Employer Of Record in China

Skuad’s Employer of Record China (EOR) solutions make business expansion to China easy and hassle-free. Our unique HR platform allows companies to hire exceptionally talented employees in China, without having to set up a separate legal entity. It streamlines the process of hiring and onboarding a remote team by handling payroll management, taxation, and other legal compliances. To learn more about Skuad, book a demo today.

China at a Glance

Estimated Population: 1,425.2 million

Currency: Yuan (CNY) and Renminbi (RMB)

Capital city: Beijing

Languages: Mandarin, Cantonese

GDP: USD17.96 Billion

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Employment In China

The employment laws and regulations in China apply to both national and foreign employees. However, there are some variations in the benefits and entitlements. A formal and written employment contract is a must for every full-time employee hired in China. There are three types of employment contracts.

Fixed-term contract - This type of employment contract lasts only for a specific period.
Non-fixed term contract - This type of employment contract does not have any definite expiration period.
Project-based contract - This employment contract ends with the completion of the project.

The Chinese government offers all its citizens and residents a basic health insurance plan. Apart from this, many organizations also offer supplemental insurance benefits to their employees. In addition, employees are also entitled to retirement benefits, employee health benefits in China, unemployment benefits, disability benefits, and maternity benefits during their employment. These benefits are given under The Labour Law, The Social Security Law, The Work Safety Law, and The Union Law.

The Chinese government updates its laws from time to time; keeping track of the latest provisions and updating work procedures can be a daunting task for foreign employers. Skuad’s EOR solutions can help you manage these complexities and mitigate challenges. Our team will ensure seamless hiring and onboarding, all in accordance with the relevant laws and procedures. To learn more about Skuad solutions, click here.

Mandatory Employee Benefits

Title	Explanation
Medical Leave	An employee can take a work-related injury or sick leave of up to 12 months with full pay. For any non-work-related injury or sickness, an employee can take leave of 3 months (if the employee’s cumulative work experience is less than 10 years) to 12 months, depending upon his period of employment.
Maternity Leave	Female employees are allowed maternity leave of 98 days. They can extend the leaves for 15-30 days in case of medical complications.
Retirement Benefits	The average retirement age in China is 60 years for males and 55 years for females. Base pension, individual account pension, and transitional pension are the three components of retirement benefits. Employees need to pay a minimum of 15 years of contribution to receive retirement benefits in China. The final amount depends upon the local regulations.
Medical Care Benefits	Employees are entitled to get reimbursed by the employer under individual medical accounts for ordinary clinical expenses and pooled public medical funds for critical illness.

Leave, Accrual, And Statutory Holidays

In general, the Chinese leave policies are not as generous as those of Western countries. Therefore, many local and foreign companies choose to stretch the minimum limit and offer more leave and rest days to the employees as a negotiating tool.

Statutory Holidays

There are 7 public holidays in China:

New Year’s Day
Spring Festival / Chinese New Year / Lunar New Year’s Day
Qingming Festival (Tomb-Sweeping Day)
Labor Day (1st May)
National Day (1st October)
Mid-Autumn Festival
Dragon Boat Festival

Rest Day Policy

Employees working in China are entitled to get 1 full day of rest every week.
It is a complete 24-hour period in which the workers do not work. Rest days in China ideally fall on Saturdays or Sundays.

Paid Leaves

Employees in China are entitled to get 5-15 days of paid leave as per their tenure of service to the company.
Apart from this, employees can also apply for marriage leave, sick leave, and funeral leave.

Annual Leave Accrual Entitlement

This is a paid benefit. It requires an employee to work for at least a year with all the employers and not just the most recent one.
5 days of annual leave are granted for cumulative employment of up to 10 years. The number of leaves doubles for a service of 10-20 years.

Minimum Annual Leave

Number of Years	Minimum Annual Leave (Days)
Less than 1	0
1 to 10	5
10 to 20	10
More than 20	15

Compensation for Unused Leaves

Companies operating in China are liable to compensate the workers if they do not avail of their paid leave.
The employer must pay 200% of the employee’s daily wage for every paid leave not availed.

Contractors Vs. Full-Time Employees

Companies planning to expand operations abroad or hire foreign talent have to choose between independent contractors and full-time employees. Here is a guide to smoothen the process and know everything about hiring contractors vs. hiring full-time employees in China.

