China 10 min

How to use an Employer of Record in China

Written by Chris McNamara
Chris McNamara

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With a GDP of over $19 billion, China is an economic powerhouse and a force to be reckoned with. Electric vehicles, designer bags, custom software development, groceries, retail, electronics — you name it, everything is made in China, and it’s all thanks to an ecosystem that’s produced the world’s brightest innovators and manufacturers.

If you’re looking to add Chinese employees to your remote team, an employer of record will help tackle the legal busywork you need to get set up to hire in China. An EOR typically helps you with all the HR processes required to hire and pay workers abroad compliantly — onboarding, benefits, taxes, payroll, and security.

This article will explain how to use an employer of record in China, the costs and benefits of using an EOR, and how you can navigate China’s employment laws as you grow your team.

Six steps to hiring employees in China using an employer of record

Partnering with an employer of record will help you start hiring employees in China faster and at a fraction of what it’d cost you to set up a local entity. The challenge is to find the ideal EOR that has the infrastructure in place to support your global hiring plans.

Follow the steps below to find a reliable EOR that can help you start hiring in China. 

Step 1: Weigh up the pros and cons of each potential partner

Think about what you need in an EOR and make a list of services required. Make sure your potential partner has the capabilities to provide basic functions such as:

  • A local entity through which you can hire employees in China

  • A working payroll solution for paying your employees and contractors

  • Legal support with changing labor regulations

  • A simple, employee-friendly onboarding process

  • Reliable, reasonable pricing

  • Assistance with paying local taxes

  • Securing your intellectual property and inventions produced by your employees

You can use these functions as a checklist for grading potential EOR partners on a sliding scale to measure which one best meets your company’s international hiring needs.

Step 2: Take the time to select the most appropriate EOR service provider 

EOR providers often use entities owned by third parties for some of their services, since it’s convenient and fast. However, this is not ideal for you as it can create legal and financial liability for your business. Note that your business can be affected if these third-party providers get into legal trouble or increase prices at will.  

Our guide to choosing between owned-entity and partner-dependent EORs goes into detail explaining why you should stick with EORs that have subsidiaries registered in China under their name.

Step 3: Check the reviews, testimonials, and coverage of your shortlist of providers

Reviews are a great source of information and can give you an unbiased picture of the quality of service an EOR provides for past and existing customers. Make sure you check out online press coverage, client testimonials, and third-party review sites to get a better understanding of how the EOR operates and whether it suits your needs.

Step 4: Ensure that the EOR solution will provide a best-in-class employee experience

The EOR hires employees on your behalf and acts as the face of your brand. So, you have to make sure that they offer a positive and engaging experience to your employees. That includes offering a simple onboarding experience, resolving employee queries, and making sure your employees are paid on time and in their currency of choice.

Step 5: Work with your partner to make sure you always provide a fair and equitable compensation package 

An employer of record can help you figure out competitive rates for Chinese candidates by factoring in the local cost of living, market sentiment, and the skill level of the candidate you’re looking to hire. Your EOR should also be able to attract top talent by offering a robust benefits package by considering the specific labor laws of the location, as well as the individual’s experience, role, and level.

Step 6: Make sure your partner will guard your intellectual property and maintain data security for your business

An employer of record serves as an outsourced legal, HR, and finance department of sorts and should have certifications that prove they can securely process any sensitive information in their custody. Data protection is an essential feature that you should look for in a potential EOR partner.

Similarly, as explained in our guide to employer of record providers, contracts issued by an EOR to your employees should assign any IP they produce to your company to avoid complications over invention rights.

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What are the benefits of using an employer of record in China?

The key benefit of using an EOR to handle your global hiring is the amount of time, money, and effort you’ll save. 

Apart from taking on the legal responsibility of opening an entity in China (which can take months), you’ll also reduce the burden of managing the HR processes involved in hiring and paying employees in China. Importantly, an EOR helps you stay compliant with China’s employment laws and regulations. Some benefits of using an EOR in China are explained below. 

  • Local entity: An EOR employs your workers (on paper) and handles all the paperwork required to have them work for your company.

  • Payroll: An EOR offers payroll functions you can use to pay your employees on time, in their currency of choice, and without hefty processing fees.

  • Benefits: An EOR can help you offer localized benefits like healthcare, dental, vision, etc., that your employees can access wherever they are located in China.

  • Legal support: Get access to employment and legal experts that’ll help you figure out Chinese laws, so you can hire compliantly and avoid fines, penalties, or legal troubles.

  • Compliance: Stay up to date with any changes to China’s employment laws so that you don’t have to worry about non-compliance.

  • Taxes: File income and payroll taxes for your business and your employees easily.

  • Onboarding: Establish seamless onboarding procedures and give your employees a platform where they can submit forms and employment paperwork.

