Employ Candidates Compliantly in China

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  1. Overview: China
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Work permit for hiring expats via PEO
  5. Contractor vs. employee: which is better?
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Global HR Compliance in China

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in China Guide below will help you understand the nuances of labor legislation in the country.

Companies hire international workforce for various reasons but in most cases they are:

  • entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
  • hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.

Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.

If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of China, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in China and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.

We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in China.

Hiring and Firing Workforce in China Guide

You want to extend your business operations to China but have been thinking of how to go about it especially owing to the difficulties associated with entering a new market, setting up an infrastructure in the country of interest, global workforce employment, and so on. Here is the good news, you can go ahead with your business extension without having to set up an infrastructure, worry about the complexities and workforce employment and other challenges of entering a foreign market.

All you need to do is to sign on with the solution Acumen International has created just for you and the rest such as payrolling and other employer of record services, expats immigration services and HR compliance services will be taken care of. In the meantime, we have framed an easy guild that will help you understand what doing business in China entails.

# Employment contracts

All the long-term employment in China requires a written contract which should be concluded within the first month an employer and an employee agree to establish an employment relationship between them. This contract must be concluded in Chinese and possibly in English too.

In a situation, whereby the employer fails to conclude the contract within this one month, the employer is bind by law to compensate the employee by paying twice his/her statutory minimum wage, notwithstanding his decision to continue or terminate the employment dismiss. If for some good reasons the employee continues to a year without receiving the contract, then the contract will be considered an “open-ended employment contract”.

# Minimum (Statutory) Employment Rights:

# Hours of work:
The working hours per day and -week depends on the kind of business. Most companies and institutions are legally bound to implement an 8-hour working day and 40-hour working weeks. For such companies, any extra hour worked by an employee will require an extra compensation. If the company wants to change these working hours to an irregular or more comprehensive working hours, he must obtain a permission from the labor authority before he can do that.
Irregular working hours will mean that the employee does that have a fixed working time limit per day or week -he/she works as the job demands. Because of the different working-hour-system that is used in China, it is expedient that the employer agrees with the employee on the expected working hours at the onset of the employment relationship.

# Probationary period:
The length of an employee’s trial period depends on his/her contractual employment duration. Based on the statutory trail period, the maximum probationary period is 6 months and this is given to employees with at least 3 years’ contract. Employees with less than 3 years’ but up to 1-year contract can be given up to 2 months of probation while those with the contract from 3 months to 1 year can have about a month of trail before they can fully commence their jobs.
People that have a contract of fewer than 3 months, work part-time or have a contract that is assignment based cannot be given probation. It is important to note that there is a high tendency of the employers to exploit their employees by fixing a long trial period. However, to protect the employees from such situation, the government has set the maximum duration of probation. Also, the law ensures that a probation time cannot be extended.

# Annual leave
Annual paid leave in China excludes special days such as national holidays, parental leave, statutory rest days and so on. The length of an employee’s annual paid leave is subject to the aggregate years of experience the employee has. This experience is not limited the number of years or months the employee has worked for the current employer; rather extends to the years of experience from his/her previous employment. Annual paid leave is only given to employees who have worked for at least one year in the current employer.
While employees who have gained from one up to 10 years’ work experience are entitled to 5 days paid leave, those who have between 10 and 20 years’ experience are entitled to 10 days paid vacation. The highest annual paid leave – 15 days – is given to the employees who have over 20 years of work experience.

# Parental leave
Enjoyment of maternity leave benefits starts from the period when the pregnant employee need to go for her antenatal checks (usually from the twelfth week of pregnancy). In total, both local and foreign employees are eligible to 98-days paid maternity leave, starting from 15 days before the child is delivered. This number of days can be extended by 30 or more days depending on the region. For example, in Shanghai, an employee can be given an extra 30 days paid leave to her statutory 98-days while in Shaanxi employees can be given up to 60 days extra paid days. Other conditions that can affect the duration of a maternity leave can include but not limited to multi childbearing, pregnancy complications, late childbearing, etc. In general, China’s statutory paternity leave does not exceed two weeks. The amount of money that can be paid an employee on a maternity leave depends on whether she has signed in for maternity insurance or not. If she has, then her allowance will be considered as the highest average employees’ monthly salary for the period of one year or the average salary in the Bureau’s jurisdiction, if the formal is 3 times more than the Bureau’s set average. In this case, the allowance will be paid by the “Social Security Bureau” in lieu. Contrariwise, an employee who has not participated in a maternity insurance program is entitled to only her salary, which in this case will be paid by her employer.

# Sick leave
If an employee’s sickness or inability to perform is work-related, the employer should by law compensate the employee with a monthly sick allowance (up to one year) for treatment. In the case, where the cause(s) of the illness is non-work related the employee will be entitled to 3 to 24 months’ sick benefit (the actual length will depend on the how long the employee has worked for his/her employer and his/her total work experience).
Generally, an employee is compensated during his/her sick-leave period at 60 to 100 percent of his/her regular wage, depending on the employee’s seniority.

# Overtime
Unlike the working hours in many other countries, the number hours worked by an employee if somewhat rigid, as every extra hour to the statutory minimum puts the employer under to compensate. An employee is entitled to 150% of his/her wage if he/she works overtime during the working days, 200% – if he/she works overtime during the non-working days and 300% – during the national holidays.

# Statutory minimum salary
As different parts of China have very different standards of living, China does not set one minimum wage for the entire nation. Instead, the task of setting minimum wages is delegated to the local governments. Each province, municipality, or region sets its own minimum wage in accordance with its own local conditions.
For example, in Shanghai the monthly minimum wage was elevated by five percent in 2017, from RMB 2,190 to RMB 2,300, while the hourly minimum wage increased from RMB 19 to RMB 20.
Although Shanghai has increased its minimum wage each year since wage hikes were frozen in 2009, the five percent increase is lower than in previous years. Nevertheless, Shanghai still has the highest monthly and hourly minimum wages in China.
The exact amount and the date of payment should be agreed in the employment contract.

# Employment termination
Except for special conditions such as employee’s incompetence during or after the probationary period, break of serious rules which might cause damage to the company, unwillingness or inability to perform as a result of a major change(s) in the contract, employee’s criminal record, etc. an employer is obliged to provide the employee with a good reason for his/her termination, prior notice of 30 days or 3 days if it’s during the trial period and severance pay. Differently put, if the reason for an employee’s dismissal includes any of the mentioned, then the employer will have no responsibility to compensate the employee or give him any prior notice.
Most importantly a China employer must be able to show the proofs that any unilateral termination was based on statutory grounds.

Based on the labor law in China, an employer cannot terminate the contract of a pregnant employee who is on leave, or who has put to bed but is still breastfeeding her baby. This implies that even if such employee’s employment contract ends during any of these aforementioned periods, the employer cannot go ahead with the termination but will be required to extend the contract until the baby is a year old (i.e. after the employee has stopped breastfeeding her child).

Because an employee’s termination is strictly supervised by the trade union, any unfair or illegal contract termination will require that the employer either annul the termination or compensate the employee for damages.

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