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China Employer of Record

China Employer of Record (EOR)

  • By Travis Kliever
  • Updated March 22, 2023
  • Fact checked by Charlotte Evans

Summary
China Employer of Record (EOR)
What is a China Employer of Record?
What services does a China Employer of Record provide?
How to engage a China Employer of Record?
What are the benefits of a China Employer of Record?
What are the disadvantages of a China Employer of Record?
Top 5 leading China Employers of Record
China Employer of Record — our take
FAQs

Key points

  • A China Employer of Record (China EOR) enables international companies to hire in China, quickly and more cost-effectively than setting up a local entity. 
  • China EORs have a range of benefits, but also some potential disadvantages for some companies. 
  • Choose carefully to ensure you pick the China EOR that is right for you. 

What is a China Employer of Record?

A China Employer of Record (EOR) is a service provider that helps foreign companies expand and establish a presence in China by acting as the legal employer for their employees in the country.

When a foreign company wants to hire employees in China, they typically face various legal and administrative complexities, including compliance with Chinese labor laws, payroll processing, tax obligations, and benefits administration. Engaging an EOR in China allows the foreign company to outsource these employer-related responsibilities to the EOR, while still maintaining control over their employees’ work and daily activities.

The China EOR becomes the legal employer of record for the employees, taking care of employment contracts, managing payroll and taxes, ensuring compliance with local labor laws, and handling HR administration tasks. This arrangement enables the foreign company to focus on its core business operations without having to establish a legal entity in China.

The EOR model provides flexibility to foreign companies that want to explore the Chinese market without making long-term commitments or investing heavily in local infrastructure. It allows businesses to quickly set up and scale their operations in China, as the EOR takes care of the legal and administrative complexities involved in hiring and managing employees.

It’s important to note that the specifics of EOR services may vary among providers, so it’s crucial to engage a reputable and experienced EOR company that understands the local regulations and can provide the necessary support for operating in China.

What services does a China Employer of Record provide?

A China Employer of Record (EOR), also known as a China Professional Employer Organization (PEO) provides a range of services to assist foreign companies in hiring and managing employees in China. 

When a company utilizes an Employer of Record (EOR) in China, the EOR shoulders the responsibility of handling the necessary paperwork and legal requirements associated with hiring employees. This includes preparing employment contracts, processing work permits, and managing visa applications. With these administrative tasks in their charge, the company is able to focus on the core aspects of its operations.

In addition to onboarding, an EOR also manages payroll processing and benefits administration. This ensures that salaries, taxes, and social security contributions are accurately and promptly paid on behalf of the employees. The EOR also handles the administration of benefits, such as insurance and pension contributions, in accordance with local regulations.

The EOR also manages tax-related obligations. This includes withholding and remitting taxes from employee salaries, filing tax returns, and adhering to other statutory requirements related to employment in China. By doing so, the EOR ensures that the foreign company remains compliant with tax laws and avoids any potential legal issues.

It’s important to note that the specific services offered by a China EOR may vary among providers. Therefore, it’s crucial to clarify the scope of services and responsibilities with the chosen EOR to ensure they align with the needs of the foreign company

How to engage a China Employer of Record?

Engaging a China Employer of Record (EOR) involves a few key steps. Here’s a general guide on how to engage a China EOR:

