Employer of Record in China

China, located in East Asia, is the world’s second-largest economy and shares its border with 14 countries. It also has major maritime access to the East China Sea, the Yellow Sea and the South China Sea.

The country has five major economic centers, namely, Shanghai, Beijing, Shenzhen, Guangzhou and Hangzhou. These centers provide China with its extensive infrastructure, manufacturing capabilities and massive domestic market (1.4 billion people).

China has a large and diversified industrial base. The workforce holds a number of specialist and advanced skills in manufacturing, technology, e-commerce, financial services, logistics and renewable energy. It also has a growing healthcare and biotechnology sector.

Foreign companies hire in China because it has a large and deep talent pool with specialist skills. The country also produces millions of university graduates annually across engineering, technology, and business disciplines. Furthermore, China has become a global learning center for innovation across sectors such as AI, fintech, EVs, biotech, and renewable energy.

Companies entering the market will discover that China has a comprehensive and employee-protective labor law framework. This framework places significant responsibility on employers to comply with employment rules and regulations.

A practical solution for entering the market without setting up a legal entity is an Employer of Record, like Rivermate. The EOR acts as the legal employer, handling payroll, taxes and all compliance for foreign employers.

How an Employer of Record (EOR) Works in China

The EOR in China follows a simple, frictionless process to compliantly hire and onboard your employees.

1. Recruit Candidates: You recruit and select the person you want to hire in China.
2. Hire Employees: The EOR drafts a locally compliant employment contract. They then hire your chosen candidate under their registered Chinese entity.
3. Onboard Employees: The EOR manages the entire onboarding process. This includes collecting necessary documents and setting up payroll and benefits.
4. Manage Employees: You manage your employee's daily responsibilities, projects, and performance. The EOR handles all HR administrative tasks in the background.
5. Payroll and Benefits: The EOR processes payroll each month, ensuring compliance with China's tax and social security regulations. They also manage all mandatory benefits, like health insurance and retirement funds.
6. Ongoing Compliance: The EOR stays up-to-date with any changes in Chinese labor law. This ensures your employment practices remain fully compliant.

Why use an Employer of Record in China

Expanding into the Chinese market offers foreign companies access to lucrative opportunities. China has two major advantages: The world’s second-largest economy and a highly specialized labor market. An EOR facilitates speedy entry into this market by helping you to hire and onboard employees. The major benefits are:

• You don’t set up a local legal entity: You can legally hire employees without the time-consuming and expensive process of establishing a company in China.
• You don’t manage complex compliance: EORs are experts in Chinese labor law. They manage complex regulations regarding contracts, working hours, and termination procedures, reducing your risk of legal issues. China's Ministry of Human Resources and Social Security (MOHRSS) outlines these complex requirements (http://www.mohrss.gov.cn/).
• You don’t need to learn new payroll and tax systems: The EOR handles all payroll calculations, tax withholdings, and payments. This includes contributions to social security and housing funds, which are mandatory in China.
• The EOR administers all employee benefits: The EOR takes care of benefits management. This includes health, unemployment, work-related injury, and maternity insurance, as well as pension contributions.
• The EOR manages all HR and compliance: You offload time-consuming HR tasks. This allows your team to focus on core business activities and growth.

Employment costs, salary expectations, social insurance rates, and talent availability vary between cities such as Shanghai, Beijing, Shenzhen, and lower-cost inland cities. It is not uncommon for employers to pay significantly different salaries for the same position, depending on where a candidate is located.

International businesses will find employment costs in China lower than in the US, Western Europe, Japan and South Korea. However, they are much higher than in other parts of Asia, prompting labor-intensive jobs to be shifted to Vietnam, Bangladesh or Cambodia.

In China, the strongest candidates, especially in technology, AI, semiconductor and advanced manufacturing roles, receive multiple offers. Top talent in the country has come to expect competitive compensation packages that reflect the level of skill they hold, and the high quality of living in major centers.

China's employment environment is highly organized, with local regulations being as important as national labor laws. Many employers view China as one of the most complex hiring markets globally, making a deep understanding of the local employment landscape essential for successful hiring.

Chinese labor authorities and employees are very aware of statutory rights. Therefore, written contracts, social insurance registration, and proper payroll administration are essential.

