China has a fast-growing economy and hundreds of millions of highly skilled workers, which can help your organization grow at a fraction of the cost you’d pay your domestic workers. This makes it appealing for US employers when hiring employees in China. However, it’s illegal for foreign employers to hire in China, and to comply with local laws, you’ll need to go through a local Chinese staffing agency. For this reason, we don’t recommend that small businesses hire employees in China.
While we often recommend US companies hire international workers as independent contractors, this is illegal—only local entities can hire Chinese contractors. The workaround is to hire a freelancer in China (without creating an independent contractor agreement) using freelance websites. You can visit Upwork.
If you’re still interested in hiring in China, whether for an employee or freelancer (which is a legal gray area), there are some things you need to consider.
Hiring in China Through a Local Staffing Unit
The only way to hire an employee in China is through a Chinese local staffing unit—a company that’s licensed to hire in China. This could be an employer of record (EOR) or an international professional employer organization (PEO), which you’ll find is essentially the same as an EOR.
Typically, most units don’t recruit (although you can find some that do) but will take over onboarding, compliance, payroll, etc., once you’ve selected your new candidates. They usually provide compliance support, regardless of which part of the process you’re in.
EOR
A Chinese EOR acts as a third-party service provider and operates as the legal employer on your company’s behalf. The EOR will handle all compliance with Chinese laws regarding payroll, benefits, contracts, and taxes.
Some benefits of hiring a Chinese EOR include
- Offers a quick setup of new hires (within one to 14 days)
- Takes on all liabilities
- Handles payroll for you
- Handles all taxes for you
You can contract with an EOR, like FDI China, to handle all your hiring needs. Visit FDI China for more information.
International PEO
As a US employer, you have a duty to ensure the Chinese company you’re working with is licensed because, if they’re not, both the Chinese company and your business can face stiff fines and potential bars to doing business in China in the future. By using an international PEO, you can ensure compliance, plus it will handle all legal liabilities for you.
Some benefits of hiring an international PEO include:
- Operates like an employment agency
- Handles all administrative duties such as onboarding, payroll, and people management
- Assumes all legal liabilities for the employee
Consider Papaya Global if you need a licensed company that can serve as your compliance partner in China. For more information, visit Papaya Global.
Hiring Freelancers in China
We don’t recommend hiring freelancers in China if you have a small business. Freelance hiring platforms like Upwork (read our review of Upwork) are really the only truly legal ways of hiring a freelancer in China. And, because the Chinese government is so strict on international working arrangements, the legality of this could change at any time.
We recommend hiring from the Philippines or hiring from India if you have any flexibility; they’re much easier to work with. Also, although fewer people live there, they’re just as skilled as workers in China.
Factors to Consider When Hiring From China
The biggest reason US small businesses hire Chinese workers is the reduced overhead. Some major cities in China rival major US cities in cost of living but, overall, China’s cost of living is about 60% less. While you may save money by paying a lower salary, the downside of hiring an international employee from the country are China’s government regulations.
1. Common Types of Work Outsourced to China
Workers in China do a variety of jobs in many industries, just like in the US. However, some jobs are more typical in China than others. To ensure your job aligns with the most frequent skills found in China, here are some of the most common jobs held by Chinese workers:
- Customer service and support
- Call center representative
- Web development
- Various positions in IT
The overwhelming majority of people in China work either in the service sector or manufacturing. However, China has been pushing computer science and related fields in schools, which has seen an increase in workforce. Many US companies are tapping into this growing sector in China to add to their domestic employees.
US companies with clients around the world can also use Chinese customer support and call center representatives. If your business has this need, you can get people who can work business hours to support your Chinese clients and speak the same language.
2. Cultural Differences
Chinese and US cultures are quite different. Some differences include:
- Language: The official language of China is Mandarin, and while there are nearly 300 languages spoken in China, most residents are at least conversational in Mandarin. Be aware that only about 1% of the Chinese population speaks fluent English, so you may need to hire a translator to help manage any employees you hire.
- Punctuality: This is crucial for businesses to succeed, and Chinese culture puts an emphasis on timeliness. However, major Chinese cities are notorious for their terrible traffic, so someone may unintentionally be late occasionally. Just like in the US, it’s good to have some leniency, but you should absolutely address it if excessive tardiness occurs.
- Lunch Breaks: In many professional settings in the US, workers eat lunch at their desks or take short breaks to eat. In China, however, lunch breaks are well-observed and often go as long as two hours. It’s also common for a short nap to occur after a worker takes lunch.
