Employer of Record (EOR) in China

Expanding your business to China comes with immense opportunities, but handling local hiring, payroll management, and compliance with Chinese labor laws can be complex. From understanding employment regulations to navigating tax requirements, the process can be overwhelming for businesses unfamiliar with the market. An Employer of Record (EOR) in China simplifies this process by managing employee contracts, payroll, and legal compliance on your behalf, allowing you to focus on your business goals.

This guide explores the essentials of EOR services in China, including how they help businesses hire top talent, ensure compliance with local labor laws, and manage payroll efficiently. From reducing administrative burdens to streamlining market entry, an EOR ensures your business operates seamlessly. Whether you’re entering the Chinese market or managing remote teams, this guide provides the insights you need to succeed with an EOR in China.

How an Employer of Record (EOR) Works in China 

An Employer of Record (EOR) in China allows businesses to hire employees without setting up a local entity. The EOR handles employment contracts, payroll, taxes, and ensures compliance with Chinese labor laws. It streamlines hiring, manages social security contributions, and reduces administrative hassles, making it easier for companies to operate in China efficiently.

Compliance

Ensuring compliance with China’s labor laws is essential when expanding your business in the region. An Employer of Record (EOR) takes on the responsibility of managing legal compliance, ensuring your business adheres to local tax regulations, employment laws, and social security contributions. With an EOR, you avoid costly fines and potential legal issues by having a partner who is well-versed in China’s complex labor laws.

Onboarding

Operating in China requires strict adherence to local labor laws and employment regulations, which can vary by region. An Employer of Record (EOR) ensures compliance by drafting legally binding employment contracts, managing mandatory social insurance contributions, and staying updated on Chinese labor law changes. This minimizes the risk of legal disputes, employee grievances, or regulatory penalties. By partnering with an EOR in China, businesses can confidently navigate compliance challenges while focusing on expansion.

Payroll Management

Managing payroll in China requires accuracy and compliance with local regulations. An EOR handles every aspect, including salary processing, mandatory deductions for social security and housing funds, and tax filing. They ensure timely, error-free payroll disbursement, helping businesses avoid fines and maintain employee satisfaction. By outsourcing payroll management to an EOR in China, companies save time, reduce administrative workloads, and ensure compliance with labor laws.

Employee Benefits and Leave Entitlements

In China, employees are entitled to a range of benefits, including social insurance, housing funds, and statutory leave like annual, sick, and maternity leave. An EOR ensures these benefits are administered in compliance with Chinese labor laws, helping businesses attract and retain top talent. They also manage the complexities of local benefit programs and employee leave tracking. By ensuring legal compliance and offering competitive benefits, businesses can create a satisfied and motivated workforce.

Tax Compliance and Risk Mitigation

Navigating China’s complex tax system is a critical aspect of doing business successfully. An EOR ensures full tax compliance by managing employee income tax calculations, filing tax returns, and ensuring accurate documentation. They also monitor tax law changes to mitigate risks and avoid penalties. With expert support, businesses can reduce tax compliance burdens while maintaining financial and legal integrity.

Things to Consider When Choosing an EOR in China

When choosing an EOR in China, consider factors such as service offerings, legal compliance, and pricing transparency. Ensure that the EOR is experienced in handling Chinese labor laws and provides a technology platform for managing payroll, taxes, and employee data. Reviews and references from other businesses can also help gauge the EOR’s reliability and service quality.

Legal Compliance

When selecting an Employer of Record (EOR) in China, legal compliance is one of the most critical factors to consider. China has strict labor laws and regulations that businesses must follow, including laws related to employment contracts, taxes, social insurance, and employee rights. A reliable EOR will ensure that your business complies with these laws, preventing costly fines or disputes. They will handle legal matters such as drafting contracts that comply with Chinese employment laws and ensuring accurate tax deductions. By choosing an EOR that prioritizes legal compliance, your business can operate in China without the risk of legal issues.

Transparent Pricing

Transparent pricing is vital when evaluating EOR services in China. A trustworthy EOR will offer clear pricing structures with no hidden fees. Whether you’re outsourcing payroll, tax management, or compliance, it’s important to understand exactly what you’re paying for. Transparent pricing helps businesses avoid unexpected costs and ensures that the services provided meet your budget and expectations. Look for an EOR that provides a detailed breakdown of their pricing, which may include setup fees and monthly service charges.

