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Planning to Hire Employees in China? Know the Rules and Policies Before You Do

The Employment Contract Law is the most important law in China relating to an employer and employee relationship. This law is applicable to the employment of foreigners as well as local Chinese employees, and applies to local Chinese companies as well as WFOE's. This law has been constructed to protect the rights of the workforce hired in China and build harmonious employment relationships.

If you have your own business in China, at some point in time, you may feel the need to hire local Chinese personnel. There are a set of rules that every employer in China has to abide by while considering recruitment of local Chinese or foreign employees .

Employment Contract

Under the People's Republic of China's (PRC) Labor Law, all employees are required to sign employment contracts with their companies. Nevertheless, only limited companies are allowed to sign employment contracts directly with local employees. If the company is a Representative Office (RO) , then it can only Hire local employees through a Licensed HR Agency like Talent Spot using Employee Leasing / Talent dispatching services. The licensed HR agency also may be granted the responsibility of the employee's payroll, benefits mandatory, individual income tax etc. based on the local policies.

While there is no standard template for the form, the agreement should include the following points:

  • Date of signing, term of contract and probation period

  • Employee and employer address details, official identification and signatures.

  • Job title, job description and work location

  • Labor protection and working conditions

  • Compensation, benefits and insurance information

  • Termination conditions

  • Breach of contract provisions & disciplinary rules

  • Other provisions such as training bond, non-disclosure agreement and non-compete agreement

Nature of Employment

Employees may be hired on a permanent or temporary basis. A temporary employment can be of fixed-term or task-based term. Permanent employment can be without a specified term. Also, if the term of employment contract is 3 months to 1 year, the probation period can be maximum 1 month. If the term of employment contract is 1 year to 3 years, the probation can be maximum 2 months. If the employment contract has no fixed term, the probation can be maximum 6 months. If the employment contract is of a fixed term or less than 3 months, there is no probation period. 

Hiring Expatriate Employees

Not every company in China has the necessary permissions to hire foreigners. The hiring power of the company with expatriate staff s is directly proportional to its registered capital. If your company is empowered to hire expatriates, it is the responsibility of the company to get a work permit and work visa for its expat recruits. Depending on the job role, expats may be hired on Work Visa (Z) / Priority Talent Visa (R) / Internship Visa (X2 / M).

Individual Income Tax and Mandatory Benefits

Being an employer in China, certain obligations have to be followed relating to tax and welfare contributions for your employees.

Individual Income Tax

Depending on their salary, all employees in China pay Individual Income Tax on their income. The employer is responsible for deducting the Individual Income Tax from the salaries every month and submit the tax deduction to the tax authority. This is only an employee contribution and applicable to both expat and Chinese employees.

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