How to Hire Remote Employees In 

China

The Basics

Currency
Chinese Yuan (CNY)
Employer Taxes
39.76- 41.12%
Payroll Frequency
Monthly
Official Language
Mandarin

Employment in 

China

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

China

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in China can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in China, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for China.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in China is not the same as paying workers in your own country. Employees have to be paid using China’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

China

 Specific Information

Working Hours

The standard workweek in China is 40 hours. Employees work 8 hours per day, 5 days per week.

Overtime

Limited to one hour per day, however, in special circumstances, can be up to 3 hours but limited to a total of 36 hours per month.

Overtime pay is 150% per hour for overtime during workdays, 200% per hour on rest days, and 300% per hour on official public holidays.  

Employees under flexible working hours are generally not entitled to overtime payment but it requires approval from the labor bureau.

Payroll Tax

Employer

Employer

  • Pension (maximum base is 28,017 CNY)
  • Unemployment Insurance (maximum base is 28,017 CNY)
  • Medical Insurance (maximum base is 28,017 CNY)
  • Injury Insurance (maximum base is 28,017 CNY)
  • Maternity Insurance (maximum base is 28, 017 CNY)
  • Housing Fund (maximum base id 28, 017 CNY)

Minimum Wage

The minimum wage varies depending on the region. The highest minimum wage is in Shanghai at 2,480 CNY per month. This is roughly double the minimum salary paid in provinces such as Hunan, Hubei, and Liaoning.

Payroll

Pay Cycle

There are no provisions in the law regarding 13th salaries. However, the common practice is to give an annual bonus equal to one months’ salary before the Chinese New Year.

13th Salary

There are no provisions in the law regarding 13th salaries. However, the common practice is to give an annual bonus equal to one months’ salary before the Chinese New Year.

Leave

Paid Time Off (PTO)

PTO is calculated by the:

  • Less than 1 year of employment- no leave entitlement
  • 1-10 years of employment- 5 days’ of annual leave
  • 10-20 years of employment- 10 days of annual leave
  • 20+ years of employment- 15 days of annual leave

Public Holidays

There are 7 public holidays, however, some regions have additional holidays.

Sick Days

The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:

6 months sick leave:

  • Less than 2 years of employment- 60% of the regular wages
  • 2-4 years of employment- 70% of the regular wages
  • 4-6 years of employment- 80% of the regular wages
  • 6-8 years of employment- 90% of the regular wages
  • 8+ years of employment- 100% of the regular wages

Over 6 months of sick leave:

  • Less than 1 year of employment- 40% of the regular wages
  • 1-3 years of employment- 50% of the regular wages
  • 3+ years of employment- 60% of the regular wages
  • Employees must provide a medical certificate.

Maternity Leave

A female employee is entitled to 98 days of maternity leave and an additional 15 days in the case of difficult labor or multiple births. Some cities offer additional maternity leave for women who give birth after the age of 23.

Maternity leave is paid by the Social Security Bureau in which the woman is registered and is based on an average monthly salary over the 12 month period before the birth. Social security will either pay this rate or 3 times the minimum wage, whichever is higher.  In some areas such as Beijing and China, the employer supplements the maternity pay with additional pay.

Paternity Leave

Fathers are entitled to 10 days if paid paternity leave, paid by the employer. In some cities, additional paternity leave is given.

Parental Leave

Nursing mothers are entitled to 1 hour off per day for children under the age of 12 months old.

Other Leave

None.

Marriage Leave

Each city follows its own laws, which vary between 3-10 days.  In Beijing and Shanghai, employees are entitled to 10 days’ marriage leave.

Bereavement Leave

Varies between cities and is between 1-3 days.

Termination

Termination Process

In China, it is difficult to terminate an employment contract unless by mutual agreement or if an employment contract expires.

Notice Period

The notice period in China is:

Advance notice is 30 days for both the employee and employer. However, if the employee is on probation, 3 days’ notice can be given.

Severance Pay

The Severance Pay in China depends:

Severance pay varies based on the reason for termination, but in general, severance is 1 month’s salary for each year of employment capped at three times the minimum wage, and cannot exceed 12 months.

Probation Period

  • For employment contract of 3 months to a year – a maximum of 1 months’ probation
  • For employment contracts of 1 to 3 years – a maximum of 2 months’ probation
  • For employment contracts of 3 years or more – up to 6 months’ probation
  • For employment contract for less than 3 months or that expire upon completion of assignment – probation is not permitted