Service Offerings

When choosing an EOR in China, it’s essential to assess the full range of services they offer. A good EOR should provide end-to-end solutions, including payroll management, tax compliance, employee benefits administration, and legal support. For example, they should handle employee onboarding, calculate salary payments, ensure tax compliance, and offer assistance with employee terminations or resignations. A comprehensive service package can help your business manage HR processes seamlessly, ensuring compliance and efficiency.

Technology Platform

The technology platform provided by an EOR is crucial for streamlining HR processes. A user-friendly platform allows businesses to manage payroll, employee records, compliance tracking, and benefits administration more effectively. The platform should be interactive, with a simple interface for employees to access their pay slips, benefits, and leave balances. By choosing an EOR with an advanced technology platform, you can ensure smooth operations, reduce manual errors, and improve HR efficiency.

References and Reviews

Before choosing an EOR in China, it’s wise to check their references and reviews. Look for case studies, customer testimonials, and reviews from businesses in similar industries. These reviews can provide insights into the EOR’s ability to meet compliance requirements, handle payroll and benefits efficiently, and offer customer service. Reliable EOR providers will have a solid track record of satisfied clients who can speak to their experience and success in navigating the complexities of Chinese labor laws.

Understanding Employment Laws and Regulations in China

China has strict employment laws and regulations that must be followed to avoid legal risks. An EOR helps businesses stay compliant with labor laws related to hiring, firing, contracts, and compensation. They also keep you informed of any changes to China’s labor laws, ensuring your business remains compliant at all times.

• Employee Contracts: In China, employment contracts are mandatory and must be signed by both the employer and employee before starting work. These contracts outline essential details such as job responsibilities, salary, work hours, and terms of employment. The Chinese labor law distinguishes between two types of contracts: fixed-term and open-ended contracts. Fixed-term contracts specify a start and end date, while open-ended contracts have no predetermined end date. Employers must ensure that contracts comply with local regulations, including clear terms on probation periods, non-compete clauses, and dispute resolution procedures. Failing to provide written contracts can result in legal penalties.
• Working Hours and Overtime Pay: Chinese labor laws set specific guidelines regarding working hours. A standard workweek is typically 40 hours, with eight hours per day and five working days. However, certain industries may have adjusted working hours based on the nature of the job. Overtime is permitted, but employers must compensate employees at a higher rate: 150% of the regular wage for overtime on weekdays, 200% on rest days, and 300% for overtime on public holidays. Employers must also ensure employees receive adequate rest periods. Failure to adhere to these regulations may result in penalties, fines, and potential lawsuits.
• Termination of Employment: The termination of employment in China is subject to strict regulations. Employers can terminate an employee during the probation period or after the contract term ends, but they must have a valid reason for dismissal. Reasons can include poor performance, misconduct, or business restructuring. However, dismissing an employee without just cause can lead to legal consequences, including severance pay and potential litigation. Employers must also provide a notice period (usually 30 days) before termination. In cases of employee misconduct, immediate termination may be possible, but legal procedures must still be followed to avoid legal disputes.
• End-of-Service Benefits: In China, employees are entitled to end-of-service benefits, including severance pay, when their employment is terminated under specific circumstances. Severance pay is calculated based on the employee’s length of service and their average salary over the last 12 months. Typically, employees receive one month’s salary for each year worked. However, employees who resign or are dismissed for misconduct may not be entitled to severance pay. In addition to severance, employees may also be entitled to other benefits such as pension, medical insurance, and other social insurance contributions, depending on their employment contract and the specific situation of termination.

Employee Benefits and Compensation in China

Employee benefits and compensation in China include health insurance, paid leave, and social security contributions. An EOR ensures that all benefits are managed according to Chinese law, providing employees with fair and legal compensation while keeping your business compliant.

