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How to Hire Employees in China

Hiring employees in China presents unique challenges for companies due to cultural differences, regulatory barriers, and a highly competitive labor market. Companies must navigate complex regulations, including varying city policies regarding minimum wage, work visas, social security contributions, and maternity leave.

Key Takeaways

  • With a robust economy, and exceptionally strong labor force, China is a popular destination for global expansion and hiring.
  • Hiring employees in China means understanding local labor laws, market practices and cultural differences in hiring in the country. 
  • Many companies hiring in China benefit from using a China Professional Employer Organization (China PEO) or China Employer of Record (China EOR). 

China is a compelling destination for international business expansion and hiring due to its substantial economic growth, vast consumer market, skilled workforce, and thriving tech sector.

China’s population, the world’s largest, coupled with an expanding middle class, currently tallying at more than 550 million, offers immense market potential. The OECD notes China’s annual production of around 8 million university graduates, providing businesses with a large pool of skilled workers.

China is also a global leader in technology and innovation, having filed more patents than any other country, according to the World Intellectual Property Organization. Moreover, governmental policies, such as Special Economic Zones and the 2020 Foreign Investment Law, make China even more attractive for foreign investment. However, these opportunities should be carefully evaluated considering potential challenges and risks.

Wondering how to hire Chinese employees? Given the market potential in China, it is no surprise that many global businesses look to recruit and hire employees in China. In this China hiring guide we list the key legal requirements, market features, costs, how to recruit in China, and other considerations.

What is the average employee’s annual salary in China?

Here is a table of the average annual salaries across sectors in China in Q2 2023, according to the National Bureau of Statistics of China (NBS):

Sector
Average Annual Salary (CNY)
Financial and insurance activities262,164
Professional, scientific and technical activities175,518
Information and communication158,196
Electricity, gas, steam and air conditioning supply135,677
Education116,002
Public administration and defense; compulsory social security109,712
Manufacturing93,062
Water supply; sewerage, waste management and remediation activities76,665
Human health and social work activities72,692
Transportation and storage71,540
Administrative and support service activities70,658
Construction68,355
Wholesale and retail trade; repair of motor vehicles and motorcycles64,190
Arts, entertainment and recreation62,447
Accommodation and food service activities46,597
Other service activities42,160

Hiring employees in China — overview

Hiring employees in China is a multifaceted process involving intricate laws and cultural customs. The procedure requires a comprehensive understanding of Chinese culture, labor law, and business ethics.

The legal framework for hiring in China is primarily governed by the Labor Contract Law, which provides substantial employee protections. This law specifies strict regulations regarding recruitment, termination, working hours, overtime, and holidays. The Social Insurance Law is another significant regulation requiring employers to contribute to social insurance funds. These laws lay a robust foundation for employee rights and ensure a fair employment process.

Recruitment in China is challenging, considering the vast diversity of the market. Various channels are utilized for job postings, including online job portals, university career services, recruitment agencies, and networking events. Employers strive to source talent through these avenues, ensuring they attract the right candidates. The interviewing and selection phase is quite formal in China, strongly emphasizing local customs and practices. For example, exchanging business cards involves both hands, and certain sensitive topics are avoided during the conversation. Chinese discrimination laws are stringent, and employers must take care not to discriminate based on gender, age, religion, or any other protected characteristic when recruiting and hiring. 

Once a candidate is chosen, the employer sends an offer letter outlining the terms of employment. After the candidate accepts the offer, an official employment contract is drafted and signed. This contract, mandated by Chinese law to be in writing, should clearly define the job description, salary, benefits, working hours, and termination conditions.

The employer is tasked with obtaining a work permit for hiring foreign employees. This multi-tiered process involves a physical examination, a criminal record check, and the submission of relevant qualifications and experience documents.

The onboarding process is another important aspect of hiring in China. It typically includes a comprehensive introduction to the company culture, role-specific training, and administrative procedures like setting up payroll and Chinese social security accounts. Under the Social Insurance and Housing Fund regulations, employers must contribute to five types of social insurance (pension, medical, unemployment, work-related injury, and maternity) and a housing fund. The contribution rates for these funds can vary regionally.

Payroll and taxation are also crucial considerations. China operates a progressive tax system for individuals, and employers are responsible for withholding individual income tax and social insurance contributions from the employee’s salary each month.

Given the complexity of the cultural and regulatory environment, hiring employees in China often necessitates collaboration with legal and HR experts familiar with the Chinese market. This expertise can help ensure a smooth and compliant hiring process. Historically, companies seeking to hire in China have set up a local legal entity/subsidiary to hire through. Still, a China Professional Employer Organization (China PEO) has become a common solution in recent years. 

