Employer of Record China
Infotree Global provides employer of record solutions to companies who want to set up payroll and hire employees in China without setting up a subsidiary or branch office. Backed up by our in-house recruitment team, we carry out tasks like sourcing, hiring, and onboarding your employees in China. Staff hired by us are in accordance with the employee regulations in China. With us, you have full control over your employees.
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Hiring in China
While you are going to start a business in China, there are a few considerations to pay attention to before hiring employees. It is important to put everything in writing to avoid confusion and tussling between both parties. Further, it is also a legal mandate to offer your employees a written employment contract in the first month of their joining. If you are unable to do so then the employee is eligible to get twice their salary.
Understanding Chinese culture is important if you wish to take your business there and our China employer of record can help. The ‘Face’ indicates respect and reputation of its nationals and hence, if you have anything to discuss with your staff, do it privately. Else, it would be considered insulting an individual in front of colleagues. The standard Bonus here is known as the “13th-month salary”. It is a common practice in China and employees should have clarity of the same in their initial contract phase.
Mandarin is the national language in China there are different languages used in various locations. Cantonese is the prime language in the southwest part of China and the major centers are Shenzhen, Hong Kong, and Guangzhou lying in the Guangdong Province. Similarly, few areas like Beijing, Shanghai, Tianjin, and Chongqing have slightly different languages.
If you plan to establish a subsidiary in China, there are a few factors to consider. Most important are the Business factors that make you aware of the employment contracts that should meet the local standards besides having professionally drafted. It should mention the industry and business type, nationality, and presence of trade agreements or business relationships. Different cities and regions may vary when it comes to rules, availability, and costs. That is why advice from China’s employer of record is always recommended. Some information that must be maintained in the contract is provided below:
Compensation – The minimum wages in China may vary by province or city. For instance, you may find higher wages offered in Shanghai with minimum wages around 2,480 CNY, while in Shenzhen minimum wages are around 2,200 CNY, and Guizhou’s wages are around 1,570 CNY. Employers are given the flexibility to offer wages in cash or bank transaction. Due to market norms, an extra bonus can be given. However, the employer can specify the monthly remuneration, terms of payment, and total annual pay in the initial contract. Bonus is not essential but can be considered under suitable criteria.
Working hours – Most of the rules in China are designated by the Labor Law, thus, there can be some changes in the criteria by employers if the proposal is agreed upon by the labor union or proper labor administration authority and employees too. The requirement of changes usually occurs while setting working hours for special positions including field personnel, hiring managerial staff, security personnel, or the sales staff.
Generally, the working schedule in China is centered on a 40-hour standard week running from Monday to Friday but no more than 44 hours a week. The office operational hours are considered from 8 am to 6 pm with two hours lunch break. but, for government offices, it is from 9 a.m. to 5 p.m. Offices remain closed on weekends; Some employers allow holidays for only one day each week while others provide two holidays.
Bonus – Bonus offers and their amount vary from job position and the company respectively. Most Chinese employees usually receive a year-end bonus. Apart from the annual compensation details, there is a market norm in China of providing one additional month’s salary to all while a sales employee may get the offer of a commission structure. Nevertheless, such a bonus or 13th Month salary is not mandatory in the country. It is only the bonus given by the employers at will during Chinese New Year.
Probationary Period – A probationary period is a fixed time at the starting of the employment, during which the worker is not entitled to all the contractual benefits but only some. Chinese law prohibits any probationary period for part-time, temporary, or freelance employees. The employee on probation can be exempt from the work even without the notice period. The setup must comply with both parties. Moreover, one employee must not have more than 1 probationary period even if the employer renews the contract.
The probation period generally depends upon the length of the employment contract. If the contract lasts 3 months to 1 year, the maximum probation is for one month. If the contract is agreed to be of 1 year to 3 years, the probationary period can be a maximum of 2 months. If the contract lasts more than three years then the probation period is a maximum of 6 months. Most of the employees are entitled to 3 months probation period.
