Most businesses are not able to figure out how to become successful in China. Especially small and medium businesses have a harder time breaking into the Chinese economy than large businesses because they cannot use the same types of tools and techniques that large businesses can use.
As a result, most small businesses fail to break even or lose money in China. However, if a business wishes to be more successful in China, then the owner needs to take into consideration different aspects related to the market, marketing strategies, labor costs, HR.
In this article, we want to introduce you to a solution that can help businesses, especially small and medium ones, to become successful and compliant in China.
Challenges For Foreign Businesses In China
Doing business in China is not that easy. While having a business active in China can bring incredible opportunities to grow your brand and increase your profits, there are also challenges that can ruin your reputation in the long term or can make you non-profitable in the market.
Some of these challenges are highlighted below:
This is probably one of the most important aspects to consider because if you don’t have a good connection with partners in the country, it becomes very hard to be successful. China has its only rules, different from other countries, and you need help from someone or some companies with local experience to help you navigate in this market.
This is another aspect to consider when doing business in China. You cannot think of coming to China and use the same strategies used in other countries, because here the culture, especially when you are having a business, plays an important role and you have to follow some rules to make sure of not making mistakes with clients and partners.
In China, the government is always active when it comes to the regulations for the market and to make sure that everything is compliant. The government imposes the rules stating what and how products are designed, developed, sold, and used in China.
An aspect to not underestimate is the one related to the competition. More companies are interested now to come to China to start a business and, especially tier 1 cities, are becoming crowded with many companies, local and not local, fighting for the same customers.
Human resource management
Human resource is one of the most important challenges for foreign companies. The rules in China are very different from other countries and you have to consider that these rules are changing every time because the country is still developing this part of the system. To avoid the potential compliance issue, a foreign company shall have a deep knowledge of all the Chinese policies and practices since these are constantly changing.
The Importance Of HR In China
In China, like many other countries, HR is one of the functions where business owners struggle most to find resources and time to manage it properly.
But it is a function extremely important, because if it is not managed properly, can make more harm than good.
Some of the functions that HR takes care of are:
- Recruitment of the right employees for the company
- Management of employee and employer relationships
- Management of payroll, benefits, and taxes
- Training and development
- Guarantee the labor law compliance
Foreign companies have to go through a difficult legal enrvironment where policies change constantly and many of the policies are hard to understand since they are in Chinese most of the time.
The hiring part is one of the main challenges for foreign companies entering China. Not knowing the culture, the language, and the local market, can impact their abilities to find the right talents for the company.
Hiring employees in China is also complicated because companies need to have a specific business structure to legally hire employees (WFOE) and they cannot hire directly employees.
Another solution is using the services of a PEO to deal with the process of hiring employees in China, even if the company does not have a legal entity in China.
A PEO As The Solution To Solve HR Challenges In China
As introduced before, a PEO (professional employer organization) is a solution for all those companies that cannot or do not want to set up a company in China. It is a solution that can solve all your problems related to HR in China and making sure that you are compliant with Chinese laws and regulations.
There are many ways that a PEO can help a small business. The PEO, for example, will ensure that your company’s employee’s taxes and social benefits are paid on time. This can save a business a great deal of money, which is something every small business could use to improve its bottom line.
Another thing that a PEO can do for a small business is managing payroll. This is extremely beneficial for any business owner. If a business is only run by one employee, the process of payroll can be quite complicated, since there are rules that are not easy to understand in the Chinese system, but if you do not follow these, you risk of being not compliant with the law with all the implications that this brings.
A payroll service will take care of this for you, so you only have to focus on the strategies and tactics that will help your company to grow in China.
A payroll service will also help with deductions that employees typically miss. For example, if an employee wants to deduct the house rent, the PEO will take care of this for you.
Many of today’s international business owners struggle with managing their payroll and employment abroad, and businesses in China are not exempt from this.
Opening a company to hire employees to manage your business in China is not a good option for many businesses, especially when they want to start their journey in China, because of the high costs and time.
By using a PEO, small business owners will not have to worry about employing people and processing payroll. In addition, a PEO can offer many benefits to their companies, including medical benefits, commercial insurance, life insurance, and many other employee benefits. These are not easily accessible to small business owners without a PEO service.
By using a PEO in China, businesses can also save a lot of money, which they can then invest back into the business, and they just have to focus on the growth of the company.