• Annual Leave: In China, employees are entitled to annual leave based on their years of service. Employees with less than one year of service are entitled to five days of leave, while those with one to ten years receive ten days, and those with over ten years get fifteen days. An Employer of Record (EOR) ensures proper tracking and management of leave balances, guaranteeing that employees receive their legal entitlement while helping businesses stay compliant with China’s labor laws regarding unused leave and compensation.
• Sick Leave: Employees in China are entitled to sick leave based on their length of service, with those working less than one year entitled to 3-6 days, and employees with more than one year entitled to 12-24 days. Sick leave is paid, either fully or partially, depending on the company and local regulations. An EOR helps manage sick leave requests, ensuring accurate processing, compliance with labor laws, and proper employee compensation.
• Parental Leave: Maternity leave in China is generally 98 days, with full pay for employees who have contributed to social insurance for at least one year. Paternity leave typically ranges from 7 to 15 days, depending on the region. An EOR ensures that both maternity and paternity leave are properly managed, allowing businesses to comply with labor laws and provide the necessary support to employees during family-related leave.
• Public Holidays: China has several public holidays, including Chinese New Year, Labor Day, and National Day, on which employees are entitled to paid leave. Employees who work on holidays are typically compensated at a higher rate. An EOR helps ensure that businesses comply with holiday regulations by managing holiday leave and ensuring employees are compensated correctly.
• Health Insurance: Health insurance is mandatory in China, with employees required to participate in the social insurance system, which covers basic medical services. Employers contribute to the insurance fund based on the employee’s salary. An EOR manages health insurance enrollments and ensures compliance with China’s healthcare regulations, providing essential coverage for employees and reducing the administrative burden on businesses.

Termination and Offboarding in China

Termination and offboarding processes in China are highly regulated, requiring strict adherence to local labor laws. An Employer of Record (EOR) ensures that all termination procedures, including notice periods, severance pay, and legal documentation, comply with Chinese labor regulations, safeguarding both employers and employees. By outsourcing these processes to an EOR, businesses can avoid legal disputes and streamline offboarding.

• Notice Period: In China, employees are entitled to a notice period before termination, typically ranging from 30 days to 90 days depending on the employment contract and tenure. An EOR ensures that the notice period complies with Chinese labor laws, helping your business avoid legal complications and ensure a smooth transition. This helps mitigate risks related to abrupt terminations.
• Severance Pay: In China, severance pay is required by law when an employee is terminated without cause. The amount is typically calculated based on the employee’s length of service and average monthly salary, with one month’s salary for each year worked. Employees with less than a year of service receive pro-rated severance. An Employer of Record (EOR) ensures that severance pay is calculated correctly and processed on time, in compliance with Chinese labor laws. 
• Redundancy Procedures: Redundancy procedures in China are governed by strict legal guidelines to protect employees. Employers must provide prior notice of termination and offer severance pay, which is calculated based on the employee’s length of service. In addition, employees must be informed of the reasons for redundancy and, in some cases, an employer may be required to consult with labor unions before proceeding with layoffs. An Employer of Record (EOR) ensures that your business follows these protocols when conducting redundancies.

Payroll and Tax Compliance in China

Payroll and tax compliance in China require careful management to meet local regulations. An EOR takes care of payroll processing, tax compliance, and employee benefits management, ensuring your business stays compliant with Chinese tax laws and avoids penalties.

• Monthly Payroll Management:  In China, managing monthly payroll involves calculating wages, tax deductions, and social security contributions, as mandated by the Social Insurance Law. An EOR ensures that the proper statutory deductions, such as individual income tax (IIT) and contributions to the pension, medical, unemployment, and housing funds, are made in compliance with the Social Insurance Law and the Housing Fund Management Regulations.
• Tax Compliance and Reporting: Under the Individual Income Tax Law, employers are obligated to withhold taxes from employees’ wages and submit monthly and annual reports to the State Administration of Taxation. An EOR ensures timely and accurate tax filings, protecting businesses from penalties. Compliance with tax reporting laws and accurate withholding ensures businesses avoid costly mistakes and legal issues.
• Employee Benefits Management: According to the Labor Contract Law and the Social Insurance Law, employers must provide essential employee benefits such as social security contributions, housing funds, and health insurance. An EOR manages these benefits on your behalf, ensuring your company is compliant with local laws, such as the Housing Fund Management Regulations, and offering employees the mandatory benefits they are entitled to.
• Payslip Compliance: Under Chinese labor law, including the Labor Contract Law, employers are required to provide employees with detailed payslips. These must include information about wages, deductions, and mandatory contributions, including social insurance. An EOR ensures that payslips are fully compliant with these legal requirements, offering both transparency and legal protection for the employer and employee.

