Hiring Practices in China 2022 Best Guide

hiring practices in china

Table of Contents

If you want to hire employees in China, you need to to follow the guidelines set forward by the Chinese government. Hiring practices in China specify that the only way to hire employees is to have a legal entity in the county or to use a certified China-based PEO or Employer of record service provider (such as HROne).

1. You need a Chinese company to hire employees in China

With a registered company in China, you can hire employees directly. This option gives you more control over the hiring process and allows you to build a team of employees that are specifically tailored to your company’s needs. However, it can be a time-consuming process, particularly if you are not familiar with Chinese employment laws. If you do not have a company in China, you can hire employees through a PEO service provided by a Chinese employment agency such as HROne! This option is less time-consuming and allows you to tap into a pool of pre-screened and qualified candidates. In addition, using a PEO service can help to minimize your risk when hiring employees in China.

2. What if I don’t have a company in China?

If you don’t have a company in China, you’ll need to use a PEO (professional employer organization). This is the only legal way to do so if you don’t have a legal entity in China. Hiring employees in China through your representative office is not legal. The best way to ensure compliance is to hire employees through a labor dispatch agency that provides PEO & Employer of Record services. This will help you navigate the complexities of Chinese employment laws and give you access to a pool of qualified candidates. Plus, it’ll free up your time so you can focus on running your business.

3.What is the difference between PEO/EOR employment agency in China?

PEOs and EORs are both types of employment agencies that provide companies with staffing solutions in China. PEOs, or Professional Employer Organizations, act as an extension of the company by assuming full responsibility for human resources, payroll, and benefits administration. EORs, or Employers of Record, act as the legally responsible party for your employees and focus primarily on payroll and compliance. While PEOs can be a comprehensive solution for companies looking to staff employees in China, EORs are a better option for companies that do not have a local entity in place in China.

4. Employment contract in China must be written

In China, it is required by law that an employment contract be in written form. The written labor contract must comply with the standards set by local labor administrative departments. The written labor contract shall be concluded between the employer and the employee, and shall come into effect on the date of signature or seals affixed by both parties. If the employee is a minor, the written labor contract shall also be signed or sealed by the employee’s guardian.

Foreign employees working in China shall also sign written labor contracts with their employers. In addition to the above-mentioned mandatory labor contract clauses, the written labor contract may also set out other clauses agreed upon by both parties through consultation. All content of the written labor contract shall be true, accurate and effective. Employment contracts that do not comply with relevant laws and regulations are invalid.

5. Contents of a labor contract in China

Labor contracts in China typically include the following content: the name and address of the contracting parties, the position of the employee, the base salary, bonus, and other benefits, the term of the labor contract, and the obligations of both parties. Typically, labor contracts are signed by both the employer and the employee, and are valid for a term of two years. After the expiration of the contract, either party may terminate the contract with 30 days’ notice. However, it is also common for employers and employees to renew their labor contracts on a yearly basis.

In China, labor contracts are governed by Chinese law, and provide employees with certain legal protections. For example, employers are not allowed to unilaterally change the terms of a labor contract without the employee’s consent. In addition, labor contracts cannot be used to exempt employers from their obligations under Chinese law. For instance, employers are still required to provide their employees with paid annual leave, even if their labor contract does not specifically mention this benefit.

6. Employment contract terms in China

Labor contracts in China are typically fixed-term contracts for two years. Although fixed-term one year & three year contracts are also common. The probation period for new employees cannot exceed 3 months for 1 year contracts, 6 months for 2 year contracts and 9 months for 3 year contracts. After the initial term expires, the contract can be renewed for another term or converted to permanent contract. It’s important to note that under Chinese law, employers must pay severance to terminated employees and employees that the company is not planning to renew the contract for, unless there are special circumstances.

7. Hiring practices in China: Salary offer package

Base salary: fixed base salary

Bonus: performance bonus, commission, allowances

13 Month salary: Also called the “annual bonus”. It is a bonus salary usually equivalent to a month’s salary that is paid out before Chinese New Year. It is also possible to have a 14 month salary or even 15 month salary which is a bonus equivalent to 2 & 3 month’s salary respectively. The annual bonus is very common, but not mandatory in China. It is influenced by the employee’s individual performance.

