China, as one of the world’s fastest-growing economies, is luring more international entrepreneurs to invest and start business in China. Hiring local employees would be the first step in expanding into a new world. The following contents will assist you in understanding how to hire an employee in China without forming a company, as well as provide you with valuable information for hiring and managing Chinese employees.
4 Options of hiring in China.
Before you hire employees in China, you must first learn about the various hiring options available in China in order to ensure that your hiring and employment practices are legal.
1. Hire employees without legal entity in China through PEO.
Using a PEO to hire employees in China is the quickest and most convenient way for foreign investors to start their company and build a team in China. Employee outsourcing, talent/labor dispatch are other terms used in China for PEO service, which means that a China employment agency (a PEO company) can serve as the employer of employees who are selected and worked for foreign companies.
The employment agency (PEO) like JSC will sign the local employment contract with your employees, and handle the monthly payroll, mandatory benefits, social benefits, expenses claim. The PEO agency will manage all of the necessary and mandatory operations that an employer must perform in China.
Due to the complexities of Chinese local laws, an experienced employment and PEO agency will assist you in declaring all local taxes and benefits in accordance with the most recent policies in the cities where your employees are located.
Advantages of hiring employee in China through PEO
Easy entry and exit into the China market
PEO is the perfect solution for foreign investors who want to test the China market but aren’t sure whether they want to make a long-term investment in China. You can easily hire employee in China through the employment agency via PEO withing 1 month. If you are unhappy with the employee’s results or do not want to continue doing business in China, you may fire him or her through the China PEO and employment agency.
Focus on business
By hire employees in China through a PEO in China, you avoid having to learn the intricacies of each city’s hiring and benefits policies, which are complicated, constantly evolving, and all in Chinese. You can outsource all of these administrative HR issues to an experienced PEO & employment provider, who can assist you in completing all of these necessary and mandatory operations effectively and efficiently, allowing you to concentrate on your own business.
Doing business in China in a compliance way is one of the most important things for foreign companies. However, different cities in China has different polices regarding payroll, tax, benefits, and due to the language barriers, it is very difficult for foreign investors to know all these polices clearly and completely. Furthermore, since all of these policies are constantly evolving, it is important to stay up to date.
Save time & Save money
Start doing business in China through PEO can enable you to start the business within 1 month without setting a company. Setting up a company (WFOE) to start a business normally takes at least two months to complete, including the establishment of a bank account. You’ll also have to pay monthly tax accounting fees to keep the business running after it’s been founded.
Avoid language and culture barriers
One of the most important obstacles foreign businesses would encounter when doing business in China is language and cultural differences. Selecting a qualified HR service provider will assist you in avoiding such stumbling blocks.
Steps to start hiring in China with no registered company.
1. Below are the different ways for you to find the right candidates.
Find through your own connections.
Post jobs in different job portals in China, e.g. Linkedin, zhaopin.com, liepin.com.
Leave the recruitment part to the recruitment or headhunting firm.
2. Sign local labor contract with employees
The HR agency you selected will sign an official China labor contract with the candidates you selected.
3. Prepare the Payroll Report
Your HR agency will calculate the monthly employment cost based on the employee’s personal information, salary specifics, and social benefits contribution policies in each region, and submit a China payroll report to your company for payment.
4. Onboard Employee
The HR agency will register the employee’s information into the government system, which will enable them to complete all of the on-boarding procedures mandated by local regulations.
5.Pay Salary to Employee
The HR agency will release the salary, allowances, expenses to employees on the monthly basis after receiving the payment from foreign companies.
2. Hiring Chinese employees after forming a company – WFOE
For hiring staff in China, you need a local company to be the employer. If you have a long-term investment plan in China, or you are very confident of your China business, or you already have the signed client in China, setting a China WFOE is the best option for you before hiring employees.
Before recruiting staffs in China, you must first create your own WFOE, which takes about 2-6 months to complete China company formation process. Since different business practices in China necessitate different licenses, the entire process may take much longer. It is very important to find an experienced agency for you to set up a company.
After your WFOE is completely operational, you must first set up your company’s social security and housing fund accounts, after which you will begin recruiting employees and managing their monthly payroll and mandatory benefits.
3. Hiring your Employees under a Representative office- Ro
Many foreign investors prefer to setting up a representative office in China first. It is essential to understand that Chinese representative offices are not permitted to hire employees directly. Hire employees in China a licensed China dispatch/PEO and employment agency is the only way to ensure compliance.
4. Hiring staff in China through your local supplier or partner
This can also be an opportunity if you can locate a local supplier or partner who is willing to hire employees in China for you. However, you must ensure that your local supplier or partner is properly managing your employees’ payroll and employment; if they are not, your employees’ experiences and feelings will be extremely negative, prompting them to leave the job.
Things you need to know before hiring in China.
1. Employment contract term in China
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.
2. Mandatory benefits in China
For hiring employees in China, you need to know the 5 China social insurance and 1 housing fund is mandatory benefits.
5 Social Insurances,
Work-Related Injury Insurance
1 Housing Fund
3. 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
4. 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.
5. China Annual leave policies
Company cannot give the China annual leave days lower than the below policy:
1 working years, at least 5 days annual leave.
10 working years, at least 10 days annual leave.
Employee working years>=20, annual leave >=15
6. Public holidays employees can take in China
Below are the public holidays in China and is paid holidays. 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.
7. China Probation period for employees
The probation period shall be set based on the employment contract term.
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.