Challenges and Risks of Using an EOR in China

While using an Employer of Record (EOR) in China provides several advantages, businesses must be aware of potential challenges. These include reliance on third-party providers, compliance risks, data security concerns, and communication difficulties. Addressing these challenges is crucial to ensure smooth operations and mitigate risks.

• Dependence on Third Parties: Relying on an EOR for payroll management and compliance in China means that your business is dependent on a third-party provider for critical HR functions. It is essential to thoroughly vet your EOR partner to minimize the risks associated with outsourcing these critical tasks, especially in a highly regulated environment like China.
• Compliance Risks: Although using an EOR helps mitigate compliance risks in China, businesses must ensure that their partner is well-versed in Chinese labor laws and employment regulations. If an EOR is not up-to-date with legal changes, your business could face significant legal challenges. Choose a knowledgeable EOR that can effectively manage compliance with Chinese labor laws, including social insurance contributions and tax filings.
• Data Security and Privacy Concerns: Data security is a major concern when working with an EOR in China. Ensure that your EOR has robust data protection measures in place to comply with China’s data protection laws. Safeguarding sensitive employee information is critical, and the right EOR should prioritize security to protect both your company and its employees.
• Communication and Control Challenges: Working with an EOR often leads to challenges related to communication and control over business operations. Ensuring clear communication and setting up well-defined agreements with the EOR is essential to maintain operational efficiency. Regular updates and transparent processes will ensure that your business remains in control while benefiting from the outsourced services.

Get Started with HRBS EOR Services in China

Are you ready to take your business to China but overwhelmed by the complexities of local regulations? With HRBS EOR services, you can leave the headaches of payroll, tax compliance, employee benefits, and legal requirements to us. Focus on scaling your business while we handle all the HR details—ensuring you’re fully compliant with China’s ever-changing labor laws. China’s workforce regulations are intricate, but with HRBS by your side, you can navigate them effortlessly. Our expert team manages everything from smooth employee onboarding to timely payroll processing, ensuring that your operations are not just efficient but also legally sound.

Why get bogged down in red tape when HRBS can simplify the entire process for you? Whether you’re hiring a single employee or building an entire team, our Employer of Record (EOR) services allow you to expand without the need to set up a local entity. Ready to scale your business in China without the stress? Reach out now to get started and unlock a world of opportunity in one of the world’s most dynamic markets!

FAQs About Employer of Record in China

What is an Employer of Record (EOR) in China?

An Employer of Record (EOR) in China is a third-party service provider that manages key HR functions for your business, including compliance, payroll, employee benefits, and labor law adherence. By partnering with an EOR, you can hire employees in China without the need to establish a local entity, ensuring full compliance with China’s complex employment regulations.

Is Using an Employer of Record (EOR) Legal in China?

Yes, using an EOR in China is completely legal. An EOR helps businesses comply with Chinese labor laws, including tax regulations, employment contracts, and social insurance requirements. It ensures that your business meets all legal obligations while you focus on growth and expansion.

Can an EOR Help with Hiring Foreign Workers in China?

Absolutely. An Employer of Record in China can assist your business with hiring foreign workers by managing the visa application process, work permits, and ensuring compliance with China’s employment regulations. This service is essential for businesses looking to employ expatriates or foreign nationals in China.

What Are the Costs of Using an EOR in China?

The cost of using an Employer of Record (EOR) in China depends on several factors, including the number of employees, the services provided (e.g., payroll, tax compliance, benefits management), and the complexity of your business needs. It’s crucial to request a detailed breakdown of costs from the EOR to understand the full financial commitment involved.

How Does an EOR Ensure Compliance with Chinese Labor Laws?

An EOR ensures compliance by managing key HR functions such as contracts, employee benefits, payroll processing, and tax withholdings according to Chinese labor laws. The EOR keeps your business updated on any changes in local laws, ensuring that your employees receive the correct legal entitlements and that your business avoids potential legal issues.

What Are the Benefits of Using an EOR in China?

Using an EOR in China offers numerous advantages, including simplified payroll management, legal compliance, faster employee onboarding, and cost-effective expansion into the Chinese market. By leveraging an EOR, you can focus on scaling your business while leaving the complex HR and legal requirements to the experts.