China is one of the main drivers of global business and economy. As such, it’s no surprise many organizations are looking to conduct business there. But more so than elsewhere in the world, China has a complex system of labor laws, prone to change and heavily scrutinized by the government. That’s why so many companies turn to an employer of record China (EOR).
These local experts, based in China, should know the ins and outs of local laws and customs and help you with everything from hiring, to compliance and every HR task in between. In this article, we’re going to look at the benefits you can expect from hiring an employer of record in China, and the qualities to look for when selecting one.
Benefits of Using Employer of Record China
Expanding your business into China can be a game-changer, but navigating the complexities of Chinese labor laws, payroll, and compliance stands to be a daunting task. An employer of record China can be your trusted partner, simplifying your global expansion and allowing you to focus on your core business objectives.
Hire local talent
China has a massive and highly skilled workforce, offering expertise in various fields, from technology and manufacturing to finance and marketing. An EOR can help you tap into this talent pool and find the right candidates for your business needs.
Setting up a legal entity in China can be a time-consuming and expensive process. An EOR eliminates this need, allowing you to hire employees in China without establishing a local entity.
Compliance
Chinese labor laws are complex and subject to frequent changes. An EOR ensures your organization keeps compliant with all regulations, from minimum wage and social insurance contributions to contracts and termination procedures.
Non-compliance can result in hefty fines and legal repercussions. An EOR takes on the responsibility of staying up-to-date with local laws, minimizing your risk of penalties.
Risk Mitigation
A China employer of record assumes legal responsibility for your employees in China, including payroll, taxes, and compliance. This reduces your exposure to potential legal and financial risks associated with misclassification or non-compliance.
They also manage employee benefits and ensure compliance with mandatory social insurance and housing fund programs. This minimizes the administrative burden and potential liabilities for your company.
Cost effective
Establishing a legal entity in China involves significant setup costs and ongoing expenses. An employer of record China eliminates these costs, offering a more affordable solution for global expansion.
Managing payroll, benefits, and compliance for international employees can require additional HR resources. An EOR takes care of these tasks, allowing you to optimize your HR team and reduce overhead costs.
Focus on core business
An employer of record China handles all the administrative burdens of employing workers in China, freeing you up to focus on your core business activities.
With an EOR handling the complexities of hiring and compliance, you can quickly onboard new employees and enter the Chinese market with minimal delays.
An EOR offers a strategic and cost-effective solution for businesses seeking to expand their presence in China. By partnering with an EOR, you can tap into the country's vast talent pool, ensure compliance with local laws, and focus on your core business objectives, ultimately driving growth and success in this dynamic market.
How does an employer of record in China work?
Now that we’ve got a clear idea of what an EOR actually is, it’s time to take a look at how they work, and what they can do for you and your organization:
1. Hiring process
You conduct your usual recruitment process – advertise the position, screen resumes, interview candidates, and select the best fit for your team. Once you've chosen your new hire, the EOR steps in to handle all the onboarding paperwork and legal requirements. This includes drafting compliant employment contracts, setting up payroll, and ensuring all necessary tax and social insurance registrations are in place.
While the employer of record China handles the administrative and legal aspects, you retain full control over your employee's day-to-day work, assigning tasks, providing feedback, and managing their performance.
Read next: How to Define Your Employee’s Job Scope (With a Template!)
2. Employment contract
The EOR ensures that all employment contracts comply with Chinese labor laws and regulations. This includes aspects like mandatory probation periods, working hours, minimum wage, termination rules, and social insurance contributions.
The EOR drafts contracts that protect both your company and your employee, minimizing the risk of legal disputes and ensuring a clear understanding of rights and responsibilities.
3. Payroll and benefits
The EOR takes care of all payroll processing, including calculating salaries, deducting taxes and social insurance contributions, and making timely payments to your employees in their local currency.
They can also assist in designing and administering competitive benefits packages that comply with Chinese regulations and attract top talent. This may include health insurance, housing funds, paid time off, and other perks.
4. Compliance
The employer of record china stays up to date of the ever-changing labor laws and regulations in China, ensuring your company remains compliant and avoids potential penalties. They handle all tax calculations, deductions, and remittances to the relevant authorities, as well as manage your employees' mandatory social insurance and housing fund contributions.
If you're hiring foreign nationals, the EOR can assist with obtaining the necessary work permits and visas, navigating the complex immigration process on your behalf.
5. HR administration
An employer of record China manages the entire employee lifecycle, from onboarding new hires to handling terminations and exit procedures while ensuring compliance with local laws. They can implement systems to track employee attendance, leaves, and absences, ensuring accurate payroll calculations and adherence to company policies.
The employer of record in China maintains secure and up-to-date records of all employee information, including personal details, employment contracts, and performance reviews. They can act as a point of contact for your employees in China, addressing their queries and concerns regarding payroll, benefits, and other HR matters.
In essence, a China employer of record acts as your local HR department, handling all the administrative, legal, and compliance aspects of employment. This allows you to focus on your core business activities, expand your global reach, and tap into the vast talent pool that China offers.
Things to consider when choosing employer of record china
Partnering with the right EOR is crucial for a smooth and successful expansion into China. With a multitude of providers available, it's essential to make an informed decision that aligns with your business needs and goals. Here are five key factors to consider when choosing an EOR in China:
Local expertise
In-depth knowledge of Chinese laws: Ensure your EOR has a comprehensive understanding of Chinese labor laws, tax regulations, and compliance requirements. They should be well-versed in the nuances of local legislation, including social insurance, housing fund contributions, and individual income tax.
