International companies are eager to hire their first Chinese employee and work hard to draft employment contracts between their international company and their Chinese "employee". Many of them don't know such contract violate Chinese law.
Under Chinese law, only Chinese entities are allowed to have employees based in China. in addition, China does not generally allow for the hiring of independent contractors. If a person (as opposed to a legitimate registered business entity) is going to be performing employment-like services for you in China, that person is your employee and that means you must comply with all Chinese laws that go along with an employment relationship. This means if you are an International company selling widgets you cannot hire someone in China as your employee to sell widgets for you. This means if you are a computer software company, you cannot hire someone in China to do your coding for you.
Some companies hire the Chinese "employee" directly and just wire that "employee" his or her paycheck every month. Years ago, this sort of arrangement was pretty common, but it is becoming far less so as word is spreading that the Chinese government and tax authorities are very much on to this scheme and are quashing it. The problem with this set-up is that your client's "employee" is at some point going to have to explain to the Chinese government why it is that he or she is monthly depositing foreign currency into their bank account and why they are not paying taxes on this.
We have received a number of calls/emails from companies seeking our help in keeping their Chinese "employees" after they were told by their "employees" that the existing relationship must be discontinued.
Without spending a fortune and going through all the legal paper to set up a Chinese entity (WOFE, JV or Rep office), the only workaround is to have the proposed employee hired by a Chinese local company and then pay the "employee" through the Chinese company (plus an administrative fee).
Why choose a professional staffing company in China?
Other than obeying the Chinese law requirements, hiring a Chinese employee through a professional staffing company (instead of a regular local company)brings following benefits to the international employer:
- Payroll and Benefits
- Contracting and on-boarding
- Personal tax calculation and withholding
- Cash distribution
- Business expense reimbursement
- Monthly invoices and reminder
- Labor law advice and reminder
- Misc. HR issues
Engaing with us will
- Solve your HR headache and save your time
- Out of trouble with local Chinese law and labor regulation
- Save employee's time and engery handling his/her payroll
- Add a useful broker (custodial) between you and employee
- Satisfy your employee with timely pay and benefits
More information? Check out Staffing Process