Hiring an independent contractor is a relatively quick and hassle-free process. There is no legal commitment other than the employment contract. Furthermore, there are no overhead costs like benefits, statutory payments, and payroll taxes.

Since it is not mandatory to establish an entity or branch office to hire a contractor, hiring independent contractors can prove to be a wise decision for short-term projects. The professional relationship ends once the term or project is complete. However, a company is free to re-engage any contractor as per their current needs.

Many organizations have realized that hiring a full-time workforce is a better choice for expanding operations on foreign land. It makes complying with employment laws easier. Moreover, the companies also get an opportunity to foster long-term relationships with talented employees.

Although there are several administrative steps in the hiring process, partnering with employers of record EOR such as Skuad can make things easier for your company’s expansion. Click here to learn more.

Hiring In China

Hiring independent contractors

It is mandatory to define the work parameters for any company that wants to hire independent contractors in China. However, the contractor has the last word on working methods, timing, and machinery used.
It is mandatory to have a written agreement or contract that specifies the mode of payment of fees and the terms of the contract.
Some independent contractors might also want to use incremental or escrow (third-party) payment systems to protect themselves against non-payment issues.

Hiring full-time employees

Hiring full-time employees in China is a complex procedure.
Companies need to have an official employment contract for every employee.
It is also mandatory to maintain employee files along with their compensation details.

Most organizations use popular Chinese job search platforms like Monster, China Job, China Hot, Careerengine, and Matchdragon to hire employees in China. Many fresh graduates upload their CVs on these platforms regularly. Choosing the right candidate can help employers in growing their business.

However, companies seeking to hire employees need to be extra vigilant about the authenticity of the profiles circulating on these platforms. With the volume of applications received on these platforms, the chances of encountering fake profiles are high. Employers can also get in touch with the best hiring companies in China to find the right candidates for the job.

Alternatively, companies that want a hassle-free and safe hiring process can enlist the services of Skuad’s local EOR for diligent profile screening, along with reference checks to ensure the best workforce selection for the organization. To learn more about Skuad, click here.

Probation & Termination

Probation & termination regulations in China are quite different from those in other nations. Here are some of the laws and regulations to consider.

Probation

According to the employment laws in China, it is mandatory to have a probationary period for both local and foreign employees. However, the maximum probationary period in China depends upon the terms of the employment contract.
Employments that are based on a fixed assignment do not have a probation period.
Moreover, the organization cannot send employees on re-probation after the renewal of their labor contract.

Duration of Employee Contract	Maximum Probation Period
3 months to 1 year	1 month
1 to 3 years	2 months
Fixed-term contract of 3 years or more	6 month

Salary – It is to be noted that the workers' salary during their probation cannot be less than 80% of their minimum wages specified in the employment contract.

Termination of employment in China

Employees in China cannot be terminated unilaterally by the companies. The ‘at will’ employment policy does not apply in China. Every company operating in China should be aware of the termination rules and regulations. Failure to comply with these rules can result in penalties, employee payments, and employee reinstatement.

Termination process	The company should have justifiable reasons for every termination of employment. It must also give a reasonable notice period and compensation to the terminated employee.
Types of Termination Notice	There are 3 types of termination notices in China; with cause without cause fixed-term employment contract
Notice Period	Every organization is liable to give a notice period of 30 days to the terminated employee. If a company terminates an employee’s contract during his probation period, it should give a 3 days notice to the employee.

EOR Solution In China

Partnering with an EOR is one of the fastest ways of expanding your business into international markets. It enables employers to explore new markets and retain key talents, irrespective of their location. Lower risk, cost-effectiveness, and rapid set-up are the other benefits of EOR Solution.

With Skuad as an EOR partner, your business is set free from legal compliance issues, taxation laws violations, provision of solicitors, and lawyers, and leaving you with ample time to concentrate on core marketing operations and getting a leg up in the international market. Click here to learn more about Skuad.

Types Of Visas In China

There are eight types of visas in China.

