Considering a PEO in China? Here’s everything you need to know

With a population of nearly 1.5 billion, China is home to the world’s second-largest economy and a hub for many different industries, from technology and finance to manufacturing, fashion, and beyond. With so much industry, it’s no wonder that China boasts a deep well of skilled professionals. But businesses looking to hire in China may face challenges, from understanding local labor markets to complying with the regulatory environment, interpreting cultural nuances, and more.

One way to simplify the process of hiring or expanding into China is by partnering with a global Professional Employer Organisation (PEO), also called an Employer of Record, or EOR. An EOR can help you hire and manage Chinese employees without the need to establish a legal entity in the country, so you can focus on growing your business. 

In this article, we'll explore what you need to know about partnering with a global PEO in China, including how it works, what it offers your business, and why it might be the right choice for your organization as you expand your global footprint.

What is a PEO?

A PEO, or Professional Employer Organization, is a third-party human resources solution provider that offers administrative HR services, such as payroll processing, benefits administration, compliance management, and more.

PEO service providers and their client companies typically form co-employment relationships in which both parties share employer responsibilities. The PEO focuses on employment-related HR activities, while the companies retain control over day-to-day employee management. This allows the client company to free itself from time-consuming, repetitive tasks and focus on more strategic business activities instead.

It’s common, especially in the context of global employment, to hear the terms “PEO,” “international PEO,” “global PEO,” and “Employer of Record (EOR)” used interchangeably. However, there are important differences between a PEO and an international PEO (or EOR), and employers looking to expand their global footprint by hiring employees in other countries should know how to differentiate between different service providers so they can find the best solution to meet their needs.

PEO vs. international PEO (EOR)

The terms PEO, international PEO, and EOR are often used interchangeably, but they represent different service models., 

A PEO (Professional Employer Organization) uses a co-employment model, meaning the PEO and its client companies share employer responsibilities. The PEO typically takes on HR functions like payroll and benefits administration, while the client company retains control of day-to-day employee management and big-picture company strategy. Co-employment isn’t common around the world, and in countries where it is an option, it typically requires both the PEO and the client company to have established local legal entities. In China, PEOs aren’t available; while you may see “China PEO” services advertised, those companies are likely taking advantage of the fact that many employers are familiar with the concept of a PEO, while actually offering an EOR service.

An EOR (Employer of Record), also called an international PEO or global PEO, becomes the full legal employer for its client companies’ international employees, handling the legal responsibilities that come with that role, which often include HR functions like payroll and benefits administration, along with compliance with local labor, employment, and tax laws. This means partnering with an EOR allows you to hire in a foreign country without setting up a local legal entity. In countries like China, an EOR can help make sure your employment practices meet local laws so you can focus on growing your business internationally without worrying about compliance with complex Chinese labor laws.

Why use a global PEO (EOR) to hire in China?

As a foreign company, there are limited ways you can hire in China. One is to set up a legal entity. Another is to partner with a global PEO (EOR). 

Setting up your own legal entity: Complex and time-consuming

Setting up a legal entity in China can take months, and the process is complex, often requiring: 

• Choosing an entity structure. In China, some common entity types for foreign companies include LLCs (also known as Wholly Foreign-Owned Enterprises or WFOEs), companies limited by shares, and partnership enterprises.
• Registering the business. Under China’s Company Law, registration typically takes at least three months and can involve multiple government agencies, including the Ministry of Commerce, Public Security Bureau, Taxation Bureau (State and Local), State Administration of Foreign Exchange (SAFE), People’s Bank of China (PBOC), and more.
• Defining registered capital. Depending on the entity structure you choose, you may need to inject starting capital into your business’ bank account following rules set by the State Administration of Foreign Exchange (SAFE).

Using an international PEO (EOR): Faster, simpler, and less risky

Another option is using an international PEO (EOR). Partnering with an EOR means being able to bypass the lengthy, complicated process of setting up a local business entity. It also comes with other benefits: 

1. It’s faster: Partnering with an international PEO means getting your business up and running and hiring employees in China potentially in a matter of days, where setting up a local entity takes months.
2. It’s simpler: An international PEO is your organization’s partner when it comes to navigating the legal complexities of international employment, including China’s labor laws and other regulations you’ll need to know to ensure full compliance. 
3. It’s less risky: As the full legal employer of your Chinese employees, an international PEO can take on much of the compliance responsibility and help protect your business from potential legal issues that can arise.

