Employer of Record in China: A Complete Guide for 2026

Introduction

Foreign companies can hire, pay, and manage employees in China without setting up a WFOE or joint venture through an employer of record. The EOR acts as the legal employer through a licensed local entity, handling employment contracts, social insurance filings, payroll in CNY, and statutory benefits on the company's behalf.

The standard Western EOR model does not apply in China the way it does in other countries because foreign companies cannot sign direct contracts without a registered entity, social insurance contributions are set city by city rather than nationally, and labour law enforcement runs at the provincial level.

Companies that move forward without accounting for these differences end up with delayed onboarding, compliance gaps, and payroll structures that don't hold up to local scrutiny.

This guide covers what foreign employers need to get right when hiring in China, from employment contracts and termination rules to social insurance, payroll tax, and work permits.

A WFOE takes three to six months before you onboard a single employee. Skuad gets your first China hire onboarded in weeks. Book a demo

Key Takeaways

• Skuad's China EOR starts at $249 per employee per month with no WFOE or joint venture required
• Onboarding takes two to three weeks once documents are confirmed, compared to three to six months for entity setup
• Skuad handles city-specific social insurance filings (pension, medical, unemployment, occupational injury) and housing fund contributions across China
• Total employer contributions range from 27% to 40% of gross salary depending on the city
• Employment contracts include IP assignment clauses by default, covering inventions, code, and creative work
• Work permit and Visa Z sponsorship is included, with processing taking four to six weeks

Skip the entity setup. Get your first China hire onboarded in weeks. Book a demo

China at a Glance

• Estimated Population: 1.41 billion
• Currency: Yuan (CNY) and Renminbi (RMB)
• Capital city: Beijing
• Languages: Mandarin, Cantonese
• GDP: USD 18.74 Trillion

How does an EOR work in China?

An employer of record in China is a licensed local entity that legally employs workers on behalf of a foreign company. The EOR signs the employment contract, runs payroll in CNY, files social insurance, and handles compliance with Chinese labour law, while the foreign company manages the employee's day-to-day work and responsibilities.

This structure lets foreign businesses hire in China without setting up a Wholly Foreign-Owned Enterprise (WFOE) or joint venture.

What are the key responsibilities of an EOR in China?

An EOR in China takes on the legal and administrative obligations that would otherwise require a registered local entity. These responsibilities include:

• Drafting contracts and managing employment laws that comply with Chinese rules and city-specific requirements
• Registering employees with the local social insurance bureau and remitting monthly contributions across pension, medical, unemployment, occupational injury, and housing fund
• Processing payroll in CNY with accurate Individual Income Tax (IIT) withholding and year-end reconciliation
• Administering statutory benefits including paid leave, maternity entitlements, and sick leave
• Managing termination and offboarding compliantly, including notice periods and severance calculations
• Sponsoring work permits and Visa Z applications for foreign nationals

The client company retains full control over the employee's role, tasks, and performance. The EOR holds the legal employment relationship only.

Why do foreign companies use an EOR instead of setting up a WFOE?

Setting up a WFOE in China takes three to six months, requires registered capital, and commits your legal and finance teams to ongoing entity maintenance. An EOR removes that dependency.

Foreign companies typically choose an EOR when they need to hire quickly, test a new market before committing to an entity, or employ a small team where the overhead of a WFOE doesn't make financial sense.

Skuad operates as the employer of record in China through a licensed local entity, handling every responsibility listed above from a single platform. Book a demo to see how Skuad gets your first China hire onboarded in weeks.

EOR vs WFOE: Which is right for your China hiring plan?

The right structure depends on how many people you're hiring, how quickly you need to start, and whether you plan to build a permanent presence in China. Here's how the two models compare:

For companies hiring fewer than 10 people in China or testing the market before committing to an entity, an EOR is typically the faster and lower-risk path. Companies planning a permanent office with a large team may eventually benefit from a WFOE, but many start with an EOR and transition later once the business case is proven.

Skuad supports both stages. Start with EOR to get your first hires onboarded in weeks, and transition to your own entity when the time is right. Book a demo to plan your China entry.

What are the risks of hiring in China without an EOR?

Foreign companies that try to hire in China without a local entity or an EOR face compliance risks that go well beyond payroll errors. Chinese labour authorities actively enforce employment regulations at the city and provincial level, and penalties for non-compliance can include fines, back-payment of contributions, and forced reinstatement of terminated employees.

