Expanding into China offers access to one of the world’s largest markets and a highly skilled workforce. However, navigating China employment laws and payroll regulations can be complex, especially for companies without a local legal entity. From understanding contract types to complying with social insurance and tax requirements, foreign employers face unique challenges.
That’s where a China Employer of Record (EOR) like JSC can make a real difference. Our EOR service enables you to hire employees in China legally, without establishing a local entity—managing China payroll, compliance, benefits, and more on your behalf.
Key Employment Components in China
Here’s what every international company should know before hiring in China:
1. Employment Contracts and Base Salary
Employment contracts in China must be written and meet legal standards. These contracts should outline terms including job duties, salary, work location, and probation period. The base salary—the fixed monthly wage before taxes and bonuses—must meet or exceed local minimum wage requirements, which vary by city.
2. Social Insurance Contributions
China requires both employers and employees to contribute to five major social insurance programs:
- Pension Insurance
- Medical Insurance
- Unemployment Insurance
- Work-Related Injury Insurance
- Maternity Insurance
These contributions are mandatory and vary by region. For example, employer contributions in major cities like Beijing or Shanghai can exceed 30% of the gross salary.
3. Housing Fund Obligations
The Housing Provident Fund is a compulsory savings program for housing-related expenses. Like social insurance, both employer and employee contribute—typically between 5% and 12% of the salary—depending on local policies. Non-compliance can lead to penalties, even for foreign companies operating via third parties.
4. Individual Income Tax (IIT)
China’s progressive Individual Income Tax (IIT) system requires monthly withholding by the employer. Rates range from 3% to 45%. When you hire employees in China, including foreign nationals, it’s critical to follow tax residency rules and double taxation agreements, where applicable.
5. Bonuses and Allowances
While not mandated, 13th-month bonuses and allowances (for housing, meals, transport) are common and often expected. These benefits play a vital role in employee satisfaction and retention—and they impact China payroll calculations since many are taxable.
6. Overtime and Working Hours
China’s Labor Law sets a standard 40-hour workweek. Overtime must be compensated at:
- 150% of base pay on weekdays
- 200% on rest days
- 300% on official holidays
Employers are legally required to track hours and compensate employees accordingly.
7. Statutory Leave and Benefits
Employees in China are entitled to annual leave, sick leave, maternity/paternity leave, and national public holidays. Your payroll system must accurately account for these to ensure compliance and proper pay during absences.
Hiring Without a Legal Entity – Using a China EOR
For companies without a local subsidiary, hiring directly can be legally and logistically difficult. This is where a China EOR like JSC can help. We act as your official local employer, handling:
- Legal employment contracts
- China payroll and tax filings
- Social insurance and housing fund contributions
- Employee benefits and leave management
- Ongoing HR support
This allows you to hire employees in China quickly, compliantly, and without the time and cost of setting up a legal entity.
Final Thoughts
Successfully navigating China employment and payroll requirements is critical for long-term success in the region. The legal landscape is nuanced, and penalties for non-compliance can be steep.
By partnering with a trusted China Employer of Record, you can eliminate legal uncertainty and operational delays. Whether you’re hiring your first employee or building an entire team, JSC helps you stay compliant while focusing on your core business.
