Hiring employees through a PEO agency in China is becoming increasingly popular among international investors looking to start a business in China . How to hire employee in China simply and in a compliant manner is a critical issue for international investors who do not have a legal entity in China or who are in the process of establishing China WFOE. This problem can be solved by a PEO in China, which can assist international companies in employing staff in China prior to establishing a company in China.

If you are unfamiliar with China’s PEO or EOR, the following two articles will be of assistance to you.

What is China PEO & China EOR? How does it work in China?

How to Hire Employees In China Without Legal Entity?

If you already have a basic understanding of China PEO and EOR, the following 5 stages for hiring a PEO in China can help you onboard your first employee quickly and easily.

Contents:

Step 1: Select a local PEO in China

Step 2: Prepare Employee On boarding Information and Documents

Step 3: Review local employment contract

Step 4: Understand China payroll and monthly hiring cost

Step 5: Pay On time. Employee onboard through PEO in China

Step 1: Select a local PEO in China

In China, there are many PEO vendors with various names, such as EOR vendors, employment agencies, employee outsourcing service providers, recruiting agencies, and so on. You can also find foreign PEO in China, state owned service provider, or local private service provider.

Given the complexities of China’s local employment policies, payroll, and benefits regulations, a local PEO service provider is more recommended because they are more familiar with the local policies and have more local resources and knowledge to assist you in completing the employer liability and handling potential labor disputes. In the meanwhile, local service provider is hiring employee under their own legal entity, and handle employee’s payroll and social security themselves which also ensure the efficiency and speed of response, while there are many foreign PEO service providers who actually outsource or subcontract the PEO employees to the local service provider. As a result, it’s critical to select a PEO in China who runs their own operation and business locally.

Here are some helpful hints for choosing a competent PEO vendor in China.
  • Select a Chinese service provider who can hire employees directly.
  • Examine the PEO vendor’s provincial and city coverage and choose the one with the most.
  • Review the PEO vendor’s labor conflict history and choose the one with the fewest labor disputes.
  • Choose a local PEO in China with extensive experience working with global enterprises in China.
  • Examine the service contract and employment contract that the PEO in China will sign with the PEO employee, and choose the one that offers multilingual agreements.
  • Examine the China PEO vendor’s flexibility in terms of salary pay dates and payment dates. Choose the one with the most versatility.
  • Examine the extent of services provided by the China PEO vendor.

Step 2:Prepare Employee On boarding Information and Documents

Based on the above recommendations, you should find a qualified China PEO service provider. It is critical to explain the PEO and EOR employment models to your Chinese employee. Because employees may verify the company’s background and records online, choosing a reputable local service provider is critical. Your employees will be more inclined to work for a reputable PEO in China.

Following initial alignment with your PEO employee in China, you will begin gathering on boarding information and documentation from your employee, which will be utilized mostly for payroll processing, local labor contract preparation, and mandatory benefits contribution.

Although different cities in China may require different paperwork, the general information and documentation required for on-boarding a PEO or EOR employee in China are included below.

  • Employee personal information includes full name, social security number, home address, phone number, bank account information, marital status, nationality, and current social security status, among other things.
  • Employment details including employee salary in China, on-boarding date, working city, social security contribution city, position, probation period, monthly gross compensation, annual leaves, and other benefits, among other things.
  • A copy of your ID card
  • Copy of your bank account
  • Employee page in Hukou book
  • Previous employer’s termination certificate

Step 3: Review local employment contract

Your PEO vendor in China will sign China local employment contract with your employees in China as the employer of record. It will be the responsibility of the China PEO vendor to produce a local labor contract based on the personal information and employment details provided by you. The labor contract of a China PEO vendor is usually a generic form that covers all of the required terms and circumstances for hiring employees in China.

Although employment contracts in China must be written in Chinese, you will need a bilingual (Chinese and English) local employment contract to fully comprehend the terms and conditions.

It is strongly recommended that you check the provisions of the labor contract given below to guarantee that both your business in China and your employee’s benefits are protected under such an employment contract.

  • Employee’s salary and benefits
  • China Leaves and China holidays
  • Confidentiality
  • Work duties
  • Intelligence Property

Many multinational companies prefer to incorporate their global policies, terms, and conditions into their employee contracts in China; nevertheless, this is not recommended. The best option is to provide the terms and conditions to your chosen China PEO service provider, who will then evaluate and change the terms to verify that they are all in conformity with Chinese laws.

