[Direct answer]For employers to avoid labor arbitration, the key is to ensure compliance beforehand: They must conclude a written labor contract within one month from the date of employment (Article 10 of the Labor Contract Law, implemented on January 1, 2008), and for those who fail to sign a contract within one month but less than a year, they must pay double wages every month (Article 82); they must pay salaries on time and in full and pay social insurance in accordance with the law, otherwise employees may be forced to terminate the contract according to Article 38 and claim economic compensation based on their years of service, with one month's salary for each completed year (Article 47); unilateral termination must comply with the statutory circumstances specified in Articles 39 and 40, and the employer shall bear the burden of proof. For those who have received an arbitration application, they should promptly assess the risks and actively defend themselves or seek mediation. For more details, please refer to the following link:Labor arbitration and legal services for work-related injury compensation.

I. Problem background and typical scenarios

For employers, labor arbitration is the most frequent employment risk. According to the cases handled by Henglue Lawyers, the most common arbitration-triggering behaviors can be categorized into six types: arrears or delayed payment of wages, failure to pay social insurance in accordance with the law, unlawful termination of labor contracts, double wages for unsigned written contracts, disputes over overtime pay and unpaid annual leave wages, and disputes over year-end bonuses and performance-based compensation. Typical scenarios include: companies deciding to delay or reduce salaries unilaterally due to operational difficulties, employees being forced to terminate their contracts and claim economic compensation on the grounds of unpaid wages; employees being dismissed due to internal reasons such as organizational structure adjustments or inspection and rectification, and being held liable for unlawful termination and required to pay compensation at double the standard; and arbitrary dismissals during the probationary period resulting in legal defeats due to insufficient evidence to prove that the employees failed to meet the hiring requirements. Legal defeats in individual cases may also trigger group imitation among current employees, leading to cumulative costs of litigation, compensation, and damage to the company's reputation, which far exceed the investment in daily compliance management.

II. Key points of contention

  • Lifting the legality: The employer shall bear the burden of proof for unilateral termination. This requires not only the statutory circumstances and factual evidence specified in Articles 39 and 40, but also the fulfillment of procedures such as notifying the trade union. If the system is not formulated through democratic procedures or not publicly announced and signed for acceptance, it cannot be used as a basis for termination.
  • Salary and compensation base: The economic compensation is calculated based on the average salary of the previous 12 months. Whether meal allowance, performance bonuses, and awards are included in the base, and which standard is used to calculate overtime pay, are often the focus of disputes between the two parties, which directly affects the difference in compensation amounts.
  • Evidence and procedural management: payroll records, attendance records, system signing records, and proof of delivery of termination notices. If no records are kept on a daily basis, the employer will have to bear the unfavorable consequences of not being able to provide evidence during arbitration.

