Hire and pay employees in China

Employer of Record (EOR) vs. entity

One of the first steps to hiring in China is deciding whether to set up your own legal entity there or hire employees through an EOR.

• Legal entity in China. Setting up your own local entity in China requires choosing a business structure, registering with the government, opening a local bank account, and consulting with Chinese labor law experts to ensure compliance with tax and labor laws. You're also fully responsible for compliantly running payroll, administering benefits, and handling taxes for your employees.
• Chinese EOR. An EOR is a third-party service that hires employees on your behalf. It handles legal requirements and compliance issues, including payroll, contracts, and benefits.

There are pros and cons to establishing a legal entity or using an EOR—ultimately, deciding between an EOR and your own entity depends on your company's size, resources, and future plans to scale in China. Here are some pros and cons to consider for each:

Learn more about hiring employees through an EOR in China—and how Rippling can help you hire and onboard Chinese employees in just 90 seconds—in our guide.

Classifying China workers: employees vs. contractors

Like many countries, China legally distinguishes between employees (who are hired indefinitely) and independent contractors (who are on a fixed-term contract). But employers should beware that the People’s Republic of China (PRC) is known as a high-risk country for hiring independent contractors. Chinese labor laws strongly favor employment and the risk of misclassification is high. Misclassifying workers in China can come with serious penalties, including fines, back payments, and even bans from operating in China.

Here's a brief overview of some of the ways China distinguishes between contractors and employees:

Learn more about how to correctly classify Chinese workers while staying compliant with Chinese labor laws, in our worker classification guide.

Work permits for China employees

Another step you need to take early in the hiring process is ensuring your prospective employees are legally authorized to work in China. Foreign nationals without permanent residency who live in China must obtain work permits in order to work there, with a few exceptions; for example, international students can take part-time jobs on their student visas as long as they obtain permission from their Chinese host university and the Chinese immigration authorities.

Some of the work visa types you may encounter include:

• Z work visa, the most common type of work visa, for those planning to stay and work in the country for more than six months.
• X1 or X2 visas, for students planning to stay more than 180 days (X1) or under 180 days (X2). 
• J1 or J2 visas, for foreign journalists. 
• M visas, for business owners staying in China for 30 to 60 days.
• F visas, for exchange students, study tours, or visitors who will be in China for 30 to 60 days. 
• R visas, for high-level foreign talent who need to work in China.

Anyone applying for a work visa in China must meet certain qualifications, including age and health criteria.For full details, including how to apply, see our guide to work permits in China.

New hire onboarding checklist

Once you've classified your new employee and determined they're legally able to work in China, you're all set to continue their onboarding. The onboarding process is your chance to set the tone for a fulfilling employment relationship.

That's why a successful onboarding experience goes well beyond the first day. Below, you'll find some suggestions for things to include at each stage of the process, for the first 90 days:

Before their first day

• Complete a background screening. 
• Send a legally compliant offer letter (more on that in the next section).
• Prepare tax documents. 
• Enroll them in benefits.
• Add them to the payroll. 
• Order and configure their apps and devices. 
• Schedule their first-day orientation.

On Day 1

• Prepare their workspace. 
• Send a welcome email. 
• Give them an agenda for their first week. 
• Schedule a meeting with their onboarding mentor and guanxi, or social network in business.
• Give them a tour of the office. 

During their first 90 days

• Schedule general and role-specific training. 
• Assign tasks and help them set goals. 
• Schedule regular check-ins to measure progress. 
• Seek their feedback on how to improve the experience.

For a full, step-by-step breakdown of onboarding a new employee in China, see our guide.

What to include in an offer letter in China

The offer letter is an integral part of your new employee's onboarding. It sets expectations for both the employee and the employer. Here's what to include in your offer letter (also known as an employment agreement) for an employee in China:

• Position and job description
• Job duties
• Start date and working hours
• Probation period
• Definition of workplace
• Compensation and benefits, including salary and any other remuneration
• Your sick leave policy
• Your termination policy
• Contact information and phone number
• Non-disclosure/non-use/non-circumvention agreements (NNN)

Note that the job offer is contingent on their ability to legally work in China. Learn more about sending a legally compliant offer letter in China in our full guide.

NDAs and confidentiality agreements in China

In many countries, it's standard to send a non-disclosure agreement (NDA) as part of the employment agreement. In China, however, it can be difficult to enforce a US-style NDA. Instead, it's common for Chinese employers to include a non-disclosure/non-use/non-circumvention agreement (NNN) as an all-encompassing document to protect trade secrets, proprietary information, and confidential information. 

The main difference between the two is that while NDAs primarily focus on confidentiality, NNNs are more broad, including non-use and non-circumvention. That's why they're often used in international business relationships. 

For an NNN to be enforceable, it needs to include:

• Clear indication of the parties involved
• Definition of the nature of confidential information
• Security measures that must be taken to protect technical or trade secrets
• Exclusions from confidentiality
• Terms of the agreements
• What happens if the agreement is breached

The NNN should also be translated into Chinese, governed by Chinese law, and signed and executed by all parties. Learn more about the differences between NDAs and NNNs and how to draft a legally compliant NNN for an employee in China in our guide.

Running background checks on China employees

Before your new employee gets started, there's one important step you should never skip: the background check.