China Business Guides

Unique features of hiring in China

In addition to China-specific legal requirements, various other market features impact hiring in China

  • Cultural Differences: Chinese corporate culture can differ greatly from Western corporate culture. For example, hierarchy is often more important, and direct criticism is often less well-received. Relatedly, building relationships, or “guanxi,” is an integral part of business culture in China, and this extends to hiring. Understanding these differences can help you manage your employees more effectively.
  • Localization: You may need to adapt your business practices and policies to suit local conditions and expectations. For example, Chinese employees may expect a certain amount of annual leave or certain types of benefits that differ from what you’re used to offering.
  • Language Barrier: While many people in China, especially younger people in urban areas, speak English, don’t assume that this will always be the case. Keep in mind also that China has dozens of regional languages, and don’t assume that everyone speaks Mandarin. Language can be a significant barrier in communication, so consider this when hiring.
  • Foreign Workforce: There are restrictions on hiring foreign employees in China. The rules can be complex and often require the involvement of immigration professionals.

How much does it cost to hire employees in China?

The cost of hiring employees in China is not straightforward as it varies based on various factors, including the industry, the location, role, experience level, and more. Here are a few key components of the cost:

  1. Salaries: The average salary in larger Chinese cities like Shanghai, Beijing, and Shenzhen for mid-level professionals can range anywhere from CNY 10,000 to CNY 30,000 per month (approximately USD 1,500 to USD 4,500), though this can vary greatly based on the specifics of the job and the industry. For high-level executives or specialists, the salary can be much higher.
  2. Social Insurance and Housing Fund: Employers must contribute to China’s social insurance and housing fund. The total cost for these payments usually amounts to about 30% to 40% of an employee’s salary, but the exact percentages can vary by city. These contributions cover pensions, medical insurance, unemployment insurance, work-related injury insurance, maternity insurance, and a housing provident fund.
  3. Recruitment Costs: include advertising the position, interviewing, and potentially hiring a recruitment agency. The cost of an agency can be a percentage of the hired employee’s annual salary.
  4. Training Costs: If the employee requires training, this will also be a cost to consider.
  5. Office Space and Equipment: Depending on the job, you may need to provide office space, computers, software, or other equipment for the employee.
  6. Benefits: Many Chinese companies provide benefits like meal allowances, transportation allowances, bonuses, and more, which should be factored into the total cost.
  7. Severance Pay: In China, employees are entitled to severance pay if their contract is not renewed. The amount is usually one month’s salary for each year they have worked for the company.

Remember that these are rough estimates, and the actual costs can vary. Additionally, the cost of living and average salaries can be much lower in smaller cities compared to major cities like Beijing and Shanghai. It’s also worth noting that China’s economic and regulatory environment can change rapidly, so it’s important to get up-to-date information when making hiring decisions.

What are the legal requirements for hiring employees in China?

hire employees in china legal requirements

Hiring employees in China requires compliance with several legal requirements. Some of the key requirements include:

  1. Employment Contract: It’s mandatory to sign a written employment contract with every employee within one month of the employee starting work. If you fail to do so, you could be required to pay double the employee’s salary for each month without a contract, up to a year.
  2. Employment Terms: Employment contracts should include terms of employment, such as position, job description, work hours, salary, probation period, and contract duration. In China, employment contracts can be fixed-term, open-ended, or project-based.
  3. Probationary Periods: The length of a probationary period in China depends on the length of the employment contract. For contracts of less than one year, it’s one month; for contracts of one to three years, it’s two months; and for contracts of more than three years or open-ended contracts, it’s six months.
  4. Social Insurance and Housing Fund: Employers must contribute to five types of social insurance (pension, medical, work-related injury, unemployment, and maternity insurance) and the housing provident fund for each employee. The exact percentages can vary by region.
  5. Working Hours, Rest, and Leave: Standard working hours in China are eight hours per day and 40 hours per week. Overtime must be paid for hours worked beyond this, and employees are entitled to at least one day off per week. Employees are also entitled to paid annual leave, the length of which depends on their years of service.
  6. Termination and Severance: An employer can only terminate an employee for specific reasons outlined in China’s labor laws. Generally, employers must pay severance to employees upon termination, unless the employee is being terminated for cause (such as serious misconduct). The amount of severance is typically one month’s salary for each year of service.
  7. Workplace Safety: Employers must provide a safe and healthy working environment, and must provide training on workplace safety.
  8. Non-Discrimination: Chinese labor laws prohibit discrimination based on ethnicity, race, gender, or religious belief. Some local laws also protect other categories.
  9. Work Permits for Foreign Employees: If you’re hiring foreign employees, they will need a valid work permit and visa. The application process for these can be complex and time-consuming.