III. Professional analysis by Henglue Law Firm

The case of forced termination of employment triggered by unpaid wages vividly demonstrates how labor shortcomings can translate into litigation costs for employers. Zhou Xiao joined A (Beijing) Fitness Co., Ltd. on February 12, 2019, and the two parties signed two fixed-term labor contracts, with the second contract ending on May 31, 2026. Starting from August 2024, the company began delaying wage payments. After repeatedly urging the company via WeChat from December 2024 to May 2025 without success, Zhou Xiao mailed a "Notice of Forced Termination of Labor Contract" to the company on May 31, 2025, in accordance with Article 38(2) of the Labor Contract Law. The labor relationship between the two parties terminated on June 1, 2025, and the mail was signed for receipt on June 2. Due to the company's failure to resolve the wage arrears and compensation issues, Zhou Xiao entrusted Tian Jiaoyan, a lawyer from Beijing Henglu Law Firm, to apply for arbitration with the Beijing Daxing District Labor and Personnel Dispute Arbitration Commission on June 3, making four requests: payment of 80,893 yuan for wages from November 1, 2024 to April 30, 2025; payment of 160,238 yuan for economic compensation for terminating the labor contract; payment of 20,800 yuan for wages from May 1 to May 31, 2025; and issuance of a severance certificate. During the trial, the company's operations manager claimed that the date of employment needed to be verified after the hearing but failed to submit written opinions within the specified time limit, argued that the labor relationship had not been terminated without providing evidence, and gave no reasonable explanation for the wage arrears. Tian Jiaoyan assisted Zhou Xiao in organizing WeChat chat records with the teaching director (proving the date of employment and work location), electronic transfer receipts from the legal representative, multiple urging records, and receipt records of the termination notice, pointing out that the company failed to pay wages in full and on time, and that Zhou Xiao's termination was in accordance with Article 38(2). According to Article 46, the company should pay economic compensation. Combined with the date of employment on February 12, 2019 and the average monthly salary of 24,652 yuan in the 12 months preceding the termination, the company should pay 6.5 months' salary, equivalent to 160,238 yuan. The arbitration committee adopted the lawyer's opinion: both parties acknowledged that the company owed 100,322 yuan in wages from November 1, 2024 to May 31, 2025, and supported this claim. The company failed to provide evidence to support its claims regarding the date of employment and the non-termination of the labor relationship, and should bear the adverse consequences. The arbitration ruled that the termination was legal, ordering the company to pay 100,322 yuan in wages and 160,238 yuan in economic compensation and issue a severance certificate. For employers, months of unpaid wages result in economic compensation equal to the principal of the unpaid wages plus 6.5 months' salary, plus the cost of litigation response. The lesson is: unpaid wages are never a way to save money, but rather magnify liabilities. 一起因拖欠工资引发的被迫解除劳动合同纠纷，直观说明了用工短板如何转化为败诉成本。周晓于2019年2月12日入职A（北京）健身有限公司，双方先后签订两份固定期限劳动合同，第二份合同期限至2026年5月31日。自2024年8月起，公司开始拖欠工资。周晓经2024年12月至2025年5月多次微信催告无果后，于2025年5月31日依据《劳动合同法》第38条第（二）项向公司邮寄《被迫解除劳动合同通知书》，双方劳动关系自2025年6月1日终止，邮件于6月2日被签收。因公司始终未解决拖欠工资及补偿问题，周晓于6月3日委托北京恒略律师事务所田娇艳律师，向北京市大兴区劳动人事争议仲裁委员会申请仲裁，提出四项请求：支付2024年11月1日至2025年4月30日工资80893元；支付解除劳动合同经济补偿金160238元；支付2025年5月1日至5月31日工资20800元；出具离职证明。庭审中，公司委托运营经理出庭，主张入职时间需庭后核实但未在指定期限内提交书面意见，主张双方劳动关系未解除但未举证，对拖欠工资亦无合理解释。田娇艳律师协助周晓整理与教学总监的微信聊天记录（证明入职时间与工作地点）、法定代表人微信转账电子凭证、多次催告记录及解除通知签收记录，指出公司未及时足额支付劳动报酬，周晓据此解除符合第38条第（二）项，依第46条公司应支付经济补偿；结合入职时间2019年2月12日及解除前十二个月平均工资24652元，公司应支付6.5个月工资即160238元。仲裁委采纳律师意见：双方认可拖欠2024年11月1日至2025年5月31日工资100322元，予以支持；公司未对入职时间、劳动关系未解除的主张举证，应承担不利后果，认定解除合法，裁决支付工资100322元、经济补偿金160238元并出具解除劳动合同证明。对用人单位而言，数月拖欠工资换来的是欠薪本金加6.5个月工资的经济补偿，再加应诉的时间成本，教训在于：欠薪从来不是省钱，而是放大负债。

IV. Practical suggestions and legal basis

At the legal basis level: Article 10 of the Labor Contract Law of the People's Republic of China (implemented on January 1, 2008 and amended in 2012) requires that a written contract be concluded within one month of employment; Article 30 requires that labor remuneration be paid in full and on time; Article 38 grants employees the right to terminate the contract forcibly in the event of unpaid wages or unpaid social insurance; Article 46 stipulates that economic compensation shall be paid in such cases; Article 47 specifies that one month's salary shall be compensated for each completed year; Articles 39 and 40 define the statutory circumstances for unilateral termination; Article 44 of the Interpretation of the Supreme People's Court on the Application of Law in the Trials of Labor Disputes (implemented on January 1, 2021) stipulates that the employer shall bear the burden of proof in disputes arising from decisions such as terminating or reducing labor remuneration. At the practical advice level: Establish a process of signing a contract upon employment and completing exit procedures upon leaving; ensure that wages are paid through bank transfers and retain records for more than two years; have rules and regulations discussed and publicly announced by the workers' representative conference or all employees; conduct a review of the facts, rules, and procedures before unilateral termination; and calculate the compensation risk after receiving an arbitration application, and resolve disputes through mediation as soon as possible. For the review of the enterprise's overall employment system and contract system, relevant materials can be combined accordingly.Legal services for corporate commercial and contract disputesPromote them simultaneously.