What does an international PEO (EOR) offer?

Employers aiming to attract and keep top talent in China must provide employment conditions that align with local regulations and standards. An international PEO (EOR) provides a range of services that streamline and automate different parts of international business operations, including:

Employee onboarding

An international PEO (EOR) can manage the onboarding process for your business’ Chinese employees, including: 

• Preparing and executing employment contracts compliant with Chinese law
• Collecting necessary documentation, like work permits or other employment authorization
• Setting up payroll and benefits enrollment for new employees

Payroll processing

Payroll is a complex process, and even more so when hiring internationally and navigating foreign tax systems. An international PEO (EOR) can help with:

• Payroll processing, including calculating wages, withholding and remitting taxes, and paying your workforce in China (including 13th month salary payments)
• Managing deductions for benefits and employment insurance
• Tax compliance, such as setting up tax accounts and ensuring accurate withholding and remittance of various payroll taxes to the correct agencies at the correct times
• Generating payroll reports 

Compliance support

Navigating foreign employment and labor laws can be daunting, but an international PEO (EOR)  can help your business comply with all relevant Chinese labor laws, removing a significant administrative burden from your team’s plate. This can include: 

• Drafting labor contracts that meet legal requirements
• Keeping up-to-date with changes in labor laws and regulations
• Advising your team on employment issues, like minimum wage, proper termination procedures, rules for probationary periods, and other local regulations
• Making sure employees receive statutory benefits, like health insurance, annual leave, and public holidays

Benefits administration

An international PEO (EOR) can help your company access competitive benefits that align with Chinese employment laws—and local employees’ expectations. 

In China, a number of employee benefits are required by law. Employers must provide:

• Social insurance. Many mandatory benefits come from China’s social security system, which requires both employees and employers to contribute to pension funds, health insurance, workers' compensation, maternity benefits, and unemployment insurance. Contribution rates are based on average wages in the employee’s location, so employers in large cities like Beijing or Shanghai can expect to pay more than rural employers.
• Housing fund contributions. Both employees and employers contribute to China’s housing fund, which employees can later use to purchase a house, pay off a mortgage, or renovate their living space. 
• Paid leave. Chinese employees are entitled to paid sick leave, annual leave, and maternity leave. 

In addition to its statutory benefits, China celebrates seven national holidays:

• New Year's Day
• Chinese New Year
• Labor Day
• Dragon Boat Festival
• Qingming Festival
• Mid-Autumn Festival
• National Day

Partnering with an EOR for benefits administration can help ensure compliance with locally required benefits and holidays. An EOR can also help your business access locally relevant benefits that will help you attract and retain top talent in China.

HR outsourcing 

• Finally, working with an international PEO (EOR) means your company can outsource many of its HR tasks to local experts. This can be particularly beneficial if you don’t have an in-house HR team, or if you lack local HR expertise as you expand your global footprint there.

What are the benefits of using a China EOR?

Partnering with an EOR in China can offer your company a number of advantages. 

Cost savings

Setting up a local business entity in a new country can be costly—add up business registration fees, legal expenses, and costs for office space and hiring administrative staff, and you could be looking at a large bill. An EOR can sometimes be more cost-effective by reducing some of the overhead that comes with expanding a business globally. EORs can also bundle certain services, which may allow your business to save where paying for each service individually could be more costly.

Time savings

Registering a legal entity in China can take months, potentially delaying your entry into the Chinese market. Working with an EOR often means you can get your business off the ground and hire employees in a new country faster, meaning faster market entry. And over time, with the EOR focusing on administrative work, you get time back for strategic, value-adding work for your business.

Reduced compliance risk

Like many countries, China has strict and varied labor and employment laws to protect its workers—and non-compliance can result in penalties, fines, and even legal action. An EOR stays up-to-date on changing regulations so you don’t have to. It can also handle legal documents, prepare compliant policies, and advise you on best practices to avoid disputes and other compliance liabilities.

