Hire in China

How to Hire in China

China, with its 1.4 billion population, is currently an economic powerhouse. To take advantage of the growing country and skilled workforce, refer to this section to understand how to hire in China.

Best ways to hire

Hiring employees in China can be challenging due to its complex hiring laws and cultural barriers. Here are some of the ideal ways to hire employees in the country:

• You can opt for a subsidiary
• You can hire staff in China via EOR
• You can partner with an AOR

How to hire by setting up a local entity

One way to hire employees is to set up a local entity. It can be a regional entity or subsidiary depending on your company requirements. 

So, how do you establish a local entity in China? You must check the local legal structure, registration process, compliance requirements, and HR management. 

Although a local entity gives you complete control over business operations, setting it up is time-consuming. Furthermore, this method can be cost-intensive as it bears set-up costs, legal fees, administrative costs, etc.

How to hire employees via EOR

An EOR (Employer of Record) is your ideal option if you are looking for a quick and efficient solution for hiring employees in China. They act as the legal employer in a foreign nation, taking care of hiring, payroll, compliance, taxes, and all other HR functions on behalf of a business. 

Furthermore, partnering with an EOR will expedite your Chinese market entry, give you the flexibility to upscale your workforce, and adapt to changing market trends. 

How to hire contractors through AOR

Hiring contractors via Agent of Record (AOR) is another great option for hiring employees in China. An AOR is a third-party service provider that takes care of all hiring and administrative needs of a foreign business. AORs are especially beneficial when you're hiring independent contractors in a country and don't want to settle permanently. 

With excellent AOR service providers like Skuad, you can hire employees in China flexibly and at minimal cost. Furthermore, AORs are experts in local laws and thus ensure compliance, making your business expansion risk-free.

Cost of Hiring in China

There are many direct and indirect costs when you hire employees in China. Here’s a cost breakdown of it:

Direct Costs:

• Salary: These are primary costs, and they vary depending on employee expertise, market conditions, and employment domain. For more details, explore Skuad’s salary insights tool.
• Statutory benefits include paid time off and health and old age insurance, which are mandated by law. 
• Talent acquisition: It is cost-intensive, covering the costs of recruitment advertisements, outsourcing, interviews, and background checks. 
• Staff training: Once you’ve onboarded new employees, they require training. This will involve costs such as training resources and facilitator fees. 

Indirect Costs:

• Administrative costs: Administrative costs cover staff salaries, office rent and equipment, payroll processing, and drafting contracts.
• Legal costs: Ensuring local compliance, misclassification fines, and any other penalties are covered in legal expenses. 

This section explores the cost comparison between setting up a local entity and hiring with an EOR.

A Brief About Employment Laws in China

Chinese labor law highlights rules about hiring employees in China. A few of its eminent features are:

• The Labor Law of the People's Republic of China
  • It guarantees employees the right to be employed on an equal basis, choose occupations, obtain remuneration for labor, take rest, have holidays and leaves of absence, receive labor safety and sanitation protection, get training in professional skills, and enjoy social insurance and welfare treatment.

• Employment Contract Law
  • Employment contracts are mandatory in China and must specify terms of employment, work expectations, remuneration, and termination conditions.
• Minimum wages: The minimum wage varies in different provinces. For example, the minimum wage in Beijing is 2420 Yuan Renminbi. 
• Statutory benefits: Paid leaves, maternity leaves, old-age insurance, unemployment benefits, and housing funds are mandated by law.
• Worker Protection: Juvenile workers are protected against working in hazardous environments.
• ‍Health and Safety: Occupational safety and health must be maintained in every organization.
  

Challenges of Hiring in China

When hiring employees in China, you might come across multiple challenges. These include:

1. Navigating complex employment laws

Chinese employment laws are complex, and foreign companies often struggle to comprehend them. As we know, China is growing continuously, the employment laws tend to change to match the pace. The laws strictly emphasize worker protection as they cover working hours, minimum wage, maternity leave, paid leave, and employment contracts.

Another common challenge when hiring contractors is drafting employment contracts. Chinese employment laws mandate detailed contracts explicitly mentioning all employment terms, which is difficult for any business unfamiliar with Chinese labor laws.

Employee termination is also difficult to consider because Chinese labor laws specify a list of grounds for dismissal. You can attract hefty penalties if you’re unfamiliar with these and dismiss any employee on the wrong grounds.

2. Payroll

Payroll management in China goes beyond simply calculating wages. It includes other statutory benefits like social insurance, housing funds, tax deductions, etc. The payroll frequency in China also varies depending on the employment contracts and nature of work. The salary can be disbursed monthly, weekly, or bi-monthly. 

So, businesses have to be highly cautious when calculating an employee’s salary because any miscalculation can lead to penalties.

Furthermore, you must always be up-to-date with the Chinese tax regime because tax regulations in the country are regularly updated. Currency controls and strict regulations of fund transfers further complicate payroll management in China.

3. Language barrier

In China, there are over 129 dialects that native employees speak. It can be hard to understand the dialect difference between regions. Even Mandarin, the most common dialect, has different accents depending on where you are. 

This can make it tough for people from different areas to talk to each other easily. In some places like Chaoshan, the local way of speaking is so different from Mandarin that it can really get in the way of understanding each other. 

This language barrier can cause problems in communicating, especially in important areas like healthcare.

To get past this barrier, companies might need to offer language training or use translation services. They also need to be ready to change how they communicate to make sure everyone understands each other.

4. Skill gap

Hiring and managing employees in China becomes challenging due to its competitive talent market and cultural roadblocks. 

There is fierce competition for qualified talent in the Chinese labor market, and to secure employees, businesses must provide competitive packages.

Chinese cultures, like the local practices and behaviors, can pose another burden on employers. Certain norms normalized in other countries may not apply in China. 

5. Cultural difference

In China, people believe in working together and keeping everyone happy, which is quite different from how Western countries function. There are also ideas like "face," which means caring a lot about your reputation and respecting hierarchy. This can be hard for people from other countries to get used to.

Sometimes, companies hiring in China might feel surprised or uncomfortable by the way Chinese people openly talk about their prejudices or opinions. China is changing quickly, which makes it even trickier to understand the culture.

Hire in China with Skuad

Are you planning to hire in China? 

With its complex laws and payroll policies, you might find it challenging. But you need not worry—Skuad is your ideal solution!

Skuad provides streamlined hiring and payroll services in over 160 countries, including China. We will help you hire and manage employees in China hassle-free and quickly. Our team of experts will ensure your business complies with local laws, generates legal contracts, issues timely payments, and much more.

Let us be your hiring guide in China!

Explore Skuad today! 

FAQs

Q1: Can I hire a contractor in China?

Yes, you can hire independent contractors in China. This is particularly a good option when you’re not planning to establish a permanent business in the country. You can also opt for AOR services to hire contractors in China. 

Q2: Can a foreign company hire employees in China?

Yes, foreign businesses can hire employees in China. You can set up a local entity in the country. You can also partner with a reputable EOR or AOR service provider. This will ensure local compliance.

Q3: How do I find employees in China?

Some easy ways to explore the Chinese talent pool are to check the hiring platforms, explore career fairs and events, or partner with an EOR service provider. Searching multiple hiring platforms and career fairs can be time-consuming, but pairing with an EOR makes hiring quick and easy.

Q4: How does China pay employees?

Employees in China are usually paid monthly, either in bank accounts or cash. Although 13th-month pay or annual bonuses are not mandatory by law in China, they are commonly given to employees.