Unregistered employment

Misuse of labour dispatch

City-level social insurance non-compliance

Employee data exposure under PIPL

What are the employment laws and regulations in China?

Employment laws in China apply to both national and foreign employees, governed primarily by:

• Labour Contract Law
• Social Insurance Law
• Work Safety Law
• Trade Union Law.

Every full-time employee must have a formal written employment contract, and employers are required to enrol employees in mandatory social insurance from day one. Benefits and contribution rates vary by city and province, making compliance a moving target for foreign companies without local infrastructure.

What types of employment contracts are used in China?

Chinese labour law requires a written contract for every full-time employee. The contract must be signed within one month of the employment start date. Failure to do so obligates the employer to pay double wages for the period without a contract. There are three types:

What mandatory benefits must employers provide in China?

Employers in China are legally required to provide medical leave, maternity leave, retirement benefits, and medical care coverage to all full-time employees. These entitlements are statutory and cannot be waived by contract.

The Chinese government updates labour regulations frequently, and employment laws also differ across provinces. Skuad manages employment contracts, statutory benefits, social insurance filings, and payroll compliance across 

Chinese cities from a single dashboard, so your team stays focused on the work rather than tracking provincial law changes. Book a demo

What are the leave policies in China?

Employees in China are entitled to 13 statutory paid holidays, 5 to 15 days of annual leave based on tenure, and additional leave for marriage, bereavement, and maternity.

Chinese leave policies are less generous than those in most Western countries. Many local and foreign companies stretch the minimum limits and offer additional rest days as a negotiating tool when competing for talent.

Statutory holidays in China

China has seven statutory public holidays totalling 13 paid days off per year, effective since 1 January 2025. The State Council increased the count from 11 to 13 days by adding Lunar New Year's Eve to the Spring Festival break and 2 May to the Labour Day break. Several of these holidays follow the lunar calendar, so exact dates shift each year. The General Office of the State Council publishes the official schedule every November.

The State Council extends several holidays into longer breaks by designating adjacent weekend days as part of the holiday and making other weekends compensating workdays. Employees required to work on a statutory holiday are entitled to 300% of their daily wage.

Rest day policy

Employees in China are legally entitled to at least one full rest day (24 consecutive hours) per week, typically falling on Saturday or Sunday. Employers who require work on a rest day must either provide a compensatory day off or pay 200% of the employee's daily wage.

Paid leaves

Employees in China are entitled to 5 to 15 days of paid annual leave depending on their cumulative years of employment across all employers. In addition to annual leave, employees can apply for marriage leave, sick leave, bereavement leave, and maternity or paternity leave as applicable under China employment laws.

Annual leave accrual entitlement

Annual leave in China accrues based on an employee's total cumulative working years across all employers, not just tenure with the current company. Employees must have worked for at least one year total to become eligible.

Compensation for Unused Leaves

Employers in China are legally required to compensate employees for any unused annual leave. The rate is 200% of the employee's daily wage for each unused leave day. This means the total payment for an unused leave day effectively becomes 300% of the daily wage (the regular day's pay plus the 200% premium). Employers who do not compensate for unused leave risk penalties from labour authorities.

Skuad tracks China's annual holiday schedule and adjusts payroll and leave policy calculations automatically, so your team stays compliant without monitoring State Council announcements independently.

What is the difference between contractors and full-time employees in China?

Foreign companies hiring in China need to choose between independent contractors and full-time employees. The right model depends on the nature of the work, how long the engagement will last, and how much compliance complexity the company is prepared to manage.

Misclassifying a full-time role as a contractor arrangement carries significant penalties in China, so getting this decision right from the start matters.

China's labour authorities look closely at contractor relationships that involve fixed working hours, company-provided equipment, or ongoing supervision. If the arrangement resembles employment in practice, it can be reclassified, triggering back-payment of social insurance, statutory benefits, and penalties.

How does Skuad support both models?

Skuad manages full-time employees through its EOR and contractors through its AOR and contractor management tools, all from a single platform:

• EOR for full-time employees: Locally compliant contracts, city-specific social insurance filings, payroll in CNY, statutory benefits, and compliant offboarding
• Contractor management: Locally compliant agreements that reduce misclassification exposure, automated invoicing, and multi-currency payouts across 70+ currencies

Both models are available at rates built for growing teams. See Skuad's pricing

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How does hiring work in China?

