If you want to invest and start a business in the China market, or if you want to start hiring employees in China. All of the following tips and practices are critical for you to learn before hiring.


1. You need a Chinese company to legally hire employees in China.

If you already have a registered company in China, you can hire employees directly. If you do not have a company in China, you can hire employees through a PEO service provided by a Chinese employment agency.

2. Different options for hiring staff in China.

  • Use a PEO/employment service to hire employees in China.
    If you do not have a legal entity in China, this is the only legal way to hiring employees in China working for you. Understand more regarding how to hire employee without a legal entity in China and 9 Tips of Hiring in China – China Employer of Record.
  • Hiring employees in China under your China WFOE.
    If you have already established a WFOE in China, you can sign the labor contract and hiring employees in China directly. You have the option of handling their payroll and benefits in-house or outsourcing them.
  • Hiring employees in China under China representative office (China Ro)
    Employees cannot be hired directly through a representative office in China. The only way to ensure compliance is to hire employees through a labor dispatch agency that provides PEO services.

3. Understanding what is a PEO/EOR employment agency in China.

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

Understand more about What is China PEO, and steps to engage a PEO in China.

4. Oral employment contact in China is not allowed.

You must have a Chinese-registered company sign a written China labor contract with each of your employees.

5. Employment contract term in China.

In most cases, an employer will sign a fixed-term contract with their employees in China. However, when the contract is renewed for the third time, it is converted into a permanent contract.

In China, it is more common to sign a two- or three-year contract.

6. Structure of the local labor contract in China.

In China, labor contracts must be written in Chinese and must include, but are not limited to, the following information: company details, including full name, address, and legal representative or person in charge.

Employee information such as full name, ID number, and address.

Term of the employment contract (for example, 2 years, 3 years…).

Position (job title), location (city), working hours, holidays, and leave are all factors to consider.

Package includes a base salary, a bonus, and a health insurance policy.

7. Mandatory Benefits: Social insurance and housing fund in China.

When hiring employees in China, you should be aware that 5 social insurance and 1 housing fund are mandatory benefits.

5 Social Insurances,
  • Pension:
  • Medical Insurance
  • Unemployment Insurance
  • Work-Related Injury Insurance
  • Maternity Insurance
1 Housing Fund

Both employee and employer shall contribute on the mandatory social insurance and housing fund on the monthly basis when hiring employees in China. The actual contribution percentage and base are determined by each city’s policy and will be adjusted annually.

Learn more about China social security system, read Complete Guide on China Social Security System.

8. Ways to contribute the social benefits (mandatory benefits) of my employees in China.

In China, you must first establish a company and then open a separate company social insurance and housing fund account so that you are able to hiring employees in China. After the company is established, After the company has been set up, you can contribute the benefits to the employees who have signed a contract with you. You can also outsource your employees’ payroll and benefits to a payroll vendor in China.

9. Popular job portals in China for searching the candidates.

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 and hiring employees in China.

Understand more on China portals in China, Top 5 Best Job Portals in China.

10. Employers are required to declare their employees’ individual income tax monthly.

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

11. Normal salary structure/offer package in China

Gross salary: fixed base salary

Flexible salary: performance bonus, commission, allowances

13 Month salary/ Annual bonus: common in China

Mandatory benefits: 5 social insurances and 1 housing fund

Supplementary health insurance: not mandatory, but very common among foreign employers

Annual leaves Paid sick leaves

12. Structure of Payroll Cost of Hiring Employees in China

Your monthly employment cost consist of:

+Employee monthly net salary

+Employer contribution of mandatory benefits

+Employee contribution of mandatory benefits


+Individual income tax

+Other benefits offered.

Complete guide on How to Calculate Employee Salary in China? [China Payroll Guide].

13. Annual leave policies in China

Company cannot give the annual leave days lower than the below policy:

1 working years, at least 5 days as annual leave.
10 working years, at least 10 days as annual leave.

Employee working years>=20, annual leave >=15

14. Public holidays employees can take in China

Below are the public holidays in China and is paid holidays you shall know when hiring employees in China. The exact date will be announced by the government at the end of December last year.

New Year’s day: 1 day

Spring Festival/Chinese New Year: 3 days

Qing Ming Festival: 1 day

Labor Day: 1 day

Dragon Boat Festival: 1 day

Mid-Autumn Festival: 1 day

China National Holiday: 3 days

Employers shall pay overtime payment if they require employees to working during the public holidays.

15. Probation period for employees

The probation period will be determined by the terms of the employment contract.

3 months 1 year Employment contract term is 3 years or more, the probation can be a maximum of 6 months.

Please kindly note that employees’ salary during probation period cannot be lower than 80% of the salary after the probation period.

16. Annual bonus is not mandatory in China

Annual bonus is not mandatory but common in China. Usually employer give the annual bonus before the Chinese new year when hiring employees in China, and annual bonus is normally decided base on company’s policy and each employees’ personal performance. Each employee can enjoy one time annual bonus tax beneficial policy, such policy will be cancelled from the year of 2022.

17. How to hire foreign employees in China?

Foreign employees in China may begin working only after obtaining a valid work permit and a residence permit. If you want to hire expats to work for you, you must sponsor their work visa.

18. Understanding the severance payment in China to terminate employment relationship.

In China, severance pay is calculated based on the number of years an employee has worked for the company.

One month’s salary shall be paid as severance payment for each full-year employee who worked for your company.

For working periods of less than six months, a half-month salary will be paid.

If the employee’s monthly salary is greater than three times the local average monthly salary, the severance payment compensated shall be three times the local average monthly salary for each year.

19. Notice period for terminate the employment relationship.

If an employee is on probation, both the employee and the employer must provide three days’ notice of termination.

Following the probationary period, both the employee and the employer must provide a 30-day notice period for termination.

If the employer needs to terminate the employee immediately, the employer must pay one month’s salary.

20. You don’t need to pay severance payment if employee resigned.

If your staffs resigned by themselves, employer don’t need to pay the severance payment for them.

21. Employee background check & Criminal check.

It is common to do a reference check or background check of candidates’ personal information, educational background, previous working experiences. You can either have your internal HR staff do it or hire an experienced HR agency to do it and provide a report. Employers in China are not allowed to conduct direct criminal background checks; however, if you do need, you can have your candidate apply for it.

22. Offer extra benefits to your employees in China.

Your employees’ sense of belonging and satisfaction is critical to their retention and motivation at work. The following are some of the most common benefits provided:

Employees receive gifts and benefits on their birthdays, Chinese New Year, Dragon Boat Festival, Moon Cake Festival, and Women’s Day.

It is also very common for foreign companies offering the commercial insurance, supplementary health insurance to your employees.

Medical check.

Team building

All of the above topics and questions are the most common things that an employer should be aware of and consider when planning to hire employees and start business in China. If you have any additional questions that have not been addressed here, please do not hesitate to contact us.

Read more about 6 Things to Consider when Doing Business in China.

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.


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