  1. Identify your needs: Determine your requirements and goals for expanding or establishing a presence in China. Consider factors such as the number of employees you plan to hire, the duration of your engagement, and the level of support you expect from the EOR.
  2. Research EOR providers: Conduct thorough research to identify reputable EOR providers in China. Look for companies with experience in the Chinese market, a strong understanding of local labor laws and regulations, and a track record of providing reliable EOR services.
  3. Assess their services: Evaluate the range of services offered by different EOR providers. Consider whether their services align with your specific needs, such as payroll administration, compliance management, HR support, and other relevant aspects of employment in China.
  4. Request proposals and quotes: Contact the selected EOR providers and request proposals outlining their services and pricing structure. Provide them with relevant details about your company, such as the number of employees, job roles, and any specific requirements you may have.
  5. Evaluate proposals: Review the proposals received from EOR providers, comparing their services, pricing, and contractual terms. Consider factors such as the scope of services, service level agreements, termination clauses, and any additional benefits or value-added services they may offer.
  6. Conduct due diligence: Before finalizing your choice, perform due diligence on the EOR provider you are considering. Verify their credentials, reputation, and client testimonials. You may also want to seek references or speak with existing clients to gather feedback on their experience with the provider.
  7. Contract negotiation: Once you have selected an EOR provider, engage in contract negotiations. Ensure that the terms and conditions align with your expectations and clearly outline the responsibilities of both parties. Pay close attention to service-level agreements, pricing, termination clauses, data protection, and confidentiality provisions.
  8. Engage the EOR: Once the EOR contract is finalized, work closely with the EOR to initiate the engagement process. Provide the necessary information about your employees, their roles, and other relevant details required for onboarding and compliance.
  9. Ongoing collaboration: Maintain regular communication and collaboration with the EOR. Stay updated on any changes in your requirements, inform them of new hires or terminations, and address any issues or concerns that may arise. Regularly review the EOR’s performance against agreed-upon service level agreements.

Remember that engaging a China EOR involves a legal and contractual relationship, so it’s advisable to consult with legal and business advisors familiar with China’s laws and regulations to ensure compliance and protect your interests throughout the process

What are the benefits of a China Employer of Record?

Engaging a China Employer of Record (EOR) can offer several benefits to foreign companies looking to expand or establish a presence in China. Here are some key advantages:

  1. Local expertise and compliance: China has complex labor laws and regulations that can be challenging for foreign companies to navigate. A China EOR brings extensive knowledge and expertise in local employment practices, ensuring compliance with labor laws, tax regulations, and other statutory requirements.
  2. Quick market entry: Engaging a China EOR allows foreign companies to enter the Chinese market rapidly without the need to establish a legal entity or navigate the lengthy process of setting up a local entity. This saves time and resources, enabling businesses to start operations and hire employees swiftly.
  3. Flexibility and scalability: With an EOR, companies can scale their operations up or down quickly based on business needs. Whether hiring a small team or expanding the workforce rapidly, the EOR can handle the administrative and legal aspects of employee management, providing flexibility in managing headcount.
  4. Risk mitigation: By relying on a China EOR, companies can mitigate various risks associated with employment and legal compliance. The EOR assumes the legal responsibility as the employer of record, reducing the risk of non-compliance with labor laws, tax penalties, or other legal issues.
  5. Cost-effectiveness: Engaging a China EOR can be cost-effective compared to setting up and maintaining a legal entity in the country. Companies can avoid the costs associated with establishing a local infrastructure, such as office space, legal fees, compliance expenses, and staffing an HR team.
  6. Business continuity: The EOR ensures smooth operations during transitions, such as mergers, acquisitions, or restructuring. They can help manage employee transfers or terminations while ensuring compliance with labor laws and handling the necessary administrative procedures.
  7. Focus on core business: By outsourcing the employer-related responsibilities to the EOR, foreign companies can focus on their core business activities, strategic planning, and market expansion efforts, knowing that employee management and compliance are in capable hands.

It’s important to note that the specific benefits may vary depending on the chosen EOR provider and the unique needs of each company. Therefore, it’s essential to carefully evaluate the services offered by the EOR and align them with your business requirements before making a decision

What are the disadvantages of a China Employer of Record?

While engaging a China EOR offers several benefits, there are also potential disadvantages to consider. Here are some of the disadvantages associated with using a China EOR:

  1. Limited control over employment matters: When you engage an EOR, they become the legal employer of your employees in China. This means you have less direct control over employment decisions, such as hiring, termination, promotions, and disciplinary actions. The EOR may have their own policies and procedures that may not align perfectly with your company’s preferences.
  2. Potential cultural and communication challenges: Working with an EOR in China may introduce cultural and language barriers. Communication and understanding between the foreign company and the EOR, as well as between the EOR and the employees, can be affected, leading to misunderstandings or inefficiencies.
  3. Dependency on a third party: By relying on a China EOR, you become dependent on their services and performance. If the EOR experiences operational issues or fails to meet expectations, it can impact your business operations and employee management in China.
  4. Limited flexibility in HR policies: The EOR typically follows standardized HR policies and practices that may not align perfectly with your company’s specific HR requirements or company culture. This can limit your ability to implement customized HR policies or practices tailored to your organization’s needs.
  5. Potential cost considerations: Engaging a China EOR involves costs, including service fees and charges for the services provided. While it may be cost-effective compared to setting up a legal entity in China, ongoing fees can impact the overall budget, particularly for long-term engagements or large-scale workforce deployments.
  6. Reliance on third-party data security: When engaging an EOR, you may need to share sensitive employee data and company information. This reliance on a third party for data security introduces potential risks, such as data breaches or unauthorized access to confidential information.
  7. Limited strategic control: Engaging an EOR may limit your strategic control and decision-making in areas such as employee development, performance management, and long-term HR planning. You may have less influence over talent development strategies and employee engagement initiatives.
  8. Potential conflicts of interest: While the EOR is legally responsible for employment matters in China, conflicts of interest may arise, as their primary relationship is with the employees they employ on your behalf. This can create challenges in managing employee relations or addressing conflicts that may arise.

It’s crucial to carefully evaluate these disadvantages in relation to your specific business requirements, long-term goals, and risk tolerance. Conducting thorough research, due diligence, and considering alternative options, such as establishing a legal entity, can help you make an informed decision about whether engaging a China EOR is the right choice for your company.

Top 5 leading China Employers of Record

Based on our careful review of provider offerings, customer reviews, and extensive first hand experience with China EORs, the following are the leading China EORs in 2023: 

  • Horizons (also known as ‘New Horizons Global Partners’) — with Horizons, client companies can leverage their expertise local expertise in entity setup, payroll management, HR support, and compliance assistance. They provide comprehensive EOR services to ensure smooth market entry and ongoing operations in China. Horizons has extensive experience in China hiring and recruitment and has a regional HQ in Shanghai. Read more about the Horizons experience in our extensive 2023 Horizons EOR review.
  • Acclime — known for its wide range of corporate services, including EOR solutions, Acclime offers client companies the advantage of seamless HR, payroll, and compliance support. This enables them to focus on core business activities while Acclime takes care of the administrative complexities.
  • HROne — HROne stands out as a prominent HR and payroll outsourcing company in China. Their EOR services empower companies to efficiently navigate the intricacies of local employment regulations, while benefiting from professional payroll processing and comprehensive HR assistance.
  • Deel —renowned for its global payroll and HR platform — recently extended its expertise to offering EOR services in China. Companies partnering with Deel gain access to a streamlined process for hiring, onboarding, and managing employees compliantly, backed by Deel’s advanced payroll capabilities. Read more about their specialized China services in our 2023 Deel analysis and service breakdown
  • INS Global specializes in providing HR and payroll solutions in China, and their EOR services are tailored to meet the unique needs of companies. INS Global offers extensive support in managing employment contracts, payroll administration, and ensuring HR compliance, allowing businesses to focus on their growth and expansion.

China Employer of Record — our take

Engaging a China Employer of Record (EOR) can provide foreign companies with a streamlined and efficient way to expand and establish a presence in China. By outsourcing employer-related responsibilities, such as compliance with labor laws, payroll processing, and HR administration, companies can save time, resources, and mitigate legal risk.

The EOR’s local expertise and support enable businesses to navigate the complexities of the Chinese market, while maintaining flexibility and scalability. However, it’s important to consider potential limitations, such as reduced control over employment matters and the need to rely on a third party for certain functions.

FAQs

No, China Employers of Record can be beneficial for companies of various sizes. While larger companies may have the resources to establish their own legal entity in China, engaging an EOR can still provide cost savings, speed, and expertise. Small and medium-sized enterprises (SMEs) often find EOR services particularly advantageous as they may not have the resources or local knowledge to navigate Chinese labor laws and administrative processes on their own.

Yes, it is possible to transition from using a China Employer of Record to establishing your own legal entity in the future. The EOR can help facilitate the transition process by providing guidance and support. Keep in mind that establishing a legal entity involves additional time, costs, and administrative requirements. It's advisable to consult with legal and business advisors to determine the most suitable timing and approach for transitioning to a legal entity based on your business objectives and long-term plans in China.