Remember that these are general guidelines and the exact requirements can vary depending on the specifics of your situation, such as the region where your business is located, the industry you’re in, and the specifics of the job. You should consult with a legal professional or HR consultant familiar with Chinese labor laws to ensure that you’re in compliance.

Different techniques for hiring employees in China

If you are considering hiring employees in China, it is worth considering the best way of doing so. The key options are:

  1. Set up a wholly foreign owned enterprise: This is the standard method of hiring in which a company directly recruits and employs its staff in China through an entity that it owns in China. This is known as a ‘foreign-invested enterprise’ or ‘wholly foreign owned enterprise’ (WFOE). The subsidiary is responsible for compliance with local labor laws and regulations, as well as for providing social benefits to Chinese employees.
  2. Joint venture: By teaming up with a local China-based partner you can set up an entity to hire employees in China. note, by doing so the China-based partner will have joint control.
  3. China Employer of Record (EOR): A China EOR is a professional services company based in China which becomes the legal employer of your employees there. This means that the EOR takes on all legal and regulatory responsibilities related to employment, including compliance with Chinese labor law. You still manage the day-to-day job duties of the employees. For foreign employers, this can be a good option if you want to hire employees in China but don’t have a legal entity there. Sometimes these providers are also known as China Professional Employer Organizations (China PEOs).

A China EOR or PEO solution can simplify the hiring process and help ensure compliance with local laws, but they also come with costs. You’ll need to pay for the services of the PEO or EOR, however, which can be a significant percentage of the employee’s salary.

Before choosing a method of hiring, it’s important to carefully consider your needs and resources, as well as the specific conditions in China. It may be helpful to seek advice from a professional who is familiar with Chinese labor laws and hiring practices.

What are the steps businesses need to take to hire employees in China?

Hiring employees in China involves several steps, which may vary depending on whether you’re hiring through a local entity, a Professional Employer Organization (PEO), or an Employer of Record (EOR). Here are the general steps for direct hiring:

  1. Establish a Legal Entity or engage a China EOR/PEO: To hire employees directly, you typically need to establish a legal entity in China, or use a recognized China EOR or PEO solution. 
  2. Register as an employer in China (note, if using a China EOR or PEO this step will already be covered).
  3. Job Posting and Recruitment: You’ll need to post the job opening and recruit candidates. This can be done through job boards, an employment agency, or social networks. The job description should be clear and specific.
  4. Interview Process: Once you’ve received applications, you’ll need to conduct interviews. This can be done in-person, over the phone, or through video conferencing.
  5. Offer of Employment: After selecting a candidate, you’ll need to make an offer of employment. The offer should include details about the job, such as the position, duties, salary, benefits, and working hours.
  6. Employment Contract: If the candidate accepts the offer, you’ll need to sign a written employment contract with them. The contract must be in Chinese and should include details about the job, as well as terms and conditions of employment, including social security contributions, rules on at will termination, public holidays, what other benefits the employer pays, who is the legal employer, payment of local taxes, whether it is a fixed term contract, minimum wage compliance, and other matters.
  7. Social Insurance and Housing Fund: You’ll need to register the employee for social insurance and the housing fund. Employers are required to contribute to these funds for each employee.
  8. Onboarding: Once the employee starts work, you’ll need to provide any necessary training and orientation. This is also a good time to introduce the employee to your company’s policies and procedures.

If you’re using a PEO or EOR, some of these steps will be handled by the PEO or EOR. For example, the PEO or EOR will handle the employment contract and social insurance registration. However, you’ll still be involved in the recruitment and onboarding process.

Hire employees in China — choose the right partner

Hiring employees in China means having a details understanding of employment regulations, market conditions, and specific cultural factors that impact on employment in China. To streamline hiring in China, many companies will benefit from a China PEO or China EOR solution. 

Check out our China PEO and China EOR guides to find China’s top PEOs and best EORs. 

FAQs

As a general rule, foreign companies need to establish a legal entity in China, such as a Wholly Foreign-Owned Enterprise (WFOE), in order to hire employees directly. However, there are services such as Professional Employer Organizations (PEOs) and Employer of Record (EOR) which can hire employees on behalf of foreign companies without the need for a legal entity in China.

The standard working hours in China are 8 hours per day, 5 days a week, totaling 40 hours per week. Any hours worked beyond this are considered overtime and must be compensated at a higher rate. Note that this is the standard requirement under Chinese law, but actual practices can vary. Some employees may work more hours, and there may be exceptions for certain industries or types of jobs.

Unlike in some countries, employers in China cannot terminate employment contracts at will. Chinese labor law provides strong protections for employees, and employers can only terminate employment contracts for specific reasons outlined in the law, such as employee misconduct or company-wide layoffs. In many cases, employers are required to pay severance to employees upon termination. Therefore, it's important for employers to understand the rules and procedures for termination in China.

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