected before litigation. Plan the procedure before issuing notice; do not rely on later correction as a routine strategy. If the entity has no union, check the applicable local handling rather than assuming the issue disappears.

5. Assess the consequence of an unsupported dismissal

Articles 48 and 87 distinguish continued performance of the employment contract from compensation for unlawful termination at twice the statutory severance standard. The employer cannot assume it may simply choose the payment outcome. Whether the contract can continue requires a factual and legal assessment, including Article 16 of the 2025 SPC Interpretation (II).

Where an unlawfully terminated contract can continue, Article 18 of Interpretation (II) addresses wages claimed for the period after the unlawful termination decision was made until the day before continued performance, using the normal-work wage standard. Where both parties were at fault regarding termination, each bears corresponding responsibility. The potential exposure therefore needs more analysis than a simple severance multiple.

6. Put the decision and the missing evidence in one file

Prepare the employing entity and work city, contract and job description, policy procedure, target communications, original performance data, PIP and actual training or reassignment records, later assessment and employee explanations. Add protected-status checks, proposed notice, union documents and separate payment calculations. Identify the responsible China decision-maker and reconcile headquarters instructions with that file.

If a required stage is missing, the immediate task is to resolve the gap or assess another lawful route, such as a genuinely voluntary negotiated termination under Article 36. Do not relabel ordinary underperformance as serious misconduct to avoid Article 40. For an initial consultation, provide a non-confidential outline of the role, work city, PIP steps and intended timing; arrange a suitable confidential channel before sharing personnel records.