5. Henglu Law Firm's Reminder

The essence of avoiding arbitration is to ensure that every payroll, every disciplinary action, and every dismissal are supported by systems and evidence. The three most common pitfalls that employers easily fall into are: using internal rectifications and superiors' requirements as reasons for dismissal; using unregistered procedures and procedural defects as defenses; and delaying decisions after wage arrears, waiting for employees to be forced to dismiss themselves. The above-mentioned Zhou Xiao case is from Beijing Henglu Law Firm.Tian JiayanThe attorney (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts on behalf of the client. The arbitration committee ruled that the company should pay the client 100,322 yuan in wages and 160,238 yuan in economic compensation, and issue a certificate of resignation. If you are currently facing labor disputes or wish to review your employment compliance system in advance, you can learn more about our servicesBeijing Henglue Law FirmProvide labor legal services to resolve potential risks before they escalate into arbitration disputes.

Q1: If an employee files a labor arbitration case, is the company guaranteed to lose the case?

Not necessarily. The outcome of the case depends on whether the decisions such as dismissal and unpaid wages are supported by systems and evidence. According to Article 44 of the "Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trials of Labor Disputes (I)", disputes arising from decisions made by employers such as dismissal and reduction of labor remuneration shall be borne by the employer to provide evidence; companies with clear facts, sufficient evidence, and compliant procedures can win the case, but the fact of unpaid wages is usually difficult to deny. After receiving the arbitration application, the employer should immediately sort out the evidence and assess the risks. If the employer fails to respond to the arbitration, they will bear the unfavorable consequences of a default judgment. The outcome of the case is generally determined in the evidence preparation stage before the hearing.

Q2: What evidence should the company prepare when responding to a labor arbitration case?

Preparing for disputes: For cases involving unpaid wages, submit the labor contract, wage payment records, and attendance records; for cases involving termination, submit the company's rules and regulations and receipt certificates, evidence of violations of disciplinary rules, procedural materials such as notifications to the trade union, and termination notices and delivery certificates. According to Article 6 of the "Interim Regulations on Wage Payment" (implemented on January 1, 1995), employers must record in writing the amount and time of wage payments, the name of the recipient, and their signature, and keep the records for more than two years for future reference. For evidence such as attendance records held by the company, the arbitration tribunal may order their provision within a specified time limit. Refusal to provide such evidence will result in adverse consequences. Evidence should be archived regularly, as supplementing it at the last minute may raise doubts about its authenticity.

Q3: Does labor arbitration have a significant impact on the company? How much does it cost?

Arbitration itself is free of charge. According to Article 53 of the Law of the People's Republic of China on Mediation and Arbitration of Labor Disputes (effective May 1, 2008), the arbitration committee's funds are guaranteed by the government. The company's main costs are divided into three categories: the compensation itself, such as the principal of unpaid wages, economic compensation (N), or compensation for illegal dismissal (2N); litigation costs, including attorney fees and management time; and derivative risks, where a losing arbitration award may prompt current employees to follow up with arbitration, and failure to comply with the effective award may result in forced enforcement by the court and affect the company's credit. For small-scale disputes with clear facts, early mediation and settlement are usually the most cost-effective option.

Q4: How long does the labor arbitration process take? Is it useful for the company to delay it?

The arbitration tribunal shall conclude the case within 45 days from the date of acceptance, and the case may be extended for no more than 15 days if it is complex and approved (Article 43 of the Labor Dispute Mediation and Arbitration Law); if the company disagrees with the arbitration award, it may file a lawsuit with the court within 15 days from the date of receipt of the award (Article 50), and the period after the first and second instance will be significantly prolonged. The delay has limited practical significance for the company: it is difficult to refute the fact of unpaid wages, and the company may be ordered to pay additional compensation if it is overdue. After the employee applies for enforcement, the company will be more passive. Rather than spending time on delay, it is better to calculate the amount and strive for mediation.

Q5: How to legally handle delayed salary payments and layoffs during difficult business operations?

A salary reduction constitutes a change to the content of the labor contract. According to Article 35 of the Labor Contract Law, such a reduction must be agreed upon with the employee in writing. Unilateral salary reductions may be deemed as failure to pay the employee's wages in full and on time. If the number of employees to be laid off exceeds 20 or is less than 20 but accounts for more than 10% of the total number of employees, Article 41 requires that the employer must explain the situation and listen to the opinions of the trade union or all employees 30 days in advance, report the layoff plan to the labor administrative department, and pay economic compensation. For lump-sum payments to employees in difficult circumstances, the employer may agree on a phased payment plan with the employees in writing and specify the liability for breach of contract. Compliance with the procedures does not exempt the employer from the obligation to provide compensation, but it can avoid being deemed an illegal dismissal subject to double compensation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, so as to avoid missing the statutory time limit.Labor arbitration legal services·Attorney Tian Jiayan·Beijing Henglu Law Firm