Employer of Record in China

An Employer of Record (EOR) in China is a company that legally hires employees on your behalf. This means you can build a team in China without setting up a local legal entity. The EOR handles all the HR tasks like payroll, taxes, benefits, and compliance with Chinese labor laws. You manage your employees' day to day work while the EOR takes care of the legal and administrative responsibilities of employment. For companies looking to hire in China, Rivermate is an EOR provider that can help you navigate this process.

How an Employer of Record (EOR) Works in China

Using an EOR simplifies hiring in China. Here is how it generally works:

1. You find the candidate you want to hire in China.
2. You partner with an EOR that has a legal entity in China.
3. The EOR drafts a compliant employment contract that meets Chinese labor laws.
4. The EOR onboards your new employee, handling all the necessary paperwork.
5. The EOR manages payroll, ensuring your employee is paid correctly and on time in the local currency.
6. The EOR handles all mandatory social security contributions and taxes.
7. You manage the employee's daily tasks and responsibilities, just like any other member of your team.

Benefits of Using an EOR for Hiring in China

Using an EOR to hire in China offers several key advantages. It allows you to enter the Chinese market and build a team quickly and efficiently. You avoid the time and expense of establishing a legal entity in the country. This approach also minimizes your legal risks by ensuring compliance with China's complex and ever changing labor laws.

Here are some of the main benefits:

• Faster Market Entry: You can hire employees and start operations in a matter of days or weeks, instead of months.
• Reduced Costs: Avoid the significant expenses associated with setting up and maintaining a legal entity in China.
• Compliance Assurance: The EOR ensures that all employment practices follow local labor laws, reducing the risk of fines and legal issues.
• Simplified HR: The EOR manages all HR administrative tasks, including payroll, taxes, and benefits, freeing you to focus on your core business.
• Access to Expertise: You benefit from the EOR's local knowledge of Chinese employment regulations and cultural norms.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in China includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in China.

Hiring in China means navigating a landscape with unique laws and cultural norms. You can't just extend an offer and expect things to work like they do in your home country. To hire employees, you must have a legal business entity in China. Many foreign companies set up a Wholly Foreign-Owned Enterprise (WFOE), but this process can be complex and time-consuming. An alternative is to partner with an Employer of Record (EOR), which can legally hire employees on your behalf, saving you the headache of establishing a local entity.

Employment contracts & must-have clauses

You must provide a written employment contract within one month of an employee's start date. Failing to do so can result in penalties, including paying the employee a double salary. Contracts can be either fixed-term or indefinite.

Your contracts should always include:

• Company and employee identifying information
• A clear job description and work location
• Terms of employment, including working hours and rest periods
• Compensation details in Chinese Yuan (CNY)
• Termination conditions

It's a legal requirement for contracts to be in Chinese. Providing a bilingual version is a good practice to ensure clarity for both you and your employee.

Probation periods

A probation period in China is a trial phase for both you and the new hire. It allows you to assess their suitability for the role and for them to evaluate the company. You can only have one probation period per employee, even if they get a promotion or change roles later.

The maximum length of the probation period depends on the contract's duration:

During probation, you can pay a salary that is at least 80% of the contractual salary, but it cannot fall below the local minimum wage. You are still required to pay full social insurance contributions.

Working hours & overtime

The standard work week in China is 40 hours, with a typical 8-hour workday. Employees are entitled to at least one rest day per week.

Anything beyond the standard hours is considered overtime. Overtime is regulated and generally should not exceed 36 hours per month. Overtime pay rates are:

• 150% of the regular hourly rate for work on a normal workday.
• 200% of the regular hourly rate for work on a rest day.
• 300% of the regular hourly rate for work on a public holiday.

Public & regional holidays

China has seven official public holidays that all citizens enjoy. The government often arranges these holidays to create longer breaks, sometimes by designating adjacent weekend days as official workdays.

The main public holidays are:

• New Year's Day: 1 day
• Spring Festival (Chinese New Year): The longest holiday, often 7 or 8 days.
• Qingming Festival (Tomb-Sweeping Day): 1 day
• Labor Day: 5 days
• Dragon Boat Festival: 1 day
• Mid-Autumn Festival: 1 day
• National Day: A 7-day "Golden Week" holiday.

