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China EOR/PEO

Recruit and onboard employees in China

Whether you are looking to onboard a remote workforce of 2 or 200, Horizons can help your company compliantly grow in China.

Ease of doing Business

Very Easy

Official Language:

Mandarin Chinese

Currency

Chinese yuan(¥, CNY)

Payroll Frequency

Monthly

Africa

Table of Contents

Understanding the China Market

Time to Hire in China

December-February:

It can be more challenging to recruit employees because it’s right before the bonus distribution period, and also during the Spring Festival (Lunar New Year). Understandably, many employees prefer to secure bonuses and celebrate the holiday before considering new opportunities.

March-May:

Higher inclination for individuals to change jobs. This typically follows the distribution of annual bonuses, which usually occurs in March-April.

But there are some solutions available if you can’t wait until May. Global expansion partners such as Horizons in China are accustomed to handling these situations regularly and can provide the most appropriate solutions for each specific case.

At any time of the year, there is a big competition between companies to recruit the best talent in the market.

China's compulsory social security contributions

Chinese employees are provided with statutory benefits through the “five insurances” practice in China.

1. Health insurance
2. Pension
3. Worker’s compensation
4. Maternity benefits, and
5. Unemployment insurance.

However, additional benefits, such as housing, are predicated by the income tax bracket of the individual employee.

These benefits are paid out of social contributions paid by both the employee and employer.

China social security for foreigners

Different rules are applied to social security contributions from foreigners and Chinese nationals.
Foreign employees in Shanghai are not yet required to pay the Chinese social security for foreign nationals. In other cities in China, foreigners must pay the full amount of Chinese social insurance.
A PEO in China will ensure that all employees are paying the correct contributions.

Individual income tax

Effective as of January 1st 2019, China has adjusted tax brackets and changed residency rules in order to reduce the tax burden on low income earners, with new special additional deductions available for resident tax payers.

The Individual Income Tax is calculated on an annual basis. The China EOR will automatically withhold taxes in advance on a monthly basis on the accumulated income and deductions. Individuals may have additional taxes or tax returns to claim through the annual settlement process.

Health insurance

Standard health and pension insurance is provided through the national system, although supplementary health insurance can be provided to the employees.

Annual Leave in China

  • Under 1 year of employment no leave entitlement
  • 1-10 years of employment 5 days of paid leave annually
  • 10-20 years of employment 10 days of paid leave annually
  • 20+ years of employment 15 days of paid leave annually

Sick leave in China

Entitled to 3 to 24 months paid leaveSick pay Above 80% of local minimum wage
Workers compensation for injuries or illnesses incurred while working cover employees with legal entitlements of up to one year’s leave at full pay to receive medical treatment.
Take a look at the chart below to learn more about the specifics of sick leave standards in China:

  • Under 1 year of employment — no leave entitlement
  • 1-10 years of employment — 5 days of paid leave annually
  • 10-20 years of employment — 10 days of paid leave annually
  • 20+ years of employment — 15 days of paid leave annually

Over 6 months of sick leave

  • Under 1 year of employment — 40% pay
  • 1-3 years of employment — 50% pay
  • 3+ years of employment — 60% pay

In order for employees to receive the full wages due to them, workers must present a valid medical certificate from a certified doctor to their employer.

Maternity leave in China

China provides all female employees with 98 days paid maternity leave.
They have the option to begin this leave within 15 days prior to child birth.
Depending on the city, women over the age of 24 are generally provided with an additional 30 days for their “late maternity leave.”

Women are traditionally granted full pay during their leave, which is either paid through social security or by their employers.

China has laws in place that legally protect women from being terminated while pregnant or breastfeeding a newborn child.

An EOR in China will ensure that all maternity leave obligations are fully complied with.

Working Hours and Overtime

5 days/week

8 hours/day

8am to 6pm

1 hour lunch break

36 hrs/month overtime limit

Overtime compensation

  1. ‘Time and a half’ for a regular workday 150% of the standard hourly rate
  2. ‘Double time’ or ‘A day in lieu’ for a rest day 200% of the standard hourly rate
  3. ‘Triple time’ for a statutory holiday 300% of the standard hourly rate

Employment contract types in China

 Project-based:Fixed-term:Indefinite:
Probationary PeriodNoneDirectly related to contact duration:
1-year contract: 1 month probation
2-year contract: 2 month probation
3+ year contract: 6 month probation
 
TerminationWhen the project ends30-days notice30-days notice
Severance1 month for every year of employmentIn mutual termination: 2 months salary for every year of service
1 month for every year of employment
In cases of justified termination: 1 month’s salary per year of service
In cases of dismissal on serious grounds: None

Working Hours and Overtime

  • 5 days/week
  • 8 hours/day
  • 8am to 6pm
  • 1-hour lunch break
  • 36 hours per month overtime limit

