In this article, we provide the idea about establish a WFOE or outsource employee in China.
What is a wholly foreign-owned enterprise (WFOE)?
How to outsource my employees in China
What services are included as a part of the PEO/ employee leasing service?
This depends on each service provider. Right from directly signing employment contracts with the employee, onboarding them, addressing VISA/Hukou issues, payment of salaries, and contributing the mandatory insurances and housing fund to providing legal support.
What are the advantages of a wholly foreign-owned enterprise (WFOE)
1. Independent legal personality;
2. Ability to receive revenues, issue invoices, and transact with customers in RMB;
3. Allows for full authority over human resources ‘ Can directly hire resources and pay their salaries directly through the company’s bank accounts.
What are the advantages of outsourcing my employees to China?
1. Saves Time – For a small business, outsourcing your employees is more effective than doing it all on your own. You can focus on the core objectives of your business, leaving the rest of the work to your employment service provider.
2. Saves Money – Startups can save money by cutting costs on the resources allocated to pay employees and maintain payroll, tax, and insurance documents. It is much cost-effective to outsource your employee instead of hiring an internal HR to handle the employment, monthly payroll, statutory benefits issues.
3. The service provider assists the foreign company in case of a labor dispute. In China, the labor policies are more employee-friendly and therefore the ‘risk factor’ of hiring an employee is very high for a company, especially in China. The service provider can give professional advisory to foreign companies on how to handle this kind of issue. And the service provider has a strong legal team to assist clients with litigation and arbitration issues.
4. Width service coverage – The service provider can handle your employees’ mandatory benefits in multiple cities in case your employee is working in different cities in China.
What are the disadvantaged of choosing the establish a WFOE over outsourcing
1. Establishment of a WFOE is complex and time-consuming (3 ‘ 10 months), with approvals required by multiple authorities.
2. Need to hire an in-house HR & payroll specialist who needs to be well updated about the latest policy requirements in China with respect to employee benefits and social insurance/housing fund contributions.
3. Needs to comply with the latest regulations in China about individual income tax, employment contracts, employment laws, employee benefits, VISA regulations, etc.
4. The company needs to take the full employer liability. In China, the labor policies are more employee-friendly and therefore the ‘risk factor’ of hiring an employee is very high for a company, especially in China. The employer’s liability increases with each year of the employee’s association with the company.
5. RMB 100,000-RMB 500,000 is advisable as minimum investment capital for establishing a WFOE in China.
6. Annual audit and other issues need to be done on a yearly basis.
What are the limitations of PEO/ employee leasing
1. In this arrangement, the employment contract must be for a minimum of two years (although lawful termination of employees is allowed.)
2. Resistance from employees – The employees might be reluctant to join and might prefer being hired by their main employer. Right communication is very vital in this arrangement between all parties.
3. An outside company’s influence on your culture ‘ It is very vital to find an established service provider for your company as you’re delegating a very sensitive and important area of your business.
How HROne can beneficial to your business
HROne’s offers employment outsourcing services in China for Representative Offices and to companies not having a legal entity in China. HROne fulfills all legal responsibilities right from directly signing employment contracts with the employee, onboarding, addressing VISA/Hukou issues, payment of salaries, and contributing the mandatory insurances and housing fund to providing legal support. More importantly, HROne can provide bilingual service to its clients both in English and Chinese.