Hiring contractors in China

You can hire independent contractors in China for short-term or specific projects. This can be a flexible way to access specialized skills without the commitments of full-time employment. However, the line between an independent contractor and an employee is thin, and misclassification carries significant risks.

If a relationship looks too much like employment (e.g., you control their work hours and methods), authorities can reclassify the contractor as an employee. This could make you liable for back pay, social security contributions, and other penalties.

An EOR mitigates this risk. By hiring your worker as a formal employee through the EOR, you ensure full compliance with local labor laws. The EOR handles the employment contract, payroll, taxes, and social benefits, eliminating the danger of misclassification. This gives you the freedom to work with talent in China without the legal and financial risks.

Navigating compensation and payroll in China can seem complex. The system involves a mix of base salary, variable pay, mandatory social security contributions, and a housing fund. Laws and contribution rates can also change depending on the city and province you operate in. Understanding these local rules is key to staying compliant.

Payroll cycles & wage structure

In China, you typically pay employees monthly. Most companies process payroll and pay salaries near the end of the month. It is also a common custom to pay a "13th month" salary, often around the Lunar New Year.

An employee's wage is more than just their base salary. It's structured with several parts:

• Fixed Salary: This is the regular, predictable amount stated in the employment contract.
• Variable Salary: This portion changes from month to month. It can include commissions, bonuses, and overtime pay.
• Allowances: You can offer allowances for expenses like housing, meals, or children's education.
• Annual Bonus: Many companies provide a yearly bonus based on company or individual performance.

Overtime & minimums

The standard workweek in China is 40 hours, based on an 8-hour day. If your employees work beyond these hours, you must pay them overtime. The rates are:

• Weekdays: 150% of the regular hourly wage.
• Weekends: 200% of the regular hourly wage.
• Public Holidays: 300% of the regular hourly wage.

China does not have a single national minimum wage. Instead, each province, and sometimes each city, sets its own minimum wage. These rates are updated periodically to reflect the local cost of living and economic conditions. For example, major cities like Shanghai and Beijing have higher minimum wages than smaller cities.

Employer taxes and contributions

As an employer, you are responsible for making several contributions on behalf of your employees. These payments fund social security programs and a housing fund. The exact percentages can vary by location, but here is a general breakdown:

Employee taxes and deductions

Your employees also contribute to social security and pay individual income tax. You must withhold these amounts from their paychecks.

In China, providing the right benefits and leave is essential for attracting and retaining talent. The system is a mix of government-mandated social insurance, statutory leave, and supplemental benefits that can vary by region. Understanding these components helps you create a competitive and compliant benefits package for your team.

Statutory leave

China's labor laws outline several types of mandatory leave to support employee well-being.

• Annual Leave: Employees are entitled to paid annual leave based on their cumulative years of service. If an employee doesn't use their annual leave, you must pay them 300% of their regular wage for the unused days.
  • 1 to 10 years of service: 5 days
  • 10 to 20 years of service: 10 days
  • More than 20 years of service: 15 days
• Sick Leave: The amount of paid sick leave an employee can take depends on their years of service and local regulations. Compensation for sick leave typically ranges from 60% to 100% of their salary.
• Maternity Leave: Female employees are entitled to maternity leave. This is covered by maternity insurance, which is now merged with medical insurance in most areas.
• Marriage Leave: Employees are entitled to leave when they get married, with the amount varying by region.
• Bereavement Leave: An employee can take a few days of leave if an immediate family member passes away.

Public holidays & regional holidays

China has 11 national public holidays each year. Some regions may have additional holidays.

Typical supplemental benefits

Beyond the mandatory benefits, many companies offer additional perks to stay competitive.

How an EOR can help with setting up benefits

Navigating China's benefits landscape can be complex. An Employer of Record (EOR) simplifies the process for you.