Hiring in China requires a written agreement for both contractors and full-time employees, but the process, obligations, and risks differ significantly between the two models. Foreign companies also need to account for limited reach of Western recruiting platforms and a higher-than-average risk of unverified credentials among candidates.

Hiring independent contractors in China

Foreign companies can engage independent contractors in China without a local entity, but the arrangement must clearly reflect a contractor relationship in practice. Key requirements include:

• A written service agreement that defines the scope of work, payment terms, deliverables, and contract duration
• The contractor retains full control over working methods, schedule, and tools used. If the company dictates any of these, the relationship risks being reclassified as employment.
• Payment terms should be tied to deliverables or milestones, not fixed monthly salaries. Some contractors may request escrow or milestone-based payment to protect against non-payment.

Hiring full-time employees in China

Hiring full-time employees is more involved. Under the Labour Contract Law, companies must:

• Sign a written employment contract within 30 days of the start date. Failing to do so triggers a double-wage penalty for every month without a signed contract.
• Register the employee with the local social insurance bureau and begin monthly contributions from day one
• Maintain employee files including compensation details, contract records, and social insurance documentation

Where do you find talent in China?

Most companies source candidates through local platforms like Zhaopin, 51job, and Boss Zhipin, which are China's dominant job boards. LinkedIn has limited reach due to platform restrictions, making it unreliable as a primary hiring channel for most roles.

Application volumes on these platforms are high, but so is the risk of unverified credentials. Fake profiles, inflated qualifications, and unverifiable employment histories are common enough that background verification is a standard step in compliant China hiring.

Skuad runs background checks as part of the hiring workflow, covering identity verification, employment history, and education credentials, so you know exactly who you're onboarding before contracts are signed. 

Combined with Skuad's local EOR infrastructure, the entire process from candidate verification to compliant onboarding runs through one platform. Book a demo

What are the probation and termination rules in China?

China does not allow at-will employment. Every termination must follow statutory grounds, mandatory notice periods, and severance calculations defined by the Labour Contract Law. Probation periods are capped based on contract length, and probation pay has two legal floors that apply simultaneously. Getting either of these wrong can result in fines, forced reinstatement, or double-severance penalties.

How long can a probation period last in China?

Probation is mandatory for both local and foreign employees, but the maximum duration is tied directly to the length of the employment contract. Project-based contracts do not allow a probation period at all, and employers cannot put an employee on probation again when renewing their contract.

Under Article 20 of the Labour Contract Law, probation pay must meet two conditions at the same time. It cannot be lower than 80% of the post-probation wage agreed in the contract, or the lowest wage paid for the same position in the company. It also cannot fall below the local minimum wage where the employer is based. Both floors apply simultaneously.

How does employee termination work in China?

Employers in China cannot terminate employees unilaterally. Every termination requires a statutory ground, proper documentation, and in most cases, advance notice and severance. Failure to follow these rules can result in the employee being reinstated or the employer paying double the standard severance amount.

How is severance calculated in China?

Severance is calculated at one month's salary for every full year of service, with a half-month payment for any remaining period between six months and one year. Service under six months is paid at half a month's salary. For employees earning more than three times the local average wage, severance is capped at three times that figure per year, with a maximum of 12 years of service counted.

Termination rules in China leave no room for error. Skuad manages notice periods, severance calculations, and offboarding compliance so your team doesn't have to navigate it alone. Book a demo

What are the types of visas in China?

Foreign nationals taking up employment in China need a Z visa and a valid work permit. The process starts with the employer obtaining a Foreign Expert Certificate or Alien Employment License from the local labour authority, followed by a Z visa application at the Chinese consulate in the employee's home country. 

After arriving in China, the employee must convert the Z visa into a residence permit within 30 days. The Z visa is the only visa category that authorises paid employment in China. Business visitors (M visa), tourists (L visa), and student visa holders are not permitted to work. 

The table below covers all 15 visa categories in China, including those for dependents, students, transit, and permanent residence.

What are the requirements to obtain a work visa in China?

