China Employer of Record
If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in China, an employer of record may be the best option for achieving your global growth objectives.
An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in China―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.
Learn about the hiring, employment, payroll and benefits requirements for workers in China and how our employer of record service, Global Employment Outsourcing (GEO), and local HR experts can help you manage your international employment needs.
Hiring in China
Although there is a central employment-related law in China—the Labor Law, passed in 1994, as well as other laws and regulations—each individual province and locality sets its own standards for things like minimum wage and pension contributions. As a result, the way a business operates in Shenzhen may differ substantially from the way it operates in Beijing.
One thing that is standard: Employers are obliged to provide their employees, including expatriate employees with work permits, with five types of social insurance benefits:
- Old-age pension insurance
- Medical insurance
- Occupational injury insurance
- Maternity insurance
- Housing funds
In recent years, the government has taken some steps toward promoting collective bargaining and providing an explicit right to strike.
Since employment requirements can vary across China, drafting contracts that are compliant in each employee’s locality is essential. As your employer of record and PEO in China, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.
Employment contracts in China
As you look to hire employees in China, here are some common regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.
The standard workweek in China is eight hours per day, 40 hours per week. Employees are entitled to at least one full day off each week, although most employers provide two days, usually Saturday and Sunday.
Employers may extend working hours as long as they consult the employees and labor union, if one exists. In general, the workday cannot be extended by more than one hour per day, with three-hour extensions permitted in certain circumstances.
For special positions that don’t fit within standard eight-hour days, an employer can adopt a flexible system for employees including high-ranking managerial staff, sales staff, field personnel, security personnel and others as long as they secure the approval of the proper labor administration authority.
As you consider the appropriate salary to offer new employees, keep in mind:
- There is no national minimum wage in China.
- Minimum wage is set by China’s 22 provinces, five autonomous regions and four direct-controlled municipalities.
- Minimum wage can differ from district to district within a province, region or municipality.
- The cities of Shenzhen in Guangdong and Suzhou in Jiangsu can both set minimum wages higher than in the rest of their respective provinces.
- There is a monthly minimum wage for full-time employees and an hourly minimum wage for part-time employees.
- Overtime cannot exceed 36 hours per month unless there is a natural disaster or similar event that endangers lives.
- Overtime compensation is as follows:
- Regular workday: 150% of regular hourly wages
- Rest day: 200% of regular hourly wages (or a compensatory day off)
- Statutory holiday: 300% of regular hourly wages
As your employer of record in China, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.
Many companies in China offer a 13th-month salary payment during the month of the Chinese New Year or Spring Holiday, but it is not required.
Employers may include a probationary period for contracts that run three months or longer. The maximum length of probation depends on the length of the contract:
- Contracts lasting three months to less than one year: One-month maximum probationary period
- Contracts lasting one year to less than three years: Two-month maximum
- Contracts lasting three or more years: Six-month maximum
Termination and severance
In most cases, termination requires a severance payment. In some cases, notice can be substituted for severance. The amount is dependent on the reason for termination. There are some exceptions to this rule.
Typically, severance pay is equal to one month’s salary for each full year of work and each year with six months or more of work, plus half a month’s salary for each year of work less than six months.
For workers whose salary is more than three times the monthly average in the locality where they work, severance is calculated for a maximum of 12 months and is limited to three times the monthly average (rather than their own wage).
Some circumstances require either 30 days’ notice or payment of one month’s wages.
Certain employees are protected from termination:
- Employees exposed to occupational hazards
- Employees who may have contracted a work-related illness or who are under a doctor’s care
- Employees on sick leave who are undergoing medical treatment for non-work-related injuries or illnesses
- Employees who have partially or totally lost their ability to work due to a work-related disease or injury
- Employees who are pregnant, on maternity leave or breastfeeding
- Employees with at least 15 years of employment who are also less than five years away from retirement
Employers are required to notify labor unions of any proposed unilateral termination. The union may demand that an employer correct an action if it violates the law or the terms of a labor contract.
As your employer of record in China, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.
Employee benefits and paid leave in China
When negotiating terms of an employment contract with a candidate in China, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.
Employers are required to offer maternity leave. The national requirement is a minimum of 98 days.
After China abandoned its one-child policy, localities lengthened the amount of maternity leave they require. The length of leave varies from place to place, the shortest being 128 days and the longest 190 days.
Leave can be extended between one and three additional months, depending on locality, if the employer agrees to it.
