Hiring in China via an Employer of Record (EOR)

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What is EOR?

Step-by-Step Guide to Hiring Through an EOR in China

FAQs on Hiring Through an EOR in China

Hiring in China offers access to a vast talent pool, with a workforce of approximately 740.4 million people. However, understanding and complying with the country’s complex labor laws can be challenging, particularly for foreign companies looking to hire full-time employees. To legally hire full-time staff, you must either establish a legal entity in China or use an employer of record (EOR).

Here’s a comprehensive guide on how to hire through an EOR in China.

What is EOR?

EOR stands for Employer of Record. It’s a service that enables companies to hire employees in foreign countries without establishing their own legal entity.

The EOR acts as the official employer, handling payroll, taxes, benefits, and compliance with local labor laws on behalf of the hiring company.

Step-by-Step Guide to Hiring Through an EOR in China

  1. Decide Between a Chinese EOR and Establishing a Legal Entity
  2. Choosing the Best EOR for Your Business
  3. Hiring and Onboarding Chinese Employees
  4. Running Payroll

Step 1: Decide Between a Chinese EOR and Establishing a Legal Entity

Choosing between hiring through an EOR or setting up a legal entity in China depends on your company’s resources, size, and growth plans.

Legal Entity in China

  • Setting up a legal entity involves a significant investment of time and money. You’ll need to select a business structure, register with the government, open a local bank account, and consult labor law experts to ensure compliance with Chinese tax and labor laws. After setup, you’ll handle all payroll, benefits, and taxes for your Chinese employees.

Chinese EOR

  • An EOR acts as the legal employer on your behalf, allowing you to bypass the process of establishing your own entity. Using an EOR enables faster hiring of full-time employees. The EOR manages all compliance aspects including payroll, contracts, taxes, and benefits. They handle tax calculations and withholdings, employee onboarding, and payroll processing.

Pros and Cons: EORs vs. Legal Entities

  • EOR:
    • Pros: Quicker setup (days instead of months), manages compliance, handles payroll and benefits.
    • Cons: Higher cost with increasing headcount, less control over certain HR policies.
  • Legal Entity:
    • Pros: More cost-effective with a larger workforce, full control over policies and procedures.
    • Cons: Longer setup time (up to six months), requires deep knowledge of local regulations and tax laws.

Step 2: Choosing the Best EOR for Your Business

Consider the following when selecting an EOR:

  • Geographical Coverage: Ensure the EOR operates in the countries where you need to hire.
  • Entity Ownership: Verify if the EOR owns its entities or partners with local providers.
  • Data Protection: Check for robust data protection measures and compliance with Chinese privacy laws.
  • Automation Capabilities: Look for EORs that offer automated HR and IT solutions.
  • Support Model: Ensure the EOR provides accessible and knowledgeable support staff.

Step 3: Hiring and Onboarding Chinese Employees

After selecting an EOR, begin the onboarding process. Required information from new hires includes:

  • Name (matching their bank account)
  • Nationality
  • Date of birth and hire
  • Contact details (mailing address and email)
  • National ID number
  • Salary in RMB/CNY
  • Direct deposit information

Ensure compliance with China’s Personal Information Protection Law by collecting only necessary data and using secure data handling practices.

Send an employment agreement detailing key conditions such as notice periods, leave, and benefits within one month of their start date. These contracts must be in Standard Chinese.

EORs simplify this process by localizing and distributing compliant contracts, considering local and national regulations. For instance, different provinces may have varying minimum wage laws, which the EOR will account for in employment agreements.

An employee handbook, a legal document in China, should also be provided and signed by the employee.

Without an EOR, you need to register employees with the State Taxation Administration, the local Social Insurance Bureau, and the Housing Fund Bureau. An EOR handles this registration for you.

Interested in simplifying your China hiring process with an EOR? Contact Sapience Pro today!

Step 4: Running Payroll

After onboarding, the EOR will pay employees in CNY/RMB and withhold required taxes, including contributions to:

  • Federal income tax
  • Pension fund
  • Unemployment fund
  • Medical fund
  • Occupational fund
  • Maternity fund

FAQs on Hiring Through an EOR in China

How Much Does an EOR Service Cost?

  • EOR pricing models typically include a percentage of payroll plus taxes or a fixed monthly fee per employee. Additional fees may apply for administrative tasks and supplemental features.

Difference Between an EOR and a PEO?

  • PEO: Co-employs the workforce, handles administrative services but does not enable hiring in foreign countries without a local entity.
  • EOR: Acts as the sole employer for your workforce segment, allowing hiring in countries without setting up a local entity and assuming all related liabilities.

Does an EOR Protect Sensitive Information?

  • Ensure your EOR adheres to data privacy laws and uses secure systems to protect your data. Establishing a Data Processing Agreement (DPA) can provide additional legal protection.

Does an EOR Assist with Chinese Tax Filings?

  • Yes, EORs manage tax calculations and filings for employees in China, ensuring compliance with local requirements.

Mandatory Benefits for Chinese Employees:

  • Retirement benefits
  • Medical care
  • Unemployment insurance
  • Workers’ compensation
  • Maternity/paternity benefits
  • Sick leave
  • Paid leave/vacation
  • Public holidays

Disclaimer: This material is for informational purposes. Consult Sapience Pro before engaging in related activities or transactions.

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