Foreign nationals need a Z visa to take up paid employment in China. The application requires the employer to secure a work permit approval first, after which the employee applies for the Z visa at a Chinese consulate in their home country. All applications must include:

• Original passport with at least six months validity and blank visa pages
• Offer letter or employment contract from the sponsoring employer
• Government-issued work permit notification letter
• Passport-sized photograph meeting Chinese visa specifications
• Health certificate from an approved medical facility
• Valid employment license or Foreign Expert Certificate issued to the employer

For the latest requirements, check directly with the Ministry of Foreign Affairs or the nearest Chinese consulate, as documentation standards can vary by jurisdiction.

How does the work permit process work in China?

Foreign nationals must obtain a work permit before they can legally start working in China. The process runs across multiple government departments, and the sequence must be followed in exact order:

• Employer obtains a work permit notification letter from the municipal or provincial labour authority where the employee will be based
• Employee applies for a Z visa at the Chinese consulate in their home country, using the notification letter and supporting documents
• Employee enters China on the Z visa and completes a health examination at a designated hospital
• Employer applies for the formal work permit card (Foreign Expert Certificate) at the local labour authority within 15 working days of arrival
• Employee applies for a residence permit at the local Public Security Bureau within 30 days of entry

Missing any deadline in this sequence can void the application and require starting over.

Work permit details at a glance

Documents required for a China work permit

Skuad sponsors work permit applications, coordinates Visa Z documentation with local authorities, manages the residence permit conversion after arrival, and tracks every deadline across the full permit lifecycle. Book a demo to see how Skuad handles China work permits end to end.

How do payroll and taxes work in China?

Foreign companies running payroll in China must navigate city-specific social insurance rates, progressive Individual Income Tax (IIT) brackets, and mandatory housing fund contributions that vary by municipality. There is no single national payroll standard. Contribution bases, filing deadlines, and employer costs differ across cities, which means payroll for an employee in Shanghai looks materially different from one in Chengdu.

What payroll options do foreign companies have in China?

Foreign employers can structure China payroll in four ways, depending on whether they have a local entity and how much they want to manage in-house:

What social insurance contributions are required in China?

Employers and employees must both contribute to five mandatory social insurance funds and one housing fund, commonly called the "five insurances and one fund" (五险一金) system. Total employer contributions typically range from 27% to 40% of salary depending on the city, while employee contributions run between 16% and 23%.

Contribution rates are set at the city level and reset each July. The ranges above reflect typical Tier-1 city rates. Contribution bases have a floor of 60% and a ceiling of 300% of the local average wage. Social insurance waiver agreements have been void since 1 September 2025 following a Supreme People's Court ruling.

To estimate your total employer cost in China, use the employee cost calculator.

What taxes do employers pay in China?

Employer taxation in China includes corporate income tax, withholding tax on cross-border payments, and the social contributions outlined above. There is no separate payroll tax.

What does it actually cost to employ someone in China?

Each component of employer cost is documented separately across government filings, but adding them up into a single total is what matters for budgeting. The table below shows a worked example for a mid-level employee in Shanghai.

Rates reflect illustrative Shanghai figures for the July 2025 to June 2026 contribution base window. Actual rates vary by city, industry risk classification, and the employee's salary relative to the local contribution base. Use the employee cost calculator for a location-specific estimate.

What income tax do employees pay in China?

China uses a progressive Individual Income Tax (IIT) system with seven brackets ranging from 3% to 45%. Taxable income is calculated as gross pay minus the CNY 60,000 annual standard deduction, employee social insurance contributions, housing fund contributions, and any applicable special additional deductions.

Employers are responsible for withholding IIT monthly and remitting it to the local tax bureau. Year-end reconciliation is required by 30 June of the following year.

What is the VAT rate in China?

China's VAT applies at three rates under the unified VAT Law that took effect 1 January 2026:

Are bonuses mandatory in China?

There is no legal requirement to pay a bonus, but the 13th-month salary is standard practice across most industries in China. This year-end bonus typically equals one month of gross salary and is considered part of the employee's expected compensation package. Omitting it can make offers less competitive when recruiting against local employers.

City-specific contribution rates, IIT withholding, and housing fund filings add up fast. Skuad runs payroll in CNY with every deduction calculated and filed on time. Book a demo

How do you incorporate a company in China?

What is the difference between PEO and EOR in China?

A PEO (Professional Employer Organization) operates on a co-employment model where the original company retains some employer obligations. An EOR (Employer of Record) becomes the sole legal employer and carries full compliance liability.

