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. Expand without a company set up
  6. 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 Agreements

China Labor Contract Law provided for three types of employment contracts, as follows:

  • Fixed-term employment contract – This type of employment contract establishes a contract for a certain amount of time, such as five or ten years.
  • Non-fixed-term employment contract – A non-fixed-term employment contract does not have a specific duration included in it.
  • Project-based employment contract – This type of employment contract is time-limited, but the time is connected to when the project is completed, rather than a specific date deadline.

#Employment Termination and Severance Pay (Dismissal)

From a legal perspective, terminating employees in China can be more difficult than expected. Employers should follow these steps to ensure full compliance:

  • Step 1 — Determine whether the termination is an early termination or not. If the employer chooses to terminate the employee prior to the expiration of the first fixed-term contract, this is considered “early termination” and certain additional requirements apply.
  • Step 2 — In case of early termination, the employer should attempt to negotiate an agreement with the employee, including the termination date, severance payment, and any other necessary details. This is often the safer option even if there are grounds for unilateral termination.
  • Step 3 — If unable to come to a termination agreement, consider whether there are grounds to support immediate termination for cause or a 30-day notice termination without cause, keeping in mind the statutory obstacles to such types of termination.

If none of the above measures can be adopted, then the termination is likely to be considered an unlawful termination and an additional severance payment might be required.

#Notice period

In China, an employee may unilaterally terminate his or her employment contract by giving a written notice 30 days in advance or 3 days in advance during the probationary period. On the other hand, an employer may unilaterally terminate an employment contract by giving a written notice 30 days in advance or providing one month’s salary in lieu of notice in certain circumstances:

  • the employee, after undergoing a legally prescribed period of medical treatment for an illness or non-work-related injury, can perform neither his or her original work nor other work arranged for him or her by the employer;
  • the employee is incompetent in performing the duties of his or her position and remains so after undergoing training or an adjustment of his or her position;
  • a major change in the objective circumstances relied upon at the time of conclusion of the employment contract renders the contract non-performable and, after consultations, the employer and the employee are unable to reach an agreement on amending the employment contract.

#Severance payments

If the employee was terminated under any of the following reasons, then the employer must provide him with severance pay:

  • Employee resignation due to the infringement of his employment rights by the employer;
  • Expiration of the contract of employment;
  • The employer and employee mutually agreed on the dismissal, with the former initiating the dismissal;
  • The termination was due to the bankruptcy of the employer;
  • Unilateral termination of the employee by the employer unless for cause, eg severe misconduct;
  • The termination was due to the revocation of employer’s license, voluntary liquidation or was ordered to close down;

#Employee Benefits and Contributions

Pursuant to national and local labour laws and regulations, employees are entitled to receive basic social benefits, including:

  • pension
  • medical insurance
  • maternity insurance
  • work-related injury insurance
  • unemployment insurance and the housing fund

In addition, employees have the right to enjoy:

  •  statutory holidays
  • paid annual leave
  • marriage leave
  • maternity leave, etc.

#Minimum statutory salary

The minimum wage in China varies based on what is set by each local government. This is changed annually or every two years based on the following:

  • Cost of living
  • Average wage levels
  • The particular region’s economic development level

#Probationary period

The China probation employment law associates the maximum term of probation with the duration of the employment contract. An employee can only have one probationary period. If the employer renews the employment contract, it cannot set up a new probationary period.  For example, the probation period would be as follows:

  • For an employment contract for less than three months – no probation period.
  • For an employment contract with no fixed term – up to 6 month probation period.
  • For an employment contract for three months to one year – up to 1 month probation period.
  • For a 2-year labor contract, max 2 months.
  • For 3-year or indefinite (open-ended contract), max 6 months probationary.

#Overtime

In some circumstances, an employer may extend the working hours of an employee after consulting with the trade union and the employee concerned. Specifically, hours can be extended to accommodate changes in production or business operations. Generally, however, overtime should be limited to one hour per day. In special circumstances, the overtime should be capped at three hours per day, provided that the employee’s health is not affected and the total monthly overtime does not exceed 36 hours.

#Work hours

The general principle is that the daily working hours should not exceed eight hours, and the weekly working hours should not exceed 40 hours under the standard working hour system. An employer must ensure that every employee has at least one rest day each week.

#Annual Leave

According to the government Regulations on Paid Annual Leave of Employees:

  • Employees who have worked between one and ten cumulative years are entitled to five days of annual leave.
  • Employees who have worked between ten and 20 cumulative years are entitled to ten days of annual leave.
  • Employees who have worked for more than 20 cumulative years are entitled to 15 days of annual leave.
  • If the employer fails to arrange annual leave for employees due to business reasons, the employer must pay an encashment to employees for such accrued but untaken annual leave.

#Sick Leave

During an employee’s sick leave period, his or her salary will be determined and paid based on the standard of sick pay and sick benefits during the medical treatment period according to state laws and local regulations. If an employee suffers from a non-work-related illness or injury and needs to stop working as a result of medical treatment, a medical leave between 3 and 24 months will be granted according to local regulations in the place where the employee works and based on the employee’s years of service. If an employee cannot perform his or her original work or other work arranged by the employer after his or her period of medical care expires, the employer has the right to terminate the employment contract and pay severance upon giving the employee a 30-days’ advance written notice or one month’s payment in lieu of notice.   In addition, subject to local regulations in different cities, the employer may pay medical treatment subsidies equivalent to 6 to 12 months of his or her salary based on the seriousness of his or her sickness.

#Parental Leave

Maternity leave

According to the Special Provisions on Labour Protection of Female Employees, pregnant employees are generally given maternity leave of 98 days, including 15 days of antenatal leave. An extra 15 days of leave may be granted if the employee experiences a difficult childbirth. Employees who give birth to more than one baby in a single birth will be granted extra maternity leave of 15 days for each additional baby.

Parental leave

While there is no national entitlement to paternity leave, local legislation generally provides male employees with some paid paternity leave. In Beijing, for example, the entitlement is 15 days, while in Shanghai, the entitlement is 10 days.

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