Overtime compensation

  1. ‘Time and a half’ for a regular workday 150% of the standard hourly rate
  2. ‘Double time’ or ‘A day in lieu’ for a rest day 200% of the standard hourly rate
  3. ‘Triple time’ for a statutory holiday 300% of the standard hourly rate

National Holidays

  • New Year’s Day: 1 day
  • Spring Festival: 3 days
  • Tomb-sweeping Day: 1 day
  • Labour Day: 1 day
  • Dragon Boat Festival: 1 day
  • Mid-Autumn Festival: 1 day
  • National Day: 3 days

Visa and Work Permit

Eligibility

  • Be at least 18 years old and in good health
  • No criminal record
  • Have a specified employer
  • Have the requisite skills and work experience to fill the employer’s vacancy
  • Have a valid passport and any other required travel documents

 

Getting the work permit in China

Application from home country
Before being able to apply for a China Work Visa (“Z-Visa”) at a Chinese embassy abroad, applicants shall first get the Notification Letter for Foreigner’s Work Permit (“Notification Letter”), which is the official Letter from the Chinese authorities stating that an applicant has been approved to work in China. To be granted the Notification Letter, the employer has to apply first by providing the required documentation to a local Labor Bureau. It took approximately 3-4 weeks to obtain the Notification Letter. Then, applicants may apply for a Work Visa at the Chinese embassy in their home country. After getting the Z-Visa, applicants may enter in China. They would have to undertake a medical examination and to register their residence at the local police station. Then, the 2 last steps would be to replace the Z-visa with a working-purpose Residence Permit and to apply for Work Permit.

Application in China

For applicants who are already in China and wishing to get a Work Permit in tier-1 city, it is possible to apply directly for the Work Permit by submitting all the required documentation to the local Labor Bureau. When the Work Permit would be issued, applicants will then have to apply for a working-purpose Residence Permit (in tier-1 cities, it is possible to convert a Tourist Visa, a Business Visa China and a Study Visa into a residence Permit – applicants can hence avoid having to go back to their home countries to apply for a Work Visa and then come back again in China).
Required documents
The exact list of documents to submit to the Chinese authorities depends on each case.

 

Legalization of Chinese Visa Documents

In addition to the required documents to be submitted to the Chinese authorities to apply for a China work permit, 2 documents now also need to be translated and authenticated before being submitted: the Diploma and the Police Clearance Certificate.

This authentication process is different for each country. Some Embassies/Consulates in China are also able to legalize documents for the Work Permit application (as for example the following Consulates: Australian, French, Greek, Indian, Spanish, British…).

Police clearance certificate

Verification from home country
After obtaining the Police Clearance Certificate in their home countries, applicants need to make it authenticated by the Chinese Embassy of their home country.

Verification in China

Besides the authentication of Diplomas abroad, or through a Consulate in China, the Chinese Ministry of Education has launched an online system able to verify foreign
Diplomas: https://renzheng.cscse.edu.cn/.

The verification process through this system takes approximately 1 month.

Verification from abroad

This authentication process is different for each country, however, everywhere, the authentication process ends with the same last step: legalization by the Chinese Embassy in the applicant’s home country.

Tom Kussman, COO & Co-Founder, Horizons Expert Insight

“For foreign employers that are looking to hire either mid-level or senior executives, more vacation days are generally offered. In fact, it is common for such offers to come with up to four weeks of vacation time per year.”

Benefits

Understanding the Juzhuzheng (居住证) Residence Card in Mainland China


The Juzhuzheng is a vital residence card for Chinese nationals working in cities different from their family’s origin.

 

Here are its key features:

Fixed-Term Contract Requirement

  • It necessitates fixed-term employment contracts of 1 to 3 years, excluding open-ended contracts.
  • Complex Application Process: Obtaining a Juzhuzheng is challenging and requires meticulous attention.
  • Essential Support: Our Horizons China team offers expertise to ensure a smooth application process.

The JiFen 积分: Hukou Points Calculation

The JiFen system is integral to employment in China, tracking an individual’s seniority at their work location.

Exclusive to Fixed-Term Contracts

  1. Compatible only with fixed-term contracts, ranging from 1 to 3 years.
  2. Integral to Juzhuzheng: The JiFen and Juzhuzheng applications are closely linked.
  3. Expert Consultation Recommended: Due to its complexity, consulting with our Horizons China team is advisable for a successful application.

Personal HuKou 户口: China’s Permanent Municipal Residency System

The Hukou system is a fundamental aspect of China’s administrative framework, influencing urban residency and societal management.

  1. Key Functions: It controls migration, manages social protection, and maintains social stability.
  2. Registration Types: Includes Personal Hukou for property owners and Jiti Hukou for renters or collective registrations.
  3. Acquisition Journey: Requires accumulating Jifen and meeting work experience criteria. The process is lengthy and outcome-dependent on local authorities.

Broader Implications of Hukou

Hukou’s importance extends to various aspects of urban life in China.