For foreign companies without a registered entity in China, an EOR is typically the only practical option because Chinese law does not easily accommodate co-employment with an unregistered foreign principal.

Most foreign companies expanding into China for the first time do not have a registered entity, which rules out the PEO model entirely. An EOR lets you skip the entity setup and start hiring in China within weeks.

Skuad operates as the legal employer of record in China, handling contracts, social insurance, payroll, and compliance from a single platform. Book a demo to get started.

How to choose an EOR in China?

Not all EOR providers operate the same way in China. Some use their own licensed entities, others rely on local partners, and pricing varies by a factor of three. 

When comparing providers, focus on how each one handles the things that make China uniquely complex: city-level social insurance filings, housing fund contributions, work permit sponsorship, and PIPL-compliant data handling.

Skuad is built for companies that want to hire in China without the cost overhead of enterprise-tier platforms. At $249 per employee per month, it covers employment contracts, social insurance, housing fund, payroll in CNY, and work permits at roughly half the price of Deel or Remote.

Book a demo to see how Skuad compares for your China hiring plan.

How to hire in China, faster and better?

Skuad handles the operational complexity of hiring in China. With the growing markets, a wide range of business opportunities in China, and swelling spending power, China is a smart choice for any organization seeking business expansion. 

However, adhering to complex employment contract laws, setting up payrolls, getting through work permits, and understanding labor laws discourage companies from moving in this direction.

Therefore, companies often seek alternatives to simplify this business expansion and employee management process. 

Skuad handles the operational complexity of hiring in China, employment contracts, social insurance filings, payroll in CNY, statutory benefits, work permits, and compliance monitoring, so your team can focus on the work.

Companies across SaaS, logistics, e-commerce, and technology use Skuad to enter the Chinese market faster, stay compliant as regulations change, and scale their China workforce without building local HR infrastructure from scratch.

Book a demo to see how Skuad gets your first China hire onboarded in weeks. 

FAQs

1. What is an employer of record in China? 

An employer of record in China is a third-party organization that legally employs workers in China on behalf of a foreign company, managing payroll, taxes, social insurance, and compliance with Chinese labor law. It lets foreign businesses hire Chinese nationals without setting up a local entity like a WFOE or joint venture.

2. Can a US company hire employees in China without setting up a local entity? 

Yes. Through an EOR or workforce management platform that holds a licensed local entity in China, a US company can hire compliantly without incorporating. The EOR signs employment contracts, runs local payroll, and remits social insurance, while the US company manages the employee's day-to-day work.

3. How much does an employer of record in China cost? 

EOR service fees typically range from $199 to $600 per employee per month. On top of that, mandatory social insurance and housing fund contributions add 27% to 38% of gross salary, varying by city. Shanghai and Beijing carry higher contribution rates than lower-tier cities, making location a significant cost variable.

4. What is the difference between an EOR and a PEO in China? 

An EOR is the sole legal employer and carries full compliance and payroll liability. A PEO operates on a co-employment model where the original company retains more employer obligations. For foreign companies without a Chinese entity, an EOR is typically the more practical structure, as Chinese law does not easily accommodate co-employment with unregistered foreign principals.

5. How long does it take to onboard an employee in China through an EOR? 

Standard onboarding through an EOR takes two to three weeks once documents are confirmed, significantly faster than entity setup, which typically takes three to six months. For foreign nationals requiring a work permit, processing adds 15 to 30 working days on top of the standard onboarding timeline.

6. Who owns intellectual property when hiring through an EOR in China?

The client company retains full ownership of all employee-created IP. Skuad's employment contracts in China include IP assignment clauses by default, covering inventions, code, and creative work as a standard contract term. This is not an optional add-on. The clause language aligns with China's Patent Law and Copyright Law provisions on service inventions and works made for hire.

7. Does an EOR protect sensitive and confidential information in China?

Yes. Skuad's China operations comply with the Personal Information Protection Law (PIPL), which governs how employee data is collected, stored, and transferred. Employee payroll records, tax filings, and social insurance data are processed within China's regulatory framework with access controls in place. Cross-border data transfers require a Personal Information Protection Impact Assessment, which Skuad handles as part of its compliance obligations. Client companies retain full IP ownership through default contract clauses.