What employers need to know when hiring in China? This article explains the most critical information that employers should have when hiring in China.
1. Company must sign a written employment contract with each employee in China.
In China, signing a labor contract electronically is uncommon when hiring in China, and E-labor contracts may increase the likelihood of future labor disputes. It is strongly advised that you have a written employment contract.
Employees must sign each copy of a labor contract in China, while the employer must sign and chop the company seal on each copy. One original copy must be kept by both the employee and the employer.
Read more about China Labor Contract.
2. You can set probationary periods for your employees in China.
Employers in China frequently use probationary periods to evaluate employees’ performance and capabilities over a specific period of time. It’s crucial to understand that probationary periods must be specified in the China labor contract.
For signing a one-year employment contract, you can set a one-month probation period, and for signing a two-year employment contract, you can set a two-month probation period. For a labor contract of more than three years, there is a six-month probation term.
Employees’ salaries during probation periods cannot be less than 80% of their post-probation salaries when hiring in China.
3. Contribute China social security on time and in full is very important.
There are five social insurance and one housing fund in China’s social security system. The Chinese social security system is extremely difficult to comprehend. In China, each city’s social security contribution base and percentage are different when hiring in China.
The social security contribution base for each employee will be adjusted annually based on their average salary from the previous year.
Read more about China Social Security System.
4. 13th month salary is not mandatory but common in China.
Many overseas employers may consider that 13th month salary is obligatory when hiring in China. In reality, the employer can choose whether or not to make an offer. However, if the 13th month salary is clearly stated in the employment contract, the employer is required to pay the employee.
The smart option when hiring in China is to give annual bonus to employee based on their performance.
5. Getting to know the China termination policy in advance.
In contrast to the United States, employers can easily fire employees due to the employment at will. Termination is a difficult process in China. Employers must notify employees one month in advance or pay one month’s wages as notice period compensation. The severance payment must also be paid by the employer. The amount of severance pay is determined by the number of years a person has worked for the company; the standard practice is one month’s salary for one complete working year when hiring in China.
6. You cannot hire employees in China directly without company establishment.
Many foreign companies will pay their employees in China directly even they have no company registered yet. It is very important to know that only registered company in China are able to hire employees in China and handling employees’ payroll, mandatory social securities. The compliance way is to engage a China EOR (China Employer of Record) and PEO vendor to hire employees.
Read more on How to Hire Employees In China Without Legal Entity?
7. Contractors are not suggested in China.
Contractors are quite common in western world. Considering the culture in China, Chinese people is more prefer to work as a full-time employee instead of hiring as part time employees and contractors. In China, contractors are not protected under China labour law, and employees are unable to engage into the China social security system. You shall consider if you would like to hire them as contractors or employees when hiring in China.
Read more about Contractors in China.
8. Benefits of using a China PEO/China EOR – China Employer of Record.
Hiring employees in China through a China PEO or China EOR is one of the most flexible and cost-effective solution when foreign investors have no company established yet in China. The PEO/ China EOR vendor in China will act as the employer of record, handle employee’s labor contract, payroll, social security, individual income tax in China while employees are working for you directly in China.
Read more about What is China PEO & China EOR? How does it work in China?
9. You shall apply work visa for your foreign employees in China.
If you want to hire foreign workers in China, you must first learn about the China work visa and residence permit processes, which vary by city. It’s becoming more difficult to hire foreigners who are currently outside of China as a result of the Covid-19. Only foreigners who have received Chinese vaccinations are permitted to enter. In China, there is a scoring system for visa applications; foreigners with a score of more than 60 can obtain a work permit and a residency permit. The entire application process takes about two months. It is critical to understand that foreigners can only legally work in China after obtaining a work permit and a resident permit.
About JSC – China PEO & Employment Expert.
JSC is a professional service company that assists foreign-invested companies in doing businesses in China.
Our core services China PEO and employment solution enables foreign investors to hire employees in China without setting up any company which allow them to expand into China market in days, not months. Our in-country local experts are also experienced in assisting businesses to compliantly establish their own legal entity in China.
Please contact us if you require any other information on China PEO.