Using an employer of record in China

Hiring and paying employees in China can be complicated, as you must always comply with local labor and employment laws, which are subject to change and regional variation. 

However, using a China Employer of Record (EOR) streamlines hiring and managing your team in the country. 

Find out more about how Payoneer WFM can help your business, or keep reading to learn what an EOR in China does.  

How to hire employees in China

There are three key routes to choose from when hiring employees in China:

1. Setting up a local entity: This can be expensive and time-consuming, but it’s a good option if you want to establish a long-term local presence. 
2. Hiring independent contractors: This route provides flexibility, but misclassifying employees as contractors incurs hefty fines.
3. Working with a China employer of record: This option allows you to hire employees in China and meet your legal obligations without setting up a local entity.

Partnering with an employer of record in China

An Employer of Record in China is a third-party company that employs international talent on your behalf. When you partner with a China EOR, you can hire Chinese nationals without having to incorporate a business or set up registered offices in the country.

An EOR in China takes responsibility for employment formalities, payroll, taxes, benefits, and compliance, so you can focus on welcoming and managing your new team members.

Payoneer WFM offers EOR services in China and 160+ other countries, helping you harness international talent without the administrative burden.

How to onboard employees in China

When onboarding a new employee in China, you need to:

• Gather essential documents (including ID card, bank details, a recent 1-inch headshot photo of your employee, and a household registration that identifies your employee as a resident of a particular area)
• Conduct background checks
• Enroll them in benefits, payroll, and social security
• Make introductions to the team and colleagues
• Set up all the devices and workplace software they’ll be using
• Set expectations and objectives
• Assign an onboarding buddy or other onboarding support

Managing compliance through your Employer of Record in China lets you focus on welcoming your new employee into the team.

Pay employees in China

The payroll process in China is complex and must follow national and regional regulations. 

The fiscal year runs from January 1st to December 31st. Employers typically pay their employees monthly, although they can set their own internal payroll cycle. 

Minimum wage in China varies by region, ranging from CNY 16.3 ($2.27) per hour to CNY 26.4 ($3.68) per hour.

Many companies also provide a yearly bonus, before or around the Chinese New Year (which is also called Spring Festival). Employers can decide to implement their own bonus system, but most choose to offer employee bonuses equivalent to 1 month’s salary.

This bonus is subject to individual income tax (IIT), and until the end of 2027, there are two methods of calculating this tax. 

One reduces the tax burden for highly paid employees, while the other is more beneficial to employees on a lower salary.

• Method 1: Calculated and paid separately on the annual bonus
• Method 2: Calculated and paid on the annual bonus combined with the employee’s total annual income

When paying employees in China, employers need to withhold the following taxes:

• Income tax: The tax rate varies from 3% to 45% depending on employee income.
• Employee social security contributions: These contributions vary by region. Foreign employees have to contribute too.

Employer of record services in China are the easiest way to pay employees while staying compliant with local laws.

Employment laws in China

When hiring employees in China, you have to follow the labor laws laid out in the Labor Law of the People’s Republic of China and the Labor Contract Law. These include legislation on:

• Working hours: Employees should work for no more than 8 hours per day and no more than 44 hours per week on average.
• Overtime: Employees shouldn’t work more than 36 hours of overtime per month. In general, overtime should be no more than 1 hour per day and paid at 150% or 200% of their salary. 
• Rest days: Employees are entitled to at least 1 day off per week. They are also entitled to rest days on national holidays.   
• Probation period. Where the employment contract lasts for more than 3 months but less than 1 year, the probationary period cannot exceed 1 month. Where the employment contract lasts between 1 and 3 years, the probationary period may not exceed 2 months. Where the employment contract is more than 3 years or indefinite, the probationary period may not exceed 6 months.
• Remuneration frequency. Employees are paid monthly, according to the schedule laid out in their employment contract.

Minimum wage in China

There is a mandatory minimum wage in China, which varies by region. For example, in Beijing province, the minimum hourly wage is CNY 26.4 ($3.68) per hour. At the lower end of the scale, in Hainan province, the minimum hourly wage is CNY 16.3 ($2.27) per hour.

Monthly minimum wage ranges from CNY 1,690 ($235.86) to CNY 2,690 ($375.42).

The minimum wage is reviewed and adjusted by state governments periodically to align with inflation and the cost of living. To comply with labor laws, employers need to stay up-to-date with the latest rates.

The easiest way to do this is by using China employer of record services. Your China EOR will keep you informed of any minimum wage updates.

Employment contracts in China

The most common types of employment contracts in China are:

• Fixed-term: A contract with a defined start and end date, usually lasting from a few months to several years.
• Open-ended: Also known as indefinite contracts, these contracts don’t have a set end date and offer greater security for employees.  

In either case, the contract has to be written and signed by both parties.

Often, an employer will initially hire a Chinese employee on a fixed-term contract. However, if your employee has signed 2 consecutive fixed-term contracts, you cannot offer another. You have to provide an open-ended contract.