3. Time Difference
Even though China spans five geographic time zones, it adheres to a single time zone so that all of China is on the same time. Called Beijing Time, it’s eight hours ahead of Greenwich Mean Time (GMT) and 12 hours ahead of US Eastern Time.
This extreme time difference can make it difficult to collaborate with your Chinese staff, so you may need to shift hours. Your US-based employees may have to work earlier some days, while your Chinese team may have to work later. Some companies require Chinese workers to work US hours all the time. While that means they’re working overnight, it can benefit your company by having every employee on the same schedule.
4. Employee vs Contractor & Penalties
There are several types of employees to choose from: full time, part time, seasonal, or temporary. You can also hire Chinese workers as independent contractors but, as covered earlier, only if the contractor agreement is with a company that’s licensed to hire contract work in China.
If you’re able to pull this off, you can avoid setting up a legal entity and reduce your overhead. However, you’ll have less control over the work done and will face stiff fines and penalties for misclassification if the worker should really be an employee.
Like the US, China has regulations around misclassifying independent contractors. If any of the following occurs, your independent contractor may be considered a de facto employee under Chinese law:
- You pay the worker a set salary
- You provide benefits
- You require the worker to work certain hours and control their daily tasks
- The worker is supporting an essential function of your business
The fines and penalties your company may be subjected to if you’re deemed to have misclassified a Chinese worker include:
- Paying double salary for up to one year in the past
- Entering into an employment contract with the worker that is retroactive up to one year
While there are strict guidelines around independent contractors, many Chinese workers are used to working on an independent contractor basis. Just keep in mind that red flags may go off since the company that’s contracting with the Chinese worker is not actually having work done. If caught, you could be sanctioned as well for your participation, as China would see it as all parties attempting to avoid taxation.
5. At-will Termination
At-will employment does not exist in China—labor laws in China stipulate that employees cannot be fired without cause. In cases where termination is needed and the employee is without fault, such as an illness or injury, the employer must provide a 30-day written notice to the employee or a month’s pay in lieu of the notice, plus severance.
How to Hire Chinese Employees
The steps to hire workers in China are very similar to hiring employees in the US. These include creating a job description, setting up payroll, posting your ad, reviewing candidates, conducting interviews, checking references, and making an offer.
Writing job descriptions involve being clear and including the skills and prerequisites necessary to perform the job well—even on freelance websites. Note that the minimum wage salary in China is currently $360 per month, however, the average wages paid per year are higher in the city than in the country.
There is no requirement of how frequently you make payments, but most Chinese workers are used to being paid at least monthly. If you’re partnering with a freelancer, ensure you have a completed IRS Form W-8BEN-E from them to verify you’re paying them correctly; otherwise, there aren’t any other rules you’ll need to adhere to. Freelancers are ultimately responsible for ensuring they’re complying with Chinese law, paying taxes, etc.
Chinese labor law sets the workday at eight hours and the workweek at no more than 44 hours. Most workplaces operate 8 a.m. to 6 p.m., allowing for a full workday and a two-hour lunch. There are, however, some special laws you need to know:
- Minimum Wage: There is no national minimum wage. Instead, provinces, municipalities, and local governments may set their own minimum wage. Rural areas usually have lower minimum wages, and cities have higher. Beijing, for example, has the highest hourly minimum wage (26.4 yuan per hour, or $3.70 per hour), and Shanghai has the highest monthly minimum wage (2,690 yuan per month, or $370 per month).
- Overtime: Employees receive 1.5 times their base pay for any hours worked over eight in one day.
- 13th Month Pay: While not required, it is expected that companies give an annual bonus. Bonuses receive preferential tax treatment in China, which can lessen the burden on employees, allowing them to take more money home.
- Social Insurance: These are mandatory deductions from an employee’s paycheck. The rates vary depending on where your employees live. Here are the most recent rates for Beijing:
Benefit | Employee Share | Employer Share |
|---|---|---|
Pension | 8% | 16% |
Medical Insurance (including maternity) | 2% | 9.8% |
Workplace Insurance | 0% | 0.2%–1.9% |
Public Housing Fund | 12% | 12% |
Unemployment Insurance | 0.5% | 0.5% |
- Paid Time Off (PTO): Any employee working for at least one year with a company is entitled to receive PTO, based on years of service:
- One to 10 years of service: five days
- 10–20 years of services: 10 days
- 20+ years of service: 15 days
- Sick Leave: There is no requirement to provide Chinese workers with sick leave, but many companies do to attract high-quality workers.