Employees receive a maternity allowance while they are on leave. The amount is based on the insurance policy their employer must hold for them, which is based on their salary.
The Social Security Bureau pays the employee. In some places, the employer must also pay the employee.
Employers cannot require overtime or night shifts for employees who are more than seven months pregnant or nursing, and pregnant or nursing employees cannot be terminated.
Employees who have worked continuously for more than one year are entitled to paid vacation.
The amount of paid leave depends on the total number of years they have worked—not just their years with their current employer.
- At least one but less than 10 total work years: Five days of annual leave
- 10 years to less than 20 years: 10 days
- 20 years or more: 15 days
Unused annual leave may be carried over to the next year.
Employers who want to cancel annual leave because of production or work requirements must get the consent of their employees and must also pay 300% of each employee’s daily wages for each day of annual leave that is accrued but unused.
Employees are entitled to 11 national holidays:
- New Year’s Day
- Spring Festival (three days)
- Tomb Sweeping Day
- International Labor Day
- Drago Boat Festival
- Mid-Autumn Festival
- National Day (three days)
Female employees are also entitled to a half day of paid leave on International Women’s Day.
The government provides additional public holidays in order to create long holiday weeks called Golden Weeks during the Spring Festival and on National Day.
Employees who are required to work on a holiday are entitled to 300% of their usual pay.
Employees who have suffered illness or injury not related to work are entitled to paid sick leave. The amount ranges from three months to two years and depends on a number of factors, including the total number of years worked, tenure with the current employer and local regulations.
Compensation also varies by location. It can be calculated in a variety of ways:
- Based on the employee’s salary and work experience
- Based exclusively on salary
- According to the employment contract
Generally, the amount of compensation must be at least 80% of the minimum monthly salary as determined by the local government.
In China, medical coverage is almost universal and largely publicly funded. In cities, employees are required to enroll in Urban Employee Basic Medical insurance, which is primarily funded by employee and employer payroll taxes. In rural areas, people can enroll in the Urban-Rural Resident Basic Medical Insurance, which is financed primarily by central and local governments.
Employers contribute between 8% and 10% of payroll, depending on where they are located, and employees contribute 2% of their income. Employee contributions are deposited into personal accounts along with approximately 30% of employer contributions. The rest of the employer contributions goes into the pooled fund.
Private insurance fills in coverage gaps. Employers may offer this to employees to cover deductibles, copayments and other costs as well as to cover services not included in the public insurance plans.
As your employer of record in China, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.
All employees, including expatriate employees with work permits, are entitled to a pension. The official retirement age is 60 for men and 50 for women.
As with all employment regulations in China, the amount of an employer’s contribution varies by locality. The maximum contribution is generally about 20% of total payroll and, irrespective of locality, the maximum salary used to determine employer contributions is three times the average local annual salary as determined by the local government.
Employees are required to contribute 8% of their salary to a personal account. Employees who have contributed for at least 15 years receive a monthly pension from the common pension fund in addition to the funds in their personal accounts. A retired employee who has contributed for fewer than 15 years can continue to make contributions until the 15-year requirement is met and will then receive a pension from the state system.
The process for reviewing workers’ compensation claims in China entail four steps:
- Health professionals diagnose the injury or illness
- Local labor and social security officials verify that the injury or illness is work-related
- The degree of disability is assessed
- Social security authorities calculate the amount of benefits to be paid
The amount of compensation and the responsibility for paying it are largely determined by labor laws and regulations, but the actual payout varies from region to region.
Employer social costs will cover a large portion of employee benefits in China, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance, if needed.
Employee onboarding with an employer of record in China
We write and validate all local employment contracts, streamlining the onboarding process for you and your employees in China—all you have to do is provide relevant information and review and approve the employment agreement.
As your employer of record in China, we will:
- Schedule a welcome call to discuss HR and employment information for China, as well as answer any questions
- Prepare a customized employment contract in English and in Mandarin (or other local language)
- Share the employment contract and benefits information with the new employee for signature and review
- Gather tax and banking information from the employee to set up payroll
- Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll
The entire onboarding process for the employee is often completed in as little as two weeks.
Partner with Safeguard Global as your China employer of record and PEO
With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on Global Employment Outsourcing (GEO) to expand and hire in over 179 countries around the world, quickly and compliantly.
We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in China. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.
Additionally, as a global payroll provider we support payroll administration—including payments, filings and other calculations—in more than 150 countries and can accommodate the payroll outsourcing needs of any size organization.
Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.
The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.
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