Annual leaves: Number of paid days off per year

8. Mandatory Benefits: Social insurance and housing fund in China

China has a system of social insurance that includes pension, medical, unemployment, work-related injury, and maternity benefits. The social insurance system is administered by the government and funded by contributions from employers and employees. A certified payroll provider can take this burden off of companies in China.

The 5 social insurances:

Pension: mandatory for all urban residents

Medical Insurance: mandatory for all urban residents

Unemployment Insurance: mandatory for all employed urban residents

Work-Related Injury Insurance: mandatory for all employees

Maternity Insurance: mandatory for female employees

Employers are required to make contributions to the pension, medical, unemployment, and work-related injury insurance funds.

Employees are required to make contributions to the pension, medical, and unemployment insurance funds.

The maternity insurance fund is financed by the government.

Housing Fund

Both the employer and employee are required to contribute to the housing fund on a monthly basis. The actual contribution percentage and base are determined by each city’s policy and will be adjusted annually. The Housing Fund is used to provide housing subsidies for employees, help employees with housing purchases, and finance other housing-related expenses. Employees can also choose to have their contributed Housing Fund used to pay for their pension.

9. How to provide social benefits to my employees in China?

Companies in China can open a social insurance and housing fund account. This account is necessary in order to hire employees in China. Once the company is established, you can contribute social insurance and housing benefits to your employees. Alternatively, you can outsource your employees’ payroll and benefits to a certified payroll provider or an Employer of Record provider in China. By doing so, you can ensure that your employees receive the social insurance and housing benefits they are entitled to.

10. Job platforms in China for finding & hiring candidates.

In China, there are many different job platforms that companies can use to find candidates. Zhaopin.com and Liepin.com are two of the most popular ones. Zhipin.com is also a popular option, especially for startups. LinkedIn is also widely used by companies in China for recruitment. However, many companies also use recruitment firms to help them find candidates. Recruitment firms usually have a good understanding of the Chinese job market and can provide guidance on the best way to find candidates. They can also help to screen candidates and narrow down the pool of applicants.

11. Employers must file their employees’ individual income tax (IIT) monthly.

In China, employers are responsible for declaring their individual income tax (IIT) every month. The employees are responsible for their individual income tax return filing on the government application once per year before June 30th.

12. Annual leave in China

In China, annual leave refers to the days off that an employee is entitled to in a working year. All employees are entitled to at least 5 days of annual leave, and those who have worked for more than 10 year are entitled to at least 10 days. Annual leave can be used for travel, personal or family reasons, or simply to rest and relax. Employees can also carry over unused annual leave to the next year, but only up to a maximum of 15 days. For most workers in China, annual leave is an important opportunity to recharge and rejuvenate, and it is much cherished.

13. Public holidays employees can take in China

New Year’s day: 1 day

Spring Festival/Chinese New Year: 3 days

Qing Ming Festival: 1 day

Labor Day: 1 day

Dragon Boat Festival: 1 day

Mid-Autumn Festival: 1 day

China National Holiday: 3 days

Employees working during the public holidays are entitled to overtime hourly rates, 1.5 times the normal wage.

14. Severance payment in China

Terminating an employee in China requires the employer to pay a severance fee. Severance pay is typically calculated as a multiple of an employee’s salary, and is paid out when an employee is let go from a company, including failure to renew a finished labor contract. You do not need to pay a severance fee if the employee resigns on his/her own will. The amount of severance pay an employee is entitled to receive depends on the length of time they have been with the company.

In general, employees are entitled to receive severance pay equal to one month’s salary for each year they have been with the company, up to a maximum of six months’ salary. Severance payments are typically paid in a lump sum, and are intended to help employees cover expenses during their transition to a new job. Read more on our severance pay guide.

15. Notice period for termination in China

3-day notice: If an employee is on probation, both the employee and the employer must provide 3 days’ notice of termination.

30-day notice: After an employee’s probation period, both the employee and the employer must provide a 30-day notice for termination.

16. Employee experience background check & criminal background check

Employee background checks are becoming increasingly common in China as companies strive to create a safe and professional work environment. While many employers still rely on personal connections and word-of-mouth to screen potential employees, an increasing number are turning to HR agencies that offer comprehensive background checks. These checks can include everything from verifying employment history and education to conducting criminal background checks. In a country with a population of over 1.3 billion people, background checks provide employers with a valuable tool for screening candidates and ensuring that they are hiring the best possible employees.

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