- Parental Leave: Both parents are entitled to take up to 10 days of parental leave (five days allowed in Beijing and Shanghai) each year until a child reaches the age of three, along with the following leave:
- Maternity: 98 days of 100% paid maternity leave
- Paternity: 15 days of 100% paid paternity leave
- Beijing and Shanghai: Mothers living in Beijing are given an additional 60 days of leave for a new birth paid at the higher rate of either the company’s average monthly salary or the mother’s wage the month of delivery. In Beijing only, if agreed by both employer and mother, the additional 60 days of maternity leave may be shared with the father.
- Holiday Leave: Chinese workers are entitled to seven paid holidays each year (confusingly, two of these holidays are actually three days long). If an employee works any of these holidays, they are to be paid three times their hourly rate:
- Lunar New Year (three days)
- National Day (three days)
- New Year’s Day
- Qingming Festival
- Labor Day
- Dragon Boat Festival
- Mid-Autumn Festival
Hiring international employees requires compliance with laws in two countries. That can be overwhelming for small businesses, and that’s why we recommend using a compliance partner. Visit Papaya Global to learn how its services can help you pay your Chinese workers correctly and ensure compliance with both China and US laws.
Your job ad needs to be posted on job boards Chinese workers will see, so these sites will be specific to China. Some of the most used job sites include:
Your job ad needs to clearly describe not only the role’s duties and responsibilities but also the work hours. Whether you decide to have your Chinese employees work their local hours or your hours, leave no ambiguity here and make it clear what you expect. This will help you narrow applicants down quickly, reducing the amount of time you need to spend reviewing resumes and interviewing candidates. Our guide on how to advertise a job ad can help you.
You may receive applicants quickly. For lower-level jobs that don’t require as much skill, expect an influx of candidates in the first few days. To help you screen applicants quickly and effectively, check out our article on how to screen applicants. We recommend you make a must-haves list for the position; no candidate will match up perfectly, but the best ones should match your needs.
Doing interviews with global workers will present some time zone challenges, but this is good practice for you to see how the individual candidates communicate given these obstacles, especially if you need them to work your hours. We recommend having a list of structured interview questions for each applicant. As a result, you can rate candidates based on their answers to the same questions, allowing you to narrow the candidates down to just one.
Conduct a video interview with the most qualified candidates. Doing this instead of a voice call will ensure you can trust their internet connection. Be aware that China has an internet firewall that may not allow the applicant to access certain websites.
If you’re working with a Chinese EOR, you can let your representative know who your chosen candidate is so that the EOR can then establish a relationship with that worker and place them with your business. Essentially, you do the legwork to find the employee you want, and then partner with a Chinese EOR to lease the worker.
After the interviews are complete and you have targeted the candidate you want to hire, ask for references. You want to ensure you speak with at least two supervisory references—this will give you a good idea of the candidate’s work ethic and the skills they possess. A supervisory reference will also help you understand what it’s like to manage this individual.
Checking references outside the US can be difficult. While we usually recommend all reference checks be completed over the phone, it might be too cumbersome to do so. Only if necessary, it would be acceptable to communicate with a reference via email. Ask them direct reference check questions, as well as follow-up questions, to gauge whether the candidate is capable of doing the job.
Freelance websites, like Upwork, have a place where you can see reviews from a freelancer’s previous customers. This can serve as a reference check if there are enough to make you comfortable. To get started, visit Upwork.
Completing all of the above steps will lead you to a successful conclusion of your hiring process: making a job offer through an employment offer letter. We also recommend connecting with the chosen candidate to discuss the offer and any remaining details. Once you’ve agreed on all the terms, present the candidate with a formal employment contract—a requirement in China—which includes:
- Salary and pay frequency
- Job title
- Start date
- Specific working hours
- Benefits
Also include the job description for the candidate to sign off on. This will allow you to hold the person accountable should they not meet your expectations. Give the candidate at least a week to review the proposed employment contract and return it to you.
Freelance websites will facilitate this for you (there won’t be benefits or specific working hours, but you’ll enter the necessary details, and they will be communicated to the worker). EORs and international PEOs with recruiting services (many don’t offer this) may also handle this part for you. You’ll still need to specify the details, i.e., start date, salary, etc., but they will handle the documentation process.
Bottom Line
Employing someone in China or partnering with a global independent contractor will present international challenges, especially for small businesses. If you can, we recommend choosing other countries to recruit from. If you’re still set on hiring employees in China, you can streamline the process considering the information we discussed above. Seek advice from an international employment lawyer to ensure your company remains compliant.