Local expertise and guidance

Expanding into any new country can be challenging. An EOR acts as a local expert, offering advice and guidance that can be invaluable when providing cultural insights or explaining local business etiquette. An EOR can offer regulatory knowledge, expertise in regional differences throughout China, and guidance on market trends and strategies to explore while expanding your business in Asia.

How to choose an international PEO

Choosing the right international PEO (EOR) is key to successfully expanding your business abroad. Here are some of the key factors to take into consideration when comparing global PEO providers:

• Industry expertise: Look for an EOR with experience in your industry.
• Service offerings: Whether your business needs payroll, benefits administration, compliance support, or all of the above, make sure your choice of EOR offers all the services you need.
• Technology and ease of use: The EOR you pick should have a user-friendly platform that integrates seamlessly with the rest of your tech stack.
• Reputation: Look to reviews and testimonials from other client companies to see what it’s like actually working with your chosen EOR.
• Pricing: Look for a transparent pricing model that fits your budget.

Best global PEOs (EORs) for hiring in China

There are many different EORs that offer services in China. Looking for standouts in a crowded field? Consider these top five contenders.

Rippling

Rippling EOR was ranked the #1 Employer of Record service in 2023 because it’s more than just a global PEO—Rippling brings together global HR, finance, and IT all in one place. Every part of Rippling is built on a single source truth for employee data, so when you're ready to scale up and establish your own local entity, transitioning your employees to your own entity takes just minutes.

Key features:

• Onboard international employees and independent contractors in 90 seconds
• Pay workers in their local currency in days instead of weeks and without waiting on transfers or conversions
• Automatically file and pay taxes globally
• Streamline and sync all your HR data with payroll, including hours, time off, deductions, and more
• Design worldwide and country-specific policies for employee benefits, leave, and more
• Automate your global compliance work
• Report on all your employee data across the world in one place
• Manage human resources, IT, and finance in one unified system for global employment

Papaya Global

Papaya Global is built for enterprise companies, offering tools for hiring, onboarding, workforce management, multi-currency payment processing, and benefits administration in its EOR.

Key features:

• Automated payroll
• Safe, simple, and fast global payments (in local currency or crypto)
• Integrations with HRIS, expense management, time and attendance, ERP, and financial software
• Dedicated customer success representative

Remote

Remote is designed for remote teams and their employers. It offers a modern platform with HR, payroll, and benefits features tailored for work-from-home or work-from-anywhere employees. 

Key features:

• Payroll with no interchange fees
• Benefits management
• IP protection
• Self-service onboarding

Deel

Deel is a well-known EOR provider that helps businesses expand their global footprint without setting up local entities.

Key features:

• Onboarding and offboarding
• App management
• Compliance management
• Streamlined payroll
• Integrations with other HR platforms

Velocity Global

Velocity Global is an EOR service that’s also known for supporting immigrants, business travelers, and others doing business in new countries.

Key features:

• Global onboarding, including help with visas
• Creating and managing compliant documents
• Benefits administration

Hire in China quickly and compliantly with Rippling

Rippling automatically handles the hard parts of hiring in China and around the world—from compliance to payroll to onboarding and more. Bring your global workforce and tools into one HR system and automate the day-to-day tasks of HR, IT, and finance—so you can focus on high priorities.

With Rippling EOR, you can:

• Onboard in minutes. Hire and onboard Chinese employees to maximize productivity on day one. Rippling handles everything from benefits enrollment to assigning required training.
• Pay locally in days—not weeks. Pay all of your employees in China—and around the world without delay. Rippling does the calculations and money movement for you. You'll be free to focus on what matters.
• Automate global compliance. Double-checking compliance risks takes time. Rippling runs securely in the background, continuously flagging potential risks.
• Unify HR, IT, and finance. Data entry and duplicate systems waste time. Every team has one source of employee data, so speedy automation can take on manual work.

Frequently asked questions about China EORs

What's the difference between a PEO and an EOR?

A PEO (Professional Employer Organization) is a third-party service provider that forms a co-employment partnership with clients to help with HR administrative tasks. To use the PEO's services, the client company typically needs to have a legal entity in the location where the PEO is engaged.

An EOR (Employer of Record) helps companies hire globally without establishing a legal entity in the target market. It acts as a legal employer that hires foreign employees on behalf of its clients, taking on all employer responsibilities from payroll to employee benefits and legal compliance.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.