An EOR helps you:

• Ensure compliance with national and local regulations.
• Administer social insurance and housing fund contributions.
• Benchmark your benefits package against local market standards.
• Manage payroll and leave tracking.
• Onboard new employees quickly and efficiently.

By handling the administrative burden, an EOR frees you up to focus on growing your business.

Ending employment in China requires careful navigation of specific legal requirements. The process is not as simple as in some other countries. You need to follow a structured process to ensure you treat your former employee fairly and comply with the law. This involves understanding notice periods, severance pay obligations, and the correct legal grounds for termination.

Notice periods

When terminating an employee for reasons not related to misconduct, you must provide 30 days' notice. Alternatively, you can provide one month's salary instead of the notice period. This is known as payment in lieu of notice.

If an employee resigns, they are also required to give you 30 days' notice. During a probation period, this notice is shortened to three days for the employee.

It's important to note that you can't terminate an employment contract at will without a valid legal reason. Terminations generally fall into a few categories:

• Mutual Agreement: You and the employee can agree to end the employment relationship.
• For Cause: You can terminate an employee for serious misconduct or a major violation of company policy. In these cases, you don't need to provide notice or severance pay.
• Without Fault: This applies in situations like an employee being unable to work due to a non-work-related injury or being incompetent for the role after training. In these cases, the 30-day notice or payment in lieu applies.

Severance pay

In most cases of termination, you will need to provide severance pay. This is a key part of the process in China. Severance is required when you terminate by mutual agreement, for reasons without fault, or due to situations like bankruptcy or mass layoffs.

The standard calculation for severance pay is one month's salary for each year the employee has worked for your company.

Here's a simple breakdown of how it's calculated:

How Rivermate handles compliant exits

Navigating the complexities of employee termination in a different country can be challenging. At Rivermate, we manage the entire offboarding process to ensure you remain compliant with all local labor laws in China.

We handle the details so you don't have to. This includes:

• Documentation: We prepare all necessary termination documents in accordance with Chinese law.
• Calculations: We accurately calculate notice periods and severance pay based on the employee's contract and service length.
• Communication: We facilitate clear communication with the departing employee to ensure a smooth and professional exit.
• Final Payroll: We process the final salary and any outstanding payments correctly and on time.

By managing these steps, we help you avoid the risks of legal disputes and ensure a fair and respectful process for your departing employees.

Navigating China's visa and work permit system can feel complex. The country uses a system of visas for entry and residence permits for longer stays, with specific work permits required for employment. All non-Chinese nationals who plan to work in China need to secure a work permit and the correct visa before starting their job. The process and requirements can change based on your nationality, the type of job, and where you'll be working in China.

Employment visas & sponsorship realities

When it comes to working in China, the Z visa is the primary visa for foreign nationals who will be employed for longer than six months. To get a Z visa, you first need a job offer from a company that is registered in China. That employer must then apply for a Work Permit Notification on your behalf. Once you have this notification, you can apply for the Z visa at a Chinese embassy or consulate in your home country. After you enter China with the Z visa, you have to apply for a Foreigner's Work Permit Card and a Chinese Residence Permit.

An Employer of Record (EOR) can help with this process. An EOR is a company that legally employs workers on behalf of another company. Here's what an EOR in China can typically do for visa sponsorship:

• Act as your legal employer: An EOR can be your legal employer in China, which is a requirement for getting a Z visa.
• Handle the paperwork: They can manage the application process for the Z-Work Visa and ensure all the paperwork is filed correctly with local authorities.
• Ensure compliance: An EOR helps you stay compliant with China's immigration, tax, and labor laws.

However, there are some important realities to keep in mind:

• No "visa-only" service: You cannot use an EOR just to get a visa. Visa sponsorship is part of a complete employment service, meaning you must be actively employed and paid through the EOR.
• Government quotas: Some EORs in China may have limits on the number of foreign nationals they can hire due to government quotas.

Business travel compliance

For short-term business trips, you will likely need an M visa. This visa is for commercial and trade activities.

To apply for an M visa, you will generally need the following:

It's important to apply for your visa well before your planned travel date. The M visa does not permit you to be employed full-time by a Chinese company.