Termination and Severance – The agreement can be terminated during the probation period. The probationary period can be of up to 6 months for an indefinite employment contract. Time requirements for submitting a notice of termination are different from industry to industry. Generally, the length of service determines the amount of notice for termination. For instance, a minimum of 1 week’s notice is enough for one month to two years of employment.
The reasons for termination must be documented. It is illegal to terminate a pregnant female employee who is on maternity leave or in the breastfeeding stage. Longer periods of contractual rights are common in binding both parties. Contracts may include a payment in lieu of notice (PILON) clause allowing employees to pay workers instead of asking them to work on their notice. Service of payment in lieu can satisfy an employee’s contractual rights. Then, statutory rights might arise against the employer.
When it comes to China’s compensation laws, offer great advantages to employees. However, it is important to comprehend every aspect of the compensation law to offer your staff a fair remuneration with extra benefits to stand out. The management of employment contracts demands the professional consider several negotiating terms while setting up employees’ statutory benefits. They all should be complying with locally updated government rules and regulations as below are:
Maternity leave – According to the Labor Law of the People’s Republic of China, the female staff is entitled to 98 days of maternity leave. If any Chinese female employee who gives birth to her first child at the age of 24 or older is considered as “late childbirth” and is therefore entitled to an additional “late maternity leave” of up to 30 days. Also, if there is the case of giving multiple births, the female employee is granted an additional 15 days of leave for each additional child.
During maternity leave, female employees are entitled to receive full pay. The Social Security Bureau pays the employee. In case the employer did not contribute to social security on the employee’s behalf, then the employer is bound to pay. Employers cannot ask for overtime or night shifts from females with more than seventh months of pregnancy. Besides, they must not be terminated during this period. In China, paternity leaves vary as per the location. In Beijing and Zhejiang, male employees can expect 15 days of leave and 10 days in Shanghai. Additional leaves are permitted to fathers in Beijing if their spouse reduces her leaves by the same amount.
Vacation – Vacation offering is for the employees who have continuously worked for more than 1 year and those with less than that receive no vacation days. Employees get paid leave depending on how many years they have worked. Those with working experience between one year and ten years get 5 days of annual leave. Those with 10-20 years of experience get 10 days of paid leave. Those with 20 years or above are entitled to 15 days of annual leave. Apart from these most mid-level to senior executives hired by foreign employers in China are entitled to 2-4 weeks of annual vacation days.
Unused annual leaves may be carried forward to the next year. Employees are expected to take their entire leaves by the employers. If an employee does not use all leaves and does not agree to carry them forward, then the employer is entitled to pay 200% of the employee’s daily wage for each unused annual leave.
Sick Leave – Under Chinese national law, an employee suffering from illness or non-work-related injuries is entitled to 3-24 months leave for medical treatment depending upon employee tenure with the employer. In case an employee becomes sick or injured on the job site, he/she is entitled to around 12 months’ leave at full pay for medical treatment.
Compensation in China varies by province or city. Its calculation can be done in several ways:
- Based on the employee’s salary and work experience
- Based on terms and conditions defined in the employment contract
- According to the Salary of the employee
As per the guidelines by the local government, sick pay should not be under 80% of the local minimum wage.
Health Benefits – Employees are entitled to basic health and pension insurance through the national system in China. As the coverage is publicly funded, in cities, employees have to enroll in Urban Employee Basic Medical Insurance financed by employer payroll taxes and employees. Employees contribute 2% of the salary and employers do between 8%-10% of payroll. However, the insurance is funded by central and local governments if the case is of Urban-Rural Resident Basic Medical Insurance, which is ensured in rural areas.
If you offer employees private insurance to cover costs and services, that are generally not offered in public insurance plans, it becomes easy to fill in coverage gaps.
Pension – In China, the official retirement age is 50 years for women and 60 years for men. All employees including foreigners, and natives are entitled to a pension. As per all employment regulations in China, the amount of an employer’s contribution depends on the locality. The maximum contribution ranges usually around 20% of the total wages paid to their workforce.
Employees contribute up to 8% of their wage and their contribution is based on their individual wages. After their contribution for at least 15 years, the funds in the personal accounts are offered to the worker from the common pension fund, in addition to the monthly pension.
