In China, if the employer neither terminates the labour contract nor renews the labour contract with the employee after the expiration of the labour contract, and the employee continues to work for the employer, a factual labour relationship will be formed between the employer and the employee. The employer will face the legal risks and consequences resulting from “failing to conclude a written labour contract with the employee”.

The legal risks and consequences of the employer's failure to renew the labour contract in time upon expiration generally include:

1. The employer shall pay double wages to the employee every month from the day following one full month after the labour contract expired if it fails to renew the labour contract with the employee for more than one month but less than one year. The cut-off point is the day before a written labour contract is concluded. The maximum period shall not exceed 11 months. (In some areas, for example, in Beijing, it stipulates that the employer shall pay double wages to the employee every month from the next day after the expiration of the labour contract. The cut-off point shall be the day before a written labour contract is concluded. The maximum period shall not exceed 12 months.)
2. It shall be deemed that the employer has entered into an open-term labour contract with the employee if the employer fails to renew the labour contract with the employee for one year.
3. If the employer shall conclude an open-term labour contract with the employee after the expiration of the labour contract but fail to do it, it shall pay double wages to the employee every month from the day an open-term labour contract should have been concluded. The cut-off point shall be the day before both parties have entered into an open-term labour contract.
   (Legal Provisions: Article 10, Article 14, Article 82 of the Labour Contract Law of the PRC; Article 6, Article 7 of the Regulation on the Implementation of the Labour Contract Law of the PRC, etc.)

In conclusion, before the expiration of the labour contract, the employer shall decide whether to renew the labour contract with the employee as soon as possible. If the employer does not intend to renew the labour contract with the employee, it shall notify the employee in writing in advance and handle the contract termination procedures in time when the labour contract expires. If the employer decides to maintain labour relations with the employee, it shall conclude a written labour contract with the employee in time to avoid the corresponding legal risks and consequences s resulting from “failing to conclude a written labour contract with the employee”. (In some areas, for example, in Beijing, it is stipulated that the employer shall notify the employee in writing of its intent to terminate or renew the labour contract 30 days in advance before the expiration of the labour contract.)

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