Visa types	Details
Visa D	This visa is issued to immigrants who wish to reside in China permanently. The applicant should have a permanent residence confirmation to obtain this visa.
Visa Z	This visa is issued to the applicants and accompanying individuals who are about to join employment in China. The employer can obtain Visa Z from municipal or provincial labor authorities.
Visa X	People who come to China for job training or higher studies are given Visa X. The duration of this visa is 6 months. A copy of the passport, Chinese student visa application form, and admission notice of the Chinese university or school is required to obtain this visa.
Visa F	Any applicant invited to China on a business tour, lecture, study, short-term course, job training, or cultural exchange needs to obtain a Visa F.
Visa L	People visiting China for personal reasons like visiting relatives, attending weddings, or sightseeing will need a Visa L. Tourists are required to submit proof of their financial capability to cover the traveling expenses in China. People visiting relatives need to submit an invitation card from those relatives.
Visa G	People who are passing through China need to obtain Visa G from the authorities. The applicants are liable to show the authorities their valid visas and their onward tickets for the regions they’re headed to.
Visa C	Aircrew members, train attendants, seamen, and their family members working with international services are given Visa C. Applicants need to submit relevant documents along with bilateral agreements to the authorities.
Visa J-1	Foreign resident correspondents working in China are issued Visa J-1.
Visa J-2	Foreign correspondents who visit China on a short trip on reporting tasks are issued Visa J-2. Both the applicants of Visa J-1 and J-2 need to submit certificates from the relevant Chinese authorities to get these visas.

Requirements to obtain a work visa in China

All work visa applications require submission of the original passport, offer letter from the employer, photograph, health certificate, and valid employment license to the Chinese authorities.

However, companies can also get in touch with the officials of the Ministry of Foreign Affairs or the Consulates / Embassies of the People’s Republic of China for the latest information on China’s work visa requirements.

Work Permits

Skuad is an EOR that can help you sponsor a China work permit for foreign employees or get a Visa Z that allows them to work in China. Skuad handles all the work permit formalities along with other requirements of employment in China. Want to know more? Click here.

Can Skuad sponsor a work permit in China?	Yes
Cost of Work Permit	USD 800
Processing Time	4 to 6 weeks
Documents Required	Passport Photo ID Work permit application form Medical examination report Reference letter Verification of past employment Verification of professional qualification Employment contract Non-criminal record authenticated by the Chinese Consulate or Details of accompanying members Physical examination record
Can the work permit processing be done in the resident country?	No, the consultant can be present in China while the processing is done. But he must return to his home country to collect Visa Z.
Is a spouse allowed to work on a dependent visa?	No.

Payroll & Taxes In China

Payroll

When understanding the system of payroll & taxes in China, it is important to understand the four payroll options:

1. Remote payroll - When a foreign employer or a non-resident organization hires resident employees in China, it comes under remote payroll.

2. Local payroll - At times, companies register their business in China under the Representative Office, Joint Venture, or Wholly Foreign-Owned Enterprise. However, some companies prefer to have another organization administer its payroll. This is termed local payroll. In this case, the EOR is fully responsible for obedience to tax, work permits, payroll, immigration, and employment regulations.

3. Internal payroll - Internal payroll is when large-scale companies wish to operate their local payroll across all their employees, be it local or foreign.

4. Fully outsourced payroll and employment - At times, companies decide to outsource the employment and payroll from the Global Employment Organization (GEO) in China. Such companies come under the fully outsourced payroll and employment system.

Skuad is a leading Global HR platform that can handle all your payroll and tax compliances while expanding your business in China. Click here to know more about it.

Social Security Contributions

Applicable Funds	Employer	Employee
Pension	Yes	Yes
Unemployment Insurance	Yes	Yes
Housing Fund	Yes	Yes
Occupational Injury	Yes	Yes
Medical and Maternity Insurance	Yes	Yes

Employer Taxation

Topic	Explanation
Corporate Income Tax	25%
Withholding Tax	10% for foreign and non-resident companies
Employer Social Security (ERSS)	Under this scheme, employers must contribute 20% towards pension, maternity insurance, health insurance, unemployment insurance, and work-related injury insurance. However, there is an upper limit that says the maximum contribution cannot exceed 3 times the median monthly wages.
Payroll Tax	NIL

Employee Taxation

Topic

Explanation

Income Tax Rate

Gross Income	Tax rate %
0-36,000	3
36,000-144,000	10
144,000-300,000	20
300,000-420,000	25
420,000-660,000	30
660,000- 960,000	35
Above 960,000	45

Sales Tax

17%

Employee Social Security (EESS)

Employees in China contribute 8% of their income towards pension, maternity insurance, health insurance, unemployment insurance, and work-related injury insurance.

