How to hire employees in China

Struggling to navigate China's complex hiring landscape? Uncertain about legal requirements and cultural nuances? Our comprehensive guide provides expert insights and strategies to streamline your hiring process, ensuring you attract top talent effortlessly.
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Engaging with China's job market presents an advantageous opportunity for enterprises ranging from sprawling multinational corporations to nimble startups. Notably, companies operating in China have the flexibility to recruit talent from Hong Kong, Macao, and Taiwan without the bureaucratic hurdles typically associated with foreign employment. Nonetheless, navigating the landscape of business expansion and the intricacies of hiring and workforce management predominantly requires proficiency in Mandarin, underscoring the importance of understanding local practices and legal frameworks.

This comprehensive guide delves into the myriad facets of the recruitment process within China, encompassing legal obligations, regulatory frameworks, strategic recruitment advice, and prevailing market trends. Grasping the essentials of how to effectively hire in China is instrumental for businesses aiming to bolster their presence on the global stage and tap into the dynamism of the Chinese economy.

How to hire employees in China

What you need to know before hiring employees in China 

Job market in China 

When delving into effective hiring strategies for China, it’s pivotal to consider key indicators that shed light on its recruitment landscape and compensation paradigms:

  • In 2023, China experienced a robust real GDP growth of 5.2%, with expectations of a 4.6% growth rate in 2024 according to the IMF. This growth underscores China's economic resilience and its position as a leading global economy.
  • There's a noticeable shift from an industrially driven economy to one that emphasizes services. This evolution indicates a maturing economy where the service sector increasingly dominates, contributing more to the GDP than manufacturing.
  • China's GRWI score, standing at 0.720, showcases its performance across four key areas: cybersecurity, economic stability, infrastructure development, and the newly added dimension of social safety criteria. This inclusion aims to assess the quality of remote work environments, marking a comprehensive evaluation of the country's readiness and adaptability in these critical sectors.
  • The rise in youth unemployment to 15.9% in 2023, a 1.1 percentage point increase from the previous year, highlights a significant challenge in the job market, particularly for young professionals.
  • China's substantial trade surplus, around 878 billion U.S. dollars in 2022, reaffirms its role as a leading manufacturing and export powerhouse, impacting global trade dynamics.
  • The shift towards a service-oriented economy opens new avenues for job creation and investment in sectors like technology, finance, healthcare, and more, offering a diversified landscape for employment.
  • China's commitment to technological advancement provides a conducive environment for digital innovation, making it an attractive market for tech-savvy professionals and companies focusing on cutting-edge projects.
  • The economic landscape presents vast opportunities for businesses to tap into China's growing service sector and technological infrastructure, leveraging the country's market potential for global expansion and talent acquisition.

China Hiring Trends

As we step into 2024, China hiring dynamics present a complex picture of challenge and opportunity, reflecting a labor market that is evolving amidst global and local economic pressures. This environment demands agility and strategic foresight from employers looking to navigate the currents of talent acquisition and organizational development effectively. The following are the hiring trends in China: 

  • While China's workforce remains a stronghold in manufacturing, there's a notable shift towards high-value sectors like technology, finance, and professional services, broadening the talent pool for these industries.
  • Recent policies aim to better protect female employees, potentially attracting more women into the workforce and promoting gender equality in employment practices.Facing a decline in the working-age population, China focuses on upskilling its labor force, emphasizing efficiency and higher skill levels to remain competitive.
  • Initiatives such as the “14th Five-Year Plan” Vocational Skills Training Plan underscore the commitment to improving vocational skills, employment, and entrepreneurship capabilities among workers.
  • The goal to increase the proportion of skilled workers to 30% by 2025 highlights a strategic shift towards fostering a more skilled and capable workforce.
  • The aftermath of the pandemic has ushered in a new era of work attitudes, with less emphasis on job loyalty and an openness among even satisfied employees to explore better opportunities. The aging population and decreasing working-age demographic are pushing companies to adapt their hiring strategies, focusing more on attracting and retaining skilled labor.
  • Data from the ACFTU survey reveals changing workforce dynamics, offering companies valuable insights into evolving attitudes towards work and new employment trends.
  • The shifts in China’s labor market, characterized by demographic changes and a new preference for employment types, play a crucial role in shaping the country’s industrial strategy and economic growth projections.

How to hire employees from China

1. Set up an entity in the country

Setting up a legal entity in China is crucial for tapping into its market, requiring choices like a Wholly Foreign-Owned Enterprise (WFOE) or Joint Venture (JV), and registration with Chinese authorities. Navigating China's complex regulatory landscape demands local expertise, with legal and tax consultations essential for compliance, especially in labor laws. Despite the challenges, a legal presence in China opens significant growth opportunities, provided companies engage in careful planning and leverage expert guidance to manage the intricate establishment process effectively.

2. Hire independent contractors

Working with independent contractors in China offers businesses the flexibility to hire professionals for particular services or projects, which is especially advantageous for short-term engagements or specialized tasks. It's imperative to accurately classify workers to steer clear of legal hurdles and penalties that come with misclassification. Yet, it's important to note that independent contractors in China might not exhibit the same commitment or loyalty as full-time employees, potentially affecting some business goals.

3. Partner with an EOR in the country

Partnering with an Employer of Record service, like Gloroots, presents a seamless entry into the Chinese market, bypassing the complexities of forming a legal entity. This strategy reduces liabilities and is cost-effective. Engaging with an EOR ensures adherence to Chinese employment laws, tax regulations, and compliance requirements, thereby mitigating legal risks and facilitating compliant business activities in China. It enables businesses to swiftly establish a presence in the Chinese market, capitalizing on local knowledge and resources with efficiency.

Employment Laws You Must Know Before Hiring in China

Managing compliance risk during the hiring process in China is essential for companies aiming to enter or grow within the Chinese market. Known for its strict and comprehensive labor laws that favor employee rights, navigating China’s regulatory landscape is crucial for any effective hiring strategy. Adherence to these laws is key to avoiding legal complications and financial repercussions. Collaborating with specialists such as Gloroots offers valuable insights and assistance, guaranteeing a hiring approach that is fully compliant with Chinese regulations.

Key Aspects of Chinese Labor Law

Employment Contract:

In China, an employment contract (劳动合同) is a fundamental component of the employment relationship, detailing the terms and conditions agreed upon by the employer and the employee. Chinese labor law emphasizes the protection of workers' rights, ensuring that employment agreements are fair and transparent. Below are key elements of employment contracts in China:

Types of Contracts

  • WFOE (Wholly Foreign-Owned Enterprise) Contracts: Often used by foreign companies to hire local employees, allowing them full control over operations.
  • Joint Venture Contracts: For employees working in enterprises co-owned by foreign and Chinese entities.
  • Fixed-Term Contracts: Specified duration contracts with a clear start and end date.
  • Open-Ended Contracts: Indefinite contracts offering greater job security, triggered after certain conditions are met, like consecutive fixed-term contracts or long-term service.

Mandatory Information: A Chinese employment contract must include vital details such as:

  • Identification of both employer and employee.
  • Detailed job description and the location of work.
  • Contract’s commencement date.
  • Specific type of contract (fixed-term, open-ended).
  • For fixed-term contracts, the exact duration and rationale.
  • Stipulated working hours and rest periods.
  • Remuneration details including salary and any additional benefits.
