What is a PEO?

A professional employer organization (PEO) will provide you with human resources, on the ground in any country, while taking care of all the necessary HR roles and duties. 

They will manage the payroll system, find out about the market-competitive employee benefits, and ensure that your company is compliant with the local laws.

One of the best things about PEOs is that they allow SMEs or startups to focus on expanding their operations. The PEOs handle the time-consuming HR responsibilities at a fraction of the cost.

In a nutshell, PEO services allow your business to improve its services and serve its customers better, rather than building an HR team.

Skuad offers PEO services in China and 160+ other countries across the world. Get in touch today to learn more about doing business in China with Skuad.

What are the benefits of using a PEO provider in China?

China has a truly staggering population of 1.4 billion people — with close to 8 million new graduates entering the workforce each year. That represents a significant talent pool for your company to make use of.

And yet, when foreign businesses attempt to open a business in China, they find one aspect of setting up harder than the rest, and that’s HR. 

With a PEO like Skuad by your side, you can tap into the labor market without any hassle. 

Taking the services of a PEO can help you in many ways. You can get the best employees from the wide talent pool available in China. Also, you won't have to worry about dealing with and fulfilling local statutory employer requirements since the PEO will handle all those things for your business.

Let’s unpack these benefits in more detail below…

Hire the best talent from the Chinese Market

Remote working allows you to resolve the problems of finding the most suitable candidates for a job position. It brings down the barriers of geographical borders and enables you to employ the best talent from China and anywhere else worldwide.

China's reforms are changing the country rapidly. As a result, businesses like yours in different locations can enjoy hiring Chinese workers without any difficulties — especially when you’re backed by a PEO. 

Become more competitive

One thing your business needs to do is attract skilled and talented resources by offering the best benefits. And that is where PEO operating in China can help you.

Do you know whether Chinese employees and contractors see paid time off as more desirable than private insurance? Or what constitutes a competitive benefits package in the region? Probably not — nor do you have to.

Your PEO partner in China will be all clued up on statutory benefits in China and can help you stay compliant with the local laws while attracting the most skilled workers.

Save on unnecessary costs

Preparing and training an HR team to hire the best talent in China can be a substantial expense. Using PEO services, you can build your team at a fraction of the cost. 

You can tick all the boxes, like payroll, onboarding, compliance, and more, without breaking the bank. 

Become experienced in a new market

Do you want to enter the Chinese market but don’t know about the potential it offers? If yes, then the best way to start is by using a PEO to gain in-depth insight into the region.

Then, with the help of your newfound Chinese workers, you can start gathering lots of local insights and harness a global perspective internally and externally in the business. Importantly, you can get a better sense of whether other Asian markets would work for your expansion, too. 

Book a Skuad demo today and start taking advantage of the myriad opportunities the Chinese market has in store.

Avoid setting up your legal entity in China

If a business decides to push ahead on its own — instead of using a PEO to hire Chinese employees — then the only way forward is to set up a local legal entity. This is laborious and expensive work, and the company would have to hire the services of local lawyers who are experts in Chinese laws. 

Not to mention the manhours involved for those high up in your business! The founder or owner might have to fly across to China multiple times before everything is signed, sealed, and delivered. They will also have to keep a close eye on everything, to ensure the business registration goes through smoothly and accurately.

None of these things are necessary if you choose to go with a PEO, as the PEO themselves already has a local legal entity you can use. 

You can work with the PEO to hire the best employees and manage all the paperwork, while you — or someone from your business — act as the line manager, assigning the worker(s) regular duties and responsibilities without dealing with any legal technicalities.

Become culturally aware

Globalization has made the world feel smaller in many ways. But you simply never know the cultural differences from one region to the next until you work with them! 

Taking a nap during office hours might not go well with companies in the West, for example. But that is not the case in China. You can take a nap for 20 to 30 minutes before coming back to work after lunch!

Your PEO will be fully briefed on working practices and preferences in China, and they’ll make sure you’re briefed as well.

Complying with the Chinese Laws

Failure to comply with local laws can land you, and your business, in serious trouble. You could be hit with fines or risk license cancellation.

Business compliance includes following payroll rules, providing accurate social security contributions, and giving employees the legally-required types of leave. Below are the most important rules and regulations you’ll need to know about when doing business in China.

Payroll requirements in China

• The currency you have to use to pay wages to Chinese employees is Yuan (¥) also known as Renmimbi.
• The minimum wage can vary from province to province or city. For example, the minimum wage is 1,808 Yuan per month in Shenzhen whereas; the minimum wage is 1,030 Yuan in Guizhou.
• … And employees will expect a 13-month bonus salary.
• As an employer, you will have to pay China housing fund.
• You will have to give severance packages, depending on the contract type: Project-based, Fixed-term, or Indefinite.

Employee leave in China

Statutory paid annual leave in China is far less than in other countries and is calculated based on the employee’s tenure with the company:

• Before one year = no leave entitlement
• 1- 10 years of employment = five days of leave per annum.
• 10 - 20 years of employment = 10 days of leaves per annum.
• More than 20 years of employment = 15 days of paid leave per annum.
  

Female employees get 98 days of statutory maternity leave. For paternity leave, the laws may vary from province to province, but it is not more than 14 days.

Chinese employees have access to 3 to 24 months of paid leave for medical issues. How long the employee has been with the company determines the exact time a person will get.

Tax and other payroll deductions or contributions

China’s max Personal Income Tax Rate is 45% and has been for many years.

For employees earning below ¥960,000 the brackets are:

• Up to  ¥36,000        3%
•  ¥36,000 -  ¥144,000 10%
•  ¥144,000 -  ¥300,000 20%
•  ¥300,000 -  ¥420,000 25%
•  ¥420,000 -  ¥660,000 30%
•  ¥660,000 -  ¥960,000 35%

Both employees and employers are required to pay social insurance contributions in China. The approximate contributions for this are:

Employee

• Pension - 8%
• Unemployment - 0.1-1.0%
• Medical - 2%
• Occupational injury - N/A
• Maternity - N/A
• Housing fund - Matched by employer
• Total = Around 10-11%

Employer

• Pension - 14-22%
• Unemployment - 0.2-2%
• Medical - 3-12%
• Occupational injury - 0.4-3%
• Maternity - 0.5-1%
• Housing fund - 5-25%
• Total = Anywhere between 23-55%

What does it cost to build a team in China?

So, now you’re ready to start building your team in China! But which route should you take? Let’s compare the costs of company incorporation in China with using PEO services.

Company incorporation in China

The Chinese markets offer plenty of opportunities for foreign business, but you’ll need to understand Chinese laws before you can follow them! Getting a team of lawyers to brief you on the China social credit system and China Labor Law & Employment Regulations can significantly increase your operational costs from day one.

Plus there are also registration fees, which can be in the region of $22,000.

PEO in China

Skuad allows you to start building a team in China without any costs — and you cancel anytime. 

Once you’re settled in, our PEO services allow you to onboard and pay international employees, starting from $19 per month. And for our employer of record services, where we hire international employees on your behalf as well as manage payroll, benefits, and compliance, prices start from $199 per month.

Enterprise businesses with more bespoke needs can reach out to our sales team to get a custom price today. 

Want to book in for a demo?

If you’re ready to start onboarding and paying employees in China, book in for a demo of Skuad’s global PEO solution right away.