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:

Contract Term	Maximum Probation Period
3 months to less than 1 year	1 month
1 year to less than 3 years	2 months
3 years or more	6 months
Open-ended	6 months

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

Independent contractors do exist in China, but they are far less common than in Europe, the US and even some parts of South America. Chinese labor law favors traditional employment relationships, and a business cannot simply classify a worker as a contractor merely because both parties agree.

As a result, many companies reserve independent contractor arrangements for specific sectors such as IT consulting, engineering, business consulting, translation services, research and short-term projects.

Contractors are not commonly hired for roles that involve regular working hours, supervised work tasks, or integration into the day-to-day operations. These roles should be filled by traditional employees to avoid a misclassification risk.

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.

The most common compensation structures in China combine a fixed monthly salary with variable incentives and several benefits (both mandatory and supplementary).

Employees in China think in terms of a monthly salary when reviewing compensation, rather than the annual salary. Candidates expect to see a clear salary breakdown showing base salary, annual bonuses and an optional 13th salary payment. In some jurisdictions, employers also offer performance-based incentives and sales commissions.

Expert insight: For foreign employers, one of the biggest cultural adjustments is that annual bonuses are viewed as part of total compensation rather than a performance-based reward.

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:

Contribution	Description
Pension	Funds the national retirement system.
Medical Insurance	Covers healthcare costs for employees.
Unemployment Insurance	Provides financial support to out-of-work individuals.
Work-Related Injury Insurance	Covers costs associated with injuries sustained on the job.
Maternity Insurance	Provides benefits for female employees during maternity leave.
Housing Fund	A mandatory savings plan to help employees purchase housing.

Employee taxes and deductions

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

Deduction	Description
Pension	Employee's contribution to their retirement fund.
Medical Insurance	Employee's share of their healthcare coverage.
Unemployment Insurance	Employee's contribution to the unemployment fund.
Housing Fund	Employee's mandatory contribution to their housing savings.
Individual Income Tax (IIT)	A progressive tax withheld from an employee's salary. The rate increases as income rises.

In China, statutory benefits are extensive, but employers still offer supplementary benefits to attract top talent. These can include medical insurance top-ups, extra retirement savings, housing allowances (common among expats), meal allowances, wellness programs, and professional development initiatives.

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 13 national public holidays each year. Some regions may have additional holidays.

Holiday	2026 Date	Duration
New Year's Day	January 1–3	3 days
Spring Festival (Chinese New Year)	February 15–23	9 days
Tomb-Sweeping Day	April 4–6	3 days
Labor Day	May 1–5	5 days
Dragon Boat Festival	June 19–21	3 days
Mid-Autumn Festival	September 25–27	3 days
National Day	October 1–7	7 days

Typical supplemental benefits

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

Statutory Benefits	Non-Statutory (Supplemental) Benefits
Pension Insurance	Additional paid time off
Medical Insurance	Flexible work arrangements
Unemployment Insurance	Private health insurance
Work-related Injury Insurance	Housing fund contributions above the minimum
Maternity Insurance	Death benefits for the employee's family
Housing Fund	Meal and transportation allowances

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.

Terminations in China are heavily regulated, and employers must have a lawful basis for dismissal. Terminations by mutual agreement are allowed in the country, but it is still advisable for employers to document the process.

Certain employees receive enhanced protections against termination. This includes pregnant employees or those on maternity leave. It also includes employees receiving medical treatment and those close to retirement. Wrongful termination of these ‘vulnerable’ employees can result in compensation liabilities.

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:

Years of Service	Severance Pay
Less than 6 months	Half a month's salary
6 months to 1 year	One month's salary
Each full year	One month's salary

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.

Foreign nationals must have their visas and work permits finalized before they begin working in China. The country uses a classification framework that categorizes foreign workers by qualifications, skills, salary level and experience.

Employer sponsorship will be required to get a work permit, and on arrival, foreign workers must obtain a residence permit linked to their employment authorization. Workers will only be allowed to perform work under their approved permits.

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:

Document	Description
Valid Passport	Your passport must have at least six months of validity remaining.
Visa Application Form	You need to complete the application form accurately.
Photograph	A recent passport-sized photo is required.
Invitation Letter	You'll need an invitation letter from a business partner in China. This letter should detail the purpose of your visit and information about both you and the inviting company.

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.