  1. Education and Property Benefits: It eases processes like school enrollment and property purchase for residents.
  2. Application Considerations: Known for its lengthy and complex process, applicants should seek expert guidance, such as from the Horizons China team.

These systems play a critical role in managing residency, employment, and social benefits within China’s urban landscape. Consulting with specialists like the Horizons China team is highly recommended for a successful navigation of these processes.

Non-Disclosure Agreements (NDAs) and Non-Competes

In China, where intellectual property rights and confidentiality are paramount, understanding the intricacies and implications of NDAs is vital for businesses and individuals operating within the Chinese market.

1. Defining NDA Agreements:

A Non-Disclosure Agreement, or a confidentiality agreement or secrecy agreement, is a legally binding contract establishing confidentiality obligations between parties involved in a business relationship.
Its primary purpose is to protect sensitive information from being disclosed to unauthorized individuals or entities, ensuring the preservation of trade secrets, proprietary knowledge, and intellectual property.

2. Legal Framework for NDAs in China:

In China, the legal framework for NDAs primarily relies on statutory law, including the Contract Law of the People’s Republic of China and the Anti-Unfair Competition Law. According to these laws, an NDA is considered a valid and enforceable contract when certain conditions are met, such as:

  • Written Form: NDAs in China generally require written form to be enforceable. While oral agreements may be considered, they are more difficult to prove in disputes.
  • Mutual Consent: Both parties must willingly agree to the terms and conditions of the NDA. Any coercion or duress may render the agreement invalid.
  • Clear and Specific Terms: The NDA should clearly define the confidential information to be protected, the duration of the agreement, the parties involved, and the consequences of breaching the agreement.

3. Types of NDAs in China:

In China, there are two main types of NDAs:

  • Unilateral NDA: This type of NDA is commonly used when one party discloses confidential information to another party. It establishes obligations on the receiving party to maintain the confidentiality of the disclosed information.
  • Mutual NDA: A mutual NDA is used when both parties in a business relationship disclose confidential information. It establishes reciprocal obligations for both parties to protect each other’s confidential information.

4. Enforceability of NDAs in China:

While NDAs are generally enforceable in China, challenges may arise during the enforcement process. Factors that can impact the enforceability of an NDA in China include:

  1. Defined Confidential Information: The NDA should clearly define confidential information. Vague or overly broad definitions may lead to difficulties in proving a breach.
  2. Registration and Notarization: Although not mandatory, in Horizons Corporate Advisory practice, registering and notarizing an NDA can provide additional evidence of its existence and terms, enhancing its enforceability.
  3. Jurisdictional Challenges: Determining the jurisdiction and applicable laws can be complex when dealing with international parties. Including a choice of law and dispute resolution clause in the NDA is advisable to address potential conflicts.
  4. Trade Secret Protection: China has specific laws and regulations, such as the Anti-Unfair Competition Law and the Law on the Protection of Trade Secrets, which protect trade secrets. NDAs should align with these laws to strengthen their enforceability.

5. Challenges and Considerations:

  1. Cultural Differences: Cultural nuances and differences in business practices can impact the interpretation and enforcement of NDAs in China. Understanding the cultural context is crucial when drafting and negotiating these agreements.
  2. Language Considerations: Translating NDAs accurately and effectively is essential to avoid misunderstandings or disputes. Employing qualified advisors familiar with legal terminology is recommended.
  3. Protecting Intellectual Property: While NDAs offer some level of protection, additional measures such as patents, trademarks, and copyrights should be considered to safeguard intellectual property rights in China.
  4. Government Regulations: China’s regulatory environment, especially in relation to data protection and cybersecurity, is evolving. Businesses must stay updated on relevant laws and regulations to ensure compliance and address potential conflicts with NDAs.

Non-disclosure agreements are crucial for protecting confidential information and trade secrets in China’s competitive business landscape.
Understanding their meaning, legal framework, enforceability, and potential challenges is essential for businesses and individuals seeking to establish secure business relationships in the country.
By considering China’s unique cultural, linguistic, and regulatory aspects, stakeholders can ensure the effectiveness and enforceability of NDAs.

Termination & Severance in China

In order to terminate an employee in China, there must be strong cause for dismissal and clearly documented grievances leading up to the termination.

  • The initial employment contract must contain an agreed upon probationary period that can last up to six months in length.
  • Specific time requirements for submitting a notice of termination vary widely by industry.
  • Any employer terminating an employee of between one month and two year’s tenure must provide at least one week’s notice.
  • Employees working for a company for over two years require notice of one week for each year of completed service up to 12 weeks of notice.
  • Employers have the option of including “payment in lieu of notice” in employee contracts which permit employers to pay employees instead of providing them with a notice of termination. This is common in Chinese business practice.


Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time.

Sebastian Klotz, Sales Manager, Horizons Expert Insight

“The laws for paternity leave differ greatly by location within China, but paternity leave typically does not exceed 14 days. Men in Shanghai usually receive 3 days of paternity leave, while men in Shenzhen are typically granted 10 days.”

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