Cultural awareness: A strong employer of record China should also possess cultural awareness and sensitivity to navigate the intricacies of the Chinese business environment. This includes understanding communication styles, business etiquette, and local customs, which can be crucial for building positive relationships with your employees.
Compliance track record
Proven experience: Look for an EOR with a proven track record of compliance in China. Inquire about their experience working with foreign companies, their familiarity with your specific industry, and their ability to handle any unique compliance challenges.
Transparent processes: Choose an EOR that is transparent about their compliance procedures and can provide evidence of their adherence to local laws and regulations. Ask about their internal controls, audit processes, and how they stay updated on any changes in legislation.
Service offerings
Comprehensive solutions: Beyond basic payroll and tax services, a good EOR should offer a comprehensive suite of HR solutions tailored to the Chinese market. This may include onboarding, visa and work permit assistance, benefits administration, employee data management, and even local HR support for your employees.
Customization options: Your business needs are unique. Look for an EOR that can tailor their services to your specific requirements, whether you're hiring a small team or rapidly expanding your operations in China.
Technology platform
User-friendly interface: An intuitive and easy-to-use platform can simplify payroll and HR management for both you and your employees. Ensure the EOR's technology is accessible and efficient.
Integration capabilities: The EOR's system should integrate seamlessly with your existing HR and payroll software to ensure smooth data flow and avoid manual errors. Inquire about their API integrations and data security protocols.
Data security: Choose an EOR that prioritizes data security and has robust measures in place to protect sensitive employee information in compliance with Chinese data privacy laws.
References and testimonials
Client feedback: Don't hesitate to ask potential EOR providers for references or testimonials from their existing clients. This will give you valuable insights into their service quality, reliability, and customer satisfaction.
Online reviews: Read online reviews and ratings from other businesses that have used the EOR's services. This can help you gauge their reputation and identify any potential red flags.
Challenges and Risks for China Employer of Record
While an EOR offers significant advantages for expanding into China, it's essential to be aware of potential challenges and risks to make informed decisions and ensure a smooth experience.
Complex China employment law
Chinese labor laws are complex and subject to frequent updates. This includes regulations on contracts, working hours, mandatory benefits, termination procedures, and data privacy. Staying compliant requires constant vigilance and expertise.
Understanding Chinese workplace culture and expectations is crucial for effective employee management. Differences in communication styles, hierarchy, and work ethic can sometimes lead to misunderstandings if not properly addressed.
Employer of record China selection
Not all EORs are created equal. It's crucial to choose a reputable provider with a strong track record, in-depth knowledge of Chinese labor laws, and a proven ability to handle your specific industry and business needs.
Conduct thorough research, read reviews, and request references before selecting an EOR. Ensure they have experience working with foreign companies, a transparent pricing structure, and a strong commitment to compliance.
Protecting employee data
China has stringent data privacy laws, including the Personal Information Protection Law (PIPL), which imposes strict requirements on the collection, use, and transfer of personal data. Your EOR must have robust data security measures in place and comply with all relevant regulations.
China's data localization requirements mandate that certain types of personal data be stored within the country. Ensure your EOR has the infrastructure and processes in place to comply with these requirements.
Frequently Asked Questions for Employer of Record China
1. What is an EOR?
An EOR is a third-party company that acts as the legal employer of your workers in China, even though you manage their day-to-day tasks. They handle all the HR, payroll, tax, and compliance responsibilities, allowing you to hire talent in China without setting up your own legal entity.
2. How long does it take to hire an employee through an employer of record China?
The hiring process through an EOR in China can typically be completed within 2-4 weeks. This timeframe can vary depending on factors such as the complexity of the role, the availability of the candidate, and the efficiency of the EOR provider.
3. What are the costs associated with using an employer of record China?
EORs in China usually charge a monthly fee per employee, which covers their services like payroll processing, tax and social insurance contributions, benefits administration, and compliance. The exact cost can vary based on factors like the employee's salary, the complexity of the role, and the specific services you require. It's essential to get a clear and transparent breakdown of fees from the EOR provider upfront.
4. Can I terminate an employee through EOR China?
Yes, you can terminate an employee through an EOR in China. However, it's important to follow the proper termination procedures outlined in Chinese labor law. The EOR can guide you through the process, ensuring compliance with legal requirements and minimizing potential risks.
5. Does an employer of record China provide benefits to employees?
Yes, a reputable EOR in China will help you design and administer a competitive benefits package that complies with local laws and meets your employees' expectations. This can include mandatory social insurance and housing fund contributions, and additional fringe benefits like health insurance, supplemental pension plans, and paid time off.
6. Can an employer of record China help with visa and work permit applications?
Yes, an EOR can assist with the entire visa and work permit application process for your foreign employees in China. They will handle the necessary documentation, applications, and interactions with the relevant authorities, ensuring a smooth and compliant process.
Maximize Your Business Potential with Employer of Record China
An employer of record China can be a valuable asset for businesses looking to expand into the Chinese market. By partnering with a reliable and reputable EOR, you can streamline your HR processes, mitigate risks, access global top talents, reduce costs, and enhance your company’s reputation in China.
Omni makes it easy to support employees across multiple countries, time zones, and currencies.
Our centralized document management solution makes gathering the necessary data required to apply for employment visas and other country-specific initiatives seamlessly and timely. With customized workflows and automated reminders, HR can help empower employees to manage the deadlines and documentation requirements for applications. And centralized documents and real-time data makes it easy for employees to access salary information and produce reports and documents necessary for verification.
Our dedicated local team of experts provides personalized support and ensures your business remains compliant with China’s labor laws. Book your demo with our team to learn more about how Omni can help maximize your business potential.
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