As per the Labor Law of the People’s Republic of China, an employment contract has to include:

• The contract duration
• A description of the work undertaken
• A description of labor protection and labor conditions
• The employee’s remuneration
• Conditions for contract termination
• Liabilities for contract violations

Other clauses can also be included according to agreements made between the employer and employee.

Leave policy in China

Chinese labor law guarantees several types of leave for employees.

Public holidays

Employees in China are entitled to the following public holidays:

• New Years Day
• Spring Festival
• International Labor Day
• National Day
• Any other holidays stipulated by laws and regulations

If an employee is asked to work on a legal holiday, they are entitled to at least 300% of their standard wage.

Vacation time

Employees who have worked for more than 1 year and less than 10 years are entitled to 5 days’ paid vacation. 

Those who have worked for 10 to 20 years are entitled to 10 days’ paid vacation. Those who have worked for more than 20 years are entitled to 15 days’ paid vacation.

Maternity leave

Female employees are entitled to a minimum of 98 days of maternity leave. In some regions, extra maternity leave is granted as standard.

Paternity leave

Male employees are entitled to paternity leave as specified in regional regulations. In Beijing, paternity leave is 15 days. In Shanghai, it’s 10 days.

Parental leave

Some employers provide parental leave for employees, though this varies by region. In Beijing and Shanghai, for example, parents are entitled to 5 days of paid leave each year until the child is 3 years old. 

These policies are subject to change and regional variations. So, you must stay up-to-date with the latest employee leave entitlements.

Work permit in China

In China, any foreign national who seeks to work as an employee needs to obtain a work permit. The most common type of work permit is called a Z-Visa.

To apply for the visa, the employee and the employer need to provide:

• A valid employment contract with a Chinese employer
• Proof of the necessary qualifications and experience
• Health check and background check

Upon arrival in China, the worker has to apply for a temporary residence permit. This allows them to stay in the country for the duration of their employment contract.

Background check in China

Background checks in China are legal, but they are subject to strict regulations. They’re governed by the Labor Contract Law and the Personal Information Protection Law (PIPL), which detail appropriate ways to gather, use, and store personal information.

Common background checks for Chinese employees include:

• Educational background verification
• Employment history verification
• Reference checks

Employees looking to work in financial, technology, healthcare, educational, and government roles may also be subject to a:

• Credit check
• Criminal record check
• Financial history check

To conduct a background check, the employer needs to get explicit consent from the candidate and explain why these checks are appropriate for the role. For example, credit records and medical information should not be checked without a relevant reason. 

It’s also illegal to inquire about a candidate’s genetic information or family medical history, and employers are not allowed to discriminate against a candidate based on non-job-related factors.

Employment termination in China

If an employee in China wants to end their contract, they have to give a minimum of 30 days’ notice. An employer can specify a longer notice period as long as it is agreed with the employee and detailed in the employment contract.  

If an employer dismisses an employee without due cause, the employee is entitled to statutory severance pay, which is roughly equivalent to 1 month’s gross salary for every working year. 

Company registration in China

Registering a company in China requires a lot of time and money, but it may be the right choice for your organization if you want to develop a significant presence in China.

To register a business in China, you need to:

• Choose your business structure
• File and register your business with the relevant authorities
• Open a corporate bank account
• Register for tax obligations

However, partnering with a China EOR is a much simpler and easier option for most U.S.-based companies.

PEO in China

When you’re looking to build an international workforce, you’re likely to come across two options: an EOR and a Professional Employer Organization (PEO).

A PEO offers HR and administrative support. It provides payroll, benefits, management, and legal support services. However, unlike an EOR, a PEO can’t employ workers on your behalf. So, you still need to register your company in China to hire Chinese workers.

An Employer of Record in China helps you grow your business and expand your workforce without setting up a legal entity in China. It’s a flexible way to enlist the best global talent without the compliance headache.

Payoneer WFM: Leading employer of record services in China

Payoneer WFM helps companies hire, onboard, and pay employees in China quickly and efficiently. With our China Employer of Record services, your business can:

• Hire employees without establishing a local entity
• Manage payroll and tax filings
• Navigate employment law with expert guidance

With deep expertise in Chinese employment practices, our team is ready to support your expansion goals.

FAQs about the employer of record in China 

1) What is an employer of record in China?

An Employer of Record in China helps you employ Chinese nationals and adhere to local labor laws without setting up a legal entity in the country.

2) Does China allow employers to do background checks?

An employer is permitted to run specified background checks on employees as long as they have written consent from the employee and all checks are conducted in line with Chinese labor and privacy laws.

3) What’s the minimum wage in China per hour?

Minimum wage in China varies by region. For example, in Beijing province, the minimum hourly wage is CNY 26.4 ($3.68) per hour. In Hainan province, the minimum hourly wage is CNY 16.3 ($2.27) per hour.