Employment & Labor Laws in China
Talking about employment law in China indicates all the associated factors. This may involve issues on remuneration, employment contracts, workplace safety, working hours, and labor disputes. Besides, it also includes training, protection from discrimination, social insurance, wage regulations, and other legal responsibilities the employer should legally abide by.
China employment law has the following obligations that include a strict termination system, the existence of local rules and policies, and varying court interpretations of the same legal troubles.
The two China employment laws must for all international investors before starting a business includes:
- 1995 Labor Law of the People’s Republic of China
- 2008 Labor Contract Law
The China employment laws are way too complex and intimidating for investors having the potential legal risks. Therefore, taking the assistance of a professional employer of record in China can help in great ways.
Payroll Tax in China
When it comes to calculating payroll and taxation, China has specific rules. However, it depends on the hiring factors whether the company employs international citizens or local employees. The main concern for an international company is that it needs to be in compliance with tax laws in China.
China has a few unique rules associated with employment, for instance, foreign citizens must pay local Taxes and Health Insurance besides having their own Health Insurance. In addition, the employers of Chinese people must register and contribute, varying by region to the social insurance system of China. It is known as the five insurances comprising medical insurance, pension fund, unemployment insurance, industry injury, and maternity insurance. In China Individual income tax (“IIT”) – progressive rates range from 3% to 45%, Corporate tax in China is 25%, Sales Tax is 17%, whereas withholding tax is 10% for non-resident companies. By partnering with our China PEO & Employer of Record, Infotree Global’s team of in-country experts will take care of all your payroll and taxes.
Challenges When Expanding into China
Expanding into China is not an easy objective to accomplish, given that the existing frameworks are extremely stringent. While expanding any business into China, there are a plethora of things to consider before taking any step. As your Employer of Record in China, we take care of all these aspects for you. One of these aspects includes considering the challenges involved while expanding your business into China. Here are a few issues that you may face while planning your business expansion in the country yourself–
Bureaucracy – While expanding the business into the Chinese market, business owners usually struggle with the local rules and regulations. On a domestic level, the bureaucratic environment in the Chinese Market is extremely problematic for international businesses trying to enter the market. A common problem area is usually concerned with obtaining the required licenses and permissions. The process is extremely lengthy and laborious, which often drives away the interest of business owners while expanding their businesses into the Chinese market.
Governmental challenges – Another significant challenge here is regarding the lack of transparency in government procedures. Businesses often end up struggling with extremely stringent policies for foreign businesses entering the Chinese market. Moreover, there are specific rules regarding how the products must be designed, manufactured, sold, and consumed in the Chinese market. Any foreign player entering the domestic market must comply with these rules.
Labor – Hiring local employees while expanding into the Chinese market is another extremely important challenge to consider. Any foreign company aiming to expand their businesses in the Chinese Market faces several obstacles when it comes to hiring Chinese employees. The first and most prominent challenge is to set up their business in a WFOE (Wholly-foreign owned enterprise). It is the country’s domestic organization that allows international businesses to hire local employees. Moreover, the entire process to locate and recruit talented employees within the existing domestic market is a challenge in itself.
Bureaucracy and Legal Complications – The existing bureaucratic environment in the Chinese market is already a challenge for new businesses. It is also important to understand the challenges that legal complications possess. The procedure to complete registration to obtain certifications and licenses is an exhaustive process.
Benefits of China Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees, distributing payroll, or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Chinese employee to work for its company. Besides quick access to the Chinese market, the employer of record also enables the client to ease off worries related to payroll and HR.
In Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in China, you need to be well aware of the payroll and taxation rules. With China Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish the one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in China. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as they can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Infotree Global is dedicated to providing professional assistance to help you set up business in China. We provide the support of our in-country team of professionals to undertake all the legal formalities associated with employment in China and help you stay compliant with country labor laws. Owing to our rich industry experience, we help you hire the most talented individuals for your company and embrace all the payroll-related jobs. Thus, we help you save time without worrying about legal hassles so that you can stay focused on your expansion endeavors. With our global payroll and employer of record solutions, you can experience professional assistance at every step and expand your business without worrying about legal complexities.