China Payroll
Overview of Employment Options And Regulations in China

Overview of Employment Options And Regulations in China

In China, employment service is provided by two entities to hire and manage employment relationships.

It is a service provided by human resource agencies to assist foreign companies in not only finding qualified talent in the country, but also managing labor contracts, payroll, and benefits for these companies’ employees.

Managing employment relationships in China is difficult due to the constantly changing laws and regulations.

In this article, we will go over the main employment regulations in China as well as the best ways to hire employees.

Overview of the recent employment law in China

Companies hiring in China must be familiar with key aspects of Chinese labor and contract laws and regulations.

In this section, we answer basic questions about the hiring process and go over the various types of labor contracts in China.

Employment contracts

Employment contracts will not be subject to Chinese law unless they are signed through an entity in mainland China or if the overseas company is considered a permanent establishment in China.

If the company is qualified to hire an employee directly and decides to do so, the employer must sign a written contract with the employee within one month of the employee’s first day of work with the company.

If the employer does not provide the contract within one month but within one year, the employer must pay the employee the double monthly salary.

If the employee refuses to sign a written labor contract with the employer, the employer must dissolve the labor relationship, notify the employee in writing, and pay the employee economic compensation following the provisions of the People’s Republic of China Labor Contract Law.

If the employee does not enter into a written labor contract with the employer within one month of starting work, the employer must notify the employee in writing that the labor relationship will be terminated without economic compensation, but must pay the labor remuneration for the actual working hours.

When does the employment relationship start in China?

The employment relationship is considered to begin on the employee’s first day of work in the company, not on the date the contract is signed.

Should labor contracts be written in Chinese?

In general, if a bilingual contract does not specify which language is the controlled version, it will automatically default to Chinese as the authoritative language.

As a result, foreign investors are advised to sign contracts in Chinese for the sake of legal certainty.

Types of labor contracts in China

Labor contracts in China can be classified into three types, according to various definitions:

1) Fixed-term labor contracts

A fixed-term contract establishes the relationship between the employer and the employee for a specific period. It can be used for either part-time or full-time employment.

Part-time employees share the following characteristics:

Employees’ average working time shall not exceed 4 hours per day and 24 hours per week.

There is no probation period, and either the employer or the employee may terminate the agreement at any time.

Employees are not entitled to severance pay.

Employers are required to pay wages at least once every 15 days.

Part-time employees are not required to sign a written contract.

In labor contracts, the term contract is the most commonly used labor relation standard.

When compared to open-ended contracts, it gives employers more flexibility to terminate and gives the employment relationship more legal certainty.

2) Open-ended contracts

A contract without a fixed term is a standard labor contract between an employer and a worker that does not have a set term.

In general, there are four methods for obtaining an open-ended contract:

The employer and employee sign an open-ended contract (not recommended) at the start of the labor relationship.

The employer refuses to sign a written contract with a full-time employee who has been with the company for at least a year;

The employer wishes to renew the employee’s contract for a second time, and the employee does not fall into any of the categories described in the preceding two paragraphs (to be provided later) of “immediate termination of the contract due to employee misconduct” and “termination of the contract with 30 days notice and payment of compensation.”

For the past ten years, the employee has worked for the same company.

Employees’ work safety before retirement is effectively guaranteed by the indefinite term contract. Because the employment contract is no longer limited to the period of employment, the company will be unable to fire the employee at the end of the contract. This means that the employer can only fire an employee if both parties agree or if there are compelling reasons to do so.

3) A labor contract whose duration is determined by the completion of a specific task.

A labor contract is defined by the task or project that the employee will complete, not by the length of time.

This type of contract enables a company to hire someone to complete a specific project. The employment relationship ends once the project is completed. At this point, the company is required to pay the employee severance pay.

Furthermore, the employer may not impose a probationary period for the labor contract. Most employers avoid this arrangement for these reasons.

Labor contract clauses in China

The following provisions must be included in the labor contract in China, according to the relevant laws:

The company’s name and address, as well as the name of its legal representative or senior management personnel;

Employee’s name, valid address, and identity card number;

The contract’s start date and duration;

Job description and implementation location;

Salary information;

A statement stating that the employer will contribute to the employee’s social security;

Labor protection, working conditions, and occupational disease prevention

It is suggested that some clauses be added to the labor contract based on the specific situation, such as:

  • Probation period
  • Non-compete agreement
  • Confidentiality agreement
  • Allowances and benefits (especially for foreign employees).

What’s more, China has mandatory benefits.

Both the employer and the employee contribute to the mandatory benefits contribution, which applies to both Chinese and foreign workers.

The mandatory benefits to include in the employment relationship are:

  • Pension insurance
  • Medical insurance
  • Unemployment insurance
  • Maternity insurance
  • Work injury insurance Housing fund

Tip: If you want to learn more about mandatory benefits in China, check out our guide to Chinese social security.

The Employment Service’s Role in China

In general, employment is a contract between an employer and an employee under which the employee agrees to perform certain services. In exchange, the employee receives a salary or hourly wage.

One of the roles of employment services in China is to match job seekers with job opportunities, but this is only one part of the picture, and the emphasis here is primarily on the employee side.

An employment service provider serves as a window into the country’s human resource laws and regulations for employers.

HR is a complicated subject, especially in a country like China. The majority of the laws are written in Chinese, and the regulations are updated regularly. It is frequently difficult for foreign companies and investors to stay current and compliant.

An employment solution in China can assist foreign companies with all aspects of employment relationships, such as contracts, benefits management, payroll, and labor disputes.

However, one question that we frequently receive from our users is about the options for hiring staff in China.

There are three options for hiring employees in China.

Hire employees through a human resources agency – This is one solution that is mostly used by companies that already have a legal presence in China. As previously stated, managing HR and payroll can be difficult and necessitates a thorough understanding of local laws. Employees who are not properly managed may face compliance issues with the government. As a result, companies in China outsource HR and payroll to a local HR agency, which handles all aspects of employment.

Labor dispatch – Another service that is primarily used by Chinese representative offices is labor dispatch. Labor dispatch is a triangular form of employment relationship in which employees are hired by the host company from a dispatch work agency and dispatched to work for the host company.

Professional Employment Organization (PEO) – A PEO is the best option for companies that do not want to establish a legal entity in China but still need to hire employees to manage on-the-ground operations or test the market. A professional employer organization (PEO) provides a full range of services such as human resource outsourcing, payroll processing solutions, employee benefits services, and employee dispatch services.

How China Payroll can help you start your business in China

As a registered PEO in China, we can assist foreign companies whose operations in China necessitate the hiring of local or foreign employees.

Our solution includes the following services:

  • Candidate search
  • Labor contract signature
  • Monthly payroll
  • Work visa processing
  • Income tax compliance
  • Employee social benefits
  • Allowances
  • Bonus & commissions
  • Medical insurance
  • Expense claim

If you have any questions about employment law in China, please contact us now!

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