Bonuses

Bonuses are awarded at the end of the year which equals one month of salary of the employee.

Incorporation

Incorporating a holding company in China involves several formalities and documentation procedures. It is vital for any company planning to expand into China to be aware of all the laws and formalities involved in incorporating a holding company.

Minimum set-up requirement	Directors – 3 to 13 Chairman – 1 Deputy Chairman – 1 A legal representative of the company Address of business place
Registration Timeline	2 to 3 months
Incorporation Process	Step 1: Pre-register the business with at least 6 proposed company names. Approval can take 2 to 15 days. Step 2: Apply for a certificate of approval with requisite documents. Step 3: Obtain business licenses and certificates. Step 4: Create an organization stamp for accounting formalities, corporate tax requirements, and annual general meetings.

Skuad can be your companion in simplifying the process of setting up a subsidiary in China. With a highly experienced team, Skuad will handle all the paperwork and documentation formalities of incorporation for you. To know more about it, click here.

Professional Employer Organization

A Professional Employer Organization China (PEO) is an organization that partners with a business entity to offer various HR services such as tax filing, employee benefits, payroll, and processing. This concept is also known as co-employment, wherein the hiring company takes care of the HR matters of the employees. As a company, PEO gives you better control over business operations.

On the other hand, an Employer Of Record (EOR) is an alternative payroll solution offered by global HR platforms. An EOR provides the same services as a PEO, but an EOR becomes the payroll employees’ legal employer.

Since an EOR is a legal employer, it takes care of compliance, payroll, timekeeping, unemployment claims, work permits in China, and worker’s compensation. As a legal employer, EOR holds all the responsibilities and liabilities of the employees.

Organizations planning to expand into new territories are better suited with a global EOR which becomes the legal employer on behalf of the organization. Instead of associating with a PEO, a co-employment partner, organizations have more to gain by utilizing the services of an EOR solution. The EOR solution safeguards organizations from unexpected policy changes, loss of control, and potential risks as the EOR bears every legal liability for the organization. In addition to these, the EOR handles payroll, tax, and employment law compliances. To know more about Skuad's EOR solution, contact Skuad today

Conclusion

With the growing markets, a wide range of business opportunities in China, and swelling spending power, China is a smart choice for any organization seeking business expansion.

However, adhering to complex employment contract laws, setting up payrolls, getting through work permits, and understanding labor laws discourage companies from moving in this direction.

Therefore, companies often seek alternatives to simplify this business expansion and employee management process. Skuad’s international exposure and globally distributed teams can help you hire an excellent workforce in China.

Be it payroll management, benefits, compliances, or taxation, Skuad has succeeded in earning the trust and confidence of its clients and aspires to grow with them in the future. It aims to offer the best EOR China services to make every business’s expansion dream come true. Connect with Skuad today and give wings to your business expansion plans.

FAQs

1) What is an employer of record in China?

In China, an Employer of Record (EOR) is a local entity that legally employs individuals on behalf of a foreign company. The EOR handles all local employment-related responsibilities, including compliance with labor laws, payroll processing, tax withholding, and benefits management. This arrangement is particularly useful for companies looking to expand into China without setting up their own local entity.

2) What is the employer of record for international employees?

For international employees, an Employer of Record (EOR) facilitates legal and compliant employment in the employee’s country of residence on behalf of a foreign company. The EOR ensures that the employment is compliant with local regulations, handles payroll, taxes, and benefits, and removes the need for the foreign company to establish a local entity.

3) Can a US company employ someone in China?

Yes, a US company can employ someone in China, typically using an Employer of Record (EOR), like Skuad, to ensure compliance with Chinese labor laws and regulations. This method allows the US company to legally hire and pay employees in China without establishing a local entity.

4) Can I pay my employees working in China directly from abroad?

Directly paying employees in China from abroad is generally not advisable due to strict Chinese foreign exchange and tax regulations. Instead, employing through an EOR or setting up a local entity is recommended to handle payroll legally and efficiently within China, ensuring compliance with local laws and tax requirements.

5) What is the difference between EOR and PEO?

An Employer of Record (EOR) becomes the legal employer of the workforce and is responsible for all compliance, HR, and payroll issues. In contrast, a Professional Employer Organization (PEO) co-employs staff with the client company. While both handle HR tasks, in a PEO setup, the original company retains more employer responsibilities and HR functions than with an EOR.

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Employer Of Record in China