Country Spotlight: Employer of Record in China

We all know that China has the largest population in the world. But did you know that it is also the second-largest economy and third-largest country by area in the world? 

And with a whopping GDP of USD17.73 trillion, China is only continuing to expand further while providing ample opportunity for business growth. 

So, it is no surprise that businesses seek to expand their talent pool by hiring in China. However, they must be wary of the complexities that come with this, especially without the help of an Employer of Record (EOR) provider. 

The Labor Contract Law – The handbook to employment 

China has a comprehensive system of labor laws, tax regulations, and social security requirements that apply to both local and foreign employees working in the country. 

All employment laws in China are governed by the Labor Contract Law of 2008, amended in 2012. With 13 chapters and over 100 articles, it details all employment mandates, such as wages, working hours, and other legal requirements, which are enforced by the Ministry of Human Resources and Social Security. 

The Chinese Work Clock 

The standard working hours in China are eight hours per day, with overtime being limited to one hour per day and three hours per day for healthcare workers. However, overtime must not exceed 36 hours per month. And it is mandated by law to give the employees at least one day per week. 

Overtime is compensated at the following rates: 

• 150% of their wages on working days. 

• 200% of their wages on their off days. 

• 300% of their wages if required to work overtime on public holidays. 

Navigating through China’s Social Security and Governance

As the name suggests, the Ministry of Human Resources and Social Security is responsible for establishing and governing the country’s social security system. 

Under this system, employees must contribute towards five types of insurance: 

Pension Insurance 

8% of the employee’s salary goes towards it to ensure post-retirement benefits. 

Medical Insurance 

Employees must contribute 2% towards Medical Insurance which can be reimbursed in case of non-work-related injuries. 

Unemployment Insurance 

Employees contribute 0.5% towards Unemployment Insurance, which can provide monetary benefits for up to 24 months in case of unemployment. 

Housing Insurance 

Both employers and employees contribute towards the housing fund, while foreign employees are exempt from it. The combined contribution must be at least 5%. 

Maternity Insurance 

Female employees can avail medical benefits through maternity insurance that is paid by their employers. Additionally, male employees can extend this benefit to their unemployed spouses depending on the local laws. 

Industrial Injury Insurance 

Additionally, employers must also contribute towards Industrial Injury Insurance every month. Employees still receive pay for the time they miss due to a work-related injury. 

Want to know everything about China? Read the Global Guide: China 

It is important to note that all these contributions are subject to change depending on local and central legislation. With volatile legislation, compliance becomes crucial for employers, as failing to stay compliant can have severe consequences. 

In these cases, it is beneficial to be equipped with a powerful employee management system that allows automated compliance updating, allowing employers to focus on their organizational goals. 

Leaving a business trail across the world: Stepping into China

There are several laws to be wary of while hiring in China. Even then, it might not be a seamless process. 

“Did you know? Not all foreign companies that have a legal entity in China can employ people from China.” 

There are several regulations for foreign companies, especially those looking to hire from China. In some cases, they are not allowed to hire employees directly and instead become dependent on Chinese agencies because they are not counted as capitalized legal entities. 

And if companies that have a local presence are tackling so many hurdles to expand their talent pool, then what about the ones that don’t? 

Fortunately, Neeyamo’s Global Work solution is a one-stop shop for both of them. Created specifically to cater to every organization’s unique requirement, the Global Work solution allows businesses to onboard talent from anywhere effortlessly. 

It comes with an integrated Global Tech Stack, which, with its technology-first approach, provides a holistic employee management system along with the best employee experience. 

Know more about how you can leave a trail in the country of your choice while remaining compliant. Reach out to the experts today at irene.jones@neeyamo.com.