Step 4: Understand China payroll and monthly hiring cost

Although it is difficult for foreign investors to fully understand China payroll and how salaries are calculated in China due to the complexity of local policies in China, it is nevertheless critical that you have a general understanding of the employment cost structure in China. You can also request a quick training on China payroll and how your employee’s salary is computed from your China PEO vendor.

Here is one article for that can help you to understand. How to Calculate Employee Salary in China? [China Payroll Guide].

To sum up the most essential payroll and labor cost advice in China,

  1. Each month, the employee’s salary will be revealed.
  2. Instead of a net pay, offer a monthly gross salary.
  3. Employee gross monthly wage – Personal tax – Employee social security contribution= Employee net monthly salary
  4. Monthly employment and recruiting cost = Employee monthly gross wage + Employer social security contribution
  5. Salary for the 13th month is optional. It becomes necessary, however, if it is included in the labor contract.
  6. The basis and percentage of contributions to social security vary by city.
  7. Social security contribution base is adjusted yearly.

Step 5: Pay On-time. Employee onboard through PEO in China

The last step is very simple but extreme important. Remember to pay your China PEO service provider on-time so that the PEO in China can release the salary to your employee on-time and contribute their local tax, social insurance and housing fund on time and in full.

Considering the foreign currency control in China, usually it takes 5 days to receive the payment from overseas to China. If your employee pay date is on last working day of each month, it is safe to pay your PEO in China around 20th of each month. The date will vary depending on local holidays and holidays in your native country, such as Chinese New Year (January, February), China National Holiday (October), and Christmas (Dec).

Hiring employees in China through a China PEO service provider is a simple and legal way to start a business in China without having to set up a corporation. The first and most critical step is to find a reputable PEO provider in China.

Please contact us if you require any other information on China PEO.

[email protected]

Frequently asked questions for payroll and hiring employees in China.

No, you do not need.

If you don’t have a company in China, you can hire employees through PEO service through the employment agency in China.

a) Hire employee through the PEO/employment service.

If you don’t have a legal entity in China, this is the only compliance way to have employee working for you in China.

b) Hire employee under WFOE.

If you already set up a WFOE in China, you can sign the labor contract with employees directly. You can either choose to handle their payroll land benefits yourself, or you can choose to outsource.

c) Hire employee under representative office (Ro)

Representative office in China is not allowed to hire employees directly. The only compliance way is hire employees through labor dispatch agency under PEO service

PEO refers to a professional employment organization, in China it’s also called employee outsourcing, labor dispatch. Foreign companies can hire staff in China through a PEO agency without setting up a legal entity in China.

Severance payment in China is based on the number of years employee has worked for the company.

Each full year employee worked for your company, one month salary shall be paid as severance payment.

For the working periods that are less than 6 months, half month salary shall be paid.

If employee’s monthly salary is higher than 3 times local average monthly salary, each year of the severance payment compensated shall be 3 times local average monthly salary.

If employees are in the probationary period, both employee and employer shall give 3 days as notice period for termination.

After probationary period, both employee and employer shall give 3o days as notice period for termination.

If employer need immediate termination, employer shall compensate one month salary.

No, You shall have a company registered in China to sign a written labor contract with each of your employee.

In practice, employer will sign a fixed term contract with their employee. However, when it goes to the third time renewal of the contract, then the contract becomes to a permanent contact.

Sign a two years or three years contract is more common in China.

Labor contract in China shall be at least in Chinese, and including but not limited to:

 Company details including full name, address and legal representative or person in charge.

 Employee details including full name, ID number, address.

 Term of the employment contract; (E.g., 2 years, 3 years…).

 Position (job title), location(city), working hours, holidays, leaves.

 Package: gross salary, bonus, commission, social insurance, other benefits.

 Occupational safety, and occupational hazard prevention.

 Other terms which laws and regulations required.

You need to set up a company in China and then set up a separate Social Insurance and Housing Fund Account. After the company has been set up, you can contribute the benefits to the employees who have signed a contract with you.

The most popular job portals in China is: Zhaopin.com, Liepin.com, zhipin.com. However, these three job portals only accept a registered company in China.

If you don’t have a company in China, you can search candidates through Linkedin.com or engage a headhunting or recruitment firm to help you search the candidates.

In China, employees’ individual income tax (personal tax) shall be declared monthly by the employer, and yearly by employee themselves.

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