In China, employers are allowed to request basic information from job applicants, as long as it's relevant to the position. These are some common types of background checks employers conduct in China:

Note that employers can't request an applicant's criminal records—only the applicant themselves can request a Certificate of Non-Criminal Conviction (CNCC certificate) from their local security bureau.

Learn more about the different types of background checks you can run in China—and how to avoid running afoul of anti-discrimination laws—in our guide.

Paying employees in China

Whether you choose to establish your own entity or use an EOR, you'll need a way to pay your employees in China. One of the fastest and easiest ways is with global payroll software like Rippling.

Once you've chosen a payroll solution, the next steps are to:

• Ensure your employees are correctly classified.
• Collect employee information, including their name, date of birth, date of hire, email, physical mailing address in China, identity certificate number (tax identification number (TIN) for those using a Chinese ID card), and bank account information.
• Input the payment amount in people’s renminbi or RMB (including any bonuses). China’s currency is also known as the Chinese Yuan or CNY. Get explicit, written permission if you plan to pay them in another currency.
• Make sure you’re following any statutory requirements for calculating payroll deductions.
• Run payroll.

Keep in mind that employers are responsible for calculating and withholding payroll deductions and social security contributions. In China, these vary from region to region. Below are a few examples for some of China's largest cities:

Employers must also calculate and withhold individual income tax (IIT), which follows a progressive tax rate structure ranging from 3-45%.

Learn more in our step-by-step guide to running payroll for employees in China.

Mandatory employee benefits in China

In China, certain employee benefits are mandated by law. China's labor laws are strict, and violating them by failing to offer the correct statutory benefits risks not only fines and penalties but bans on operating in China.

Mandatory benefits include:

• Social security. Both employers and employees contribute to China's social insurance system, which funds residents' pensions, medical insurance, maternity insurance, unemployment, and workers' compensation.
• Housing fund. Both employers and employees also contribute to the housing fund, which helps employees purchase, build, or renovate homes.
• Paid vacation. Full-time employees receive vacation entitlements based on the length of their employment at your company, as well as their time in the workforce at large.
• Sick leave. Sick leave is also based on the employee's length of employment and covers illnesses and injuries not obtained during the course of work.
• Statutory holidays. There are seven public holidays in China. Some last more than one day, resulting in a total of 11 paid days off each year.
• Additional leave. Employees are entitled to additional leave for bereavement and marriage. Lengths of leave vary depending on the region.

Many companies in China offer additional benefits to help them attract top talent. These can include life insurance, additional medical benefits, additional paid time off, and more.

To learn more about how to meet China's statutory requirements for employee benefits—and go above and beyond for your employees—read our full guide.

Managing remote employees’ computers and apps

One of the toughest things about navigating the global future of work is setting distributed employees up with all the apps, tools, and integrations they need—and still being able to manage them. Remote work has created challenges around app and device management, but Rippling can help with all the logistics, from shipping devices to your employees to setting them up and updating them from afar.

With Rippling you can:

• Quickly set up and secure employees' accounts and permissions.
• Set up, manage, and disable employee accounts and apps, all from one place.

Check out our guide to learn more about setting up and managing remote employee devices.

Protecting company IP in China

Protecting your company's sensitive information is a must whenever you hire new employees—including any IP created by the employee during their tenure. 

In China, NNNs protect confidential information and prevent other parties from using disclosed information to compete against your company, or from circumventing the relationship. This is a useful tool, but it needs to be used alongside other legal protections in China for different types of IP, including:

• Patent protection
• Copyrights
• Trademark protection

Learn about the basics of IP protection and ownership in China in our guide.

Complying with China labor laws

One of the most difficult things about being a global company is ensuring you're compliant with all the labor and employment laws in the countries where your employees live. In China, failure to follow the country's strict labor laws can result in millions in fines, legal action, and a ban from operating.

Read more about the most important Chinese labor laws, including:

• Labor laws vary by province. If you hire multiple employees in China who live in different areas, they may have different minimum wage requirements.
• Written employment contracts are mandatory for all employees, part-time and full-time. Contracts should be supplied in English (or your local language) and Chinese, and outline all the terms of employment.
• At-will employment doesn't exist in China. Chinese employees can't be fired without cause—more on this in the next section.

Terminating employees in China

At-will employment is not recognized in China. Employees can only be terminated involuntarily in very limited cases:

• The employee can’t work due to being ill or injured (but is outside the treatment and observation period).
• The employee is incompetent, even after switching roles or being given additional training.
• Their labor contract can’t be fulfilled due to unforeseen changes.

Employees can be terminated for cause if:

• They seriously violate company rules or are violent in the workplace.
• They are convicted of a crime while in your employment.
• They cause you to suffer serious losses.
• They signed their contract under false assumptions or coercion.
• They take another job which could be harmful to you.

For termination without cause or in cases of layoffs, employees are entitled to a 30-day notice period and severance pay, which is calculated by multiplying the monthly salary by the employee’s years of service. For example:

• Service up to one year: one month of pay
• Service up to two years: two months of pay
• Service up to five years: five months of pay
• Service up to 10 years of pay: 10 months of pay

Severance is negotiable in China and employees may negotiate higher payouts as part of their labor contract negotiations. 

Learn more about Chinese termination requirements in our comprehensive guide.

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