  • Offboarding: Dismiss employees compliantly with a system that helps you provide notice and pay severance benefits.

Using an EOR can be a good financial investment, as long as you choose the right partner for your business. Here’s a guide to deciding when to use an EOR and how to find the best provider for your needs. 

How much does it cost to use an EOR in China?

How much can you expect to spend on an employer of record? It depends on the kind of services offered by the EOR, the number of workers you want to hire, and their location.

Older EOR providers charge huge enterprise rates of up to $2,000 per employee per month or a percentage (up to 25%) of your payroll expenses. Smaller EOR providers may charge less, but they probably depend on third parties to offer their services. They may also not have the infrastructure or security measures in place to support your hiring needs.

Remote’s employer of record services offers required to hire employees abroad — onboarding, localized benefits, global payroll, enhances security measures, and compliance with the country’s labor laws — at an affordable flat fee.

Compare Remote’s pricing with other EOR providers, and you’ll see how much value we offer for a more reasonable price.

Hiring in China

Much of China’s labor legislation is spelled out in the Constitution, the Labor Law of 1994, the Labor Contract Law of 2007, and the Social Security Law of 2011. It defines provisions for workers’ rights, salaries, benefits and compensation, labor arbitration, etc.

For more information on employing Chinese talent, check out Remote’s guide to hiring in China.

Employment contracts and agreements in China

Chinese law requires that employment contracts must be spelled out in writing (within 30 days of hiring an employee) although the standards are not as strict for freelance contracts.

Written employment contracts must contain details such as:

  • Name, domicile, and legal representative of the employer

  • Employee's name, domicile, and identification

  • Term of the employment contract

  • Job description and place of work

  • Working hours, rest, and leave

  • Remuneration

  • Social insurance

  • Labor protection, working conditions, and protection against occupational hazards

Payroll and payroll taxes in China

Employee income taxes are capped at 45% while payroll contributions vary by region. Businesses pay up to 41% in payroll taxes depending on their region.

Employment benefits and compensation in China

Chinese law demands that employees provide certain statutory benefits and these are outlined below.

Maternity and paternity leave

Expectant mothers are entitled to 98 days of paid maternity leave, with benefits paid by the Social Security Bureau. Maternity leave can be increased to 113 days for multiple or complicated births.

Vacations and public holidays

Chinese employees are entitled to 11 paid public holidays and must be paid at a 300% premium if they’re required to work on a holiday.

Workers earn five days of paid annual leave after their first year of employment, which increases to 10 days within years 10 to 20, and finally 15 days after 20 years of service.

Healthcare

Workers are entitled to anywhere from 3 to 24 months of paid sick leave, depending on their tenure and the region they’re employed.

Other benefits Remote can help you roll out

Remote can also help you roll out perks that go above and beyond to provide a rich work-life balance for your employees globally.

Above and beyond the basics you’re required to provide, Remote can help you roll out country-specific global benefits which are locally compliant. These include:

  • Medical insurance

  • Dental and vision insurance

  • Pensions

  • 401K retirement benefits

  • Life insurance

Severance pay and employee terminations in China

Dismissed employees are entitled to severance pay equal to a month’s pay for every year worked.

Workers with at least six months of tenure get their tenure rounded to a year, while those with less than six months’ tenure are entitled to half a month’s wages if they’re let go.

What are the risks of employee misclassification in China?

Most countries, including China, make a distinction between employees and contractors. Independent contractors do not receive the same protections under the law or statutory benefits that employees receive. 

Employers may intentionally (or accidentally) misclassify their workers to avoid paying benefits. Misclassifying your workers often has serious consequences, and businesses may end up facing fines, penalties, or legal action.

An employer of record can help you classify your workers correctly, ensure compliance, and avoid misclassification risks.

Two people signing a document at a table.

When should you convert a contractor to an employee?

While contractor designations may be appropriate for some business relationships, companies cannot simply pay people as contractors because it’s easier. Contractors and employees fulfill different roles and have distinct legal definitions. Converting a contractor to an employee can protect the employer from penalties, provide a better experience for the employee, and make it simpler for both parties to collaborate.

Get started with an employer of record in China

Hiring global talent doesn’t have to cost a fortune or take months before you sign a contract with your first employee in China. Using an employer of record can make it fast, easy, and safe to hire in China and abroad.

An employer of record can help you:

  • View and manage all your global employees in one single platform

  • Handle paperwork including employment contracts, tax legislation, etc.

  • Offer a range of benefits and stock options to your employees in China

  • Pay salaries and invoices to your workers on time, in the local currency

  • Stay compliant with evolving labor laws and mitigate misclassification risks

  • Secure intellectual property and protect company and employee data.

Ready to expand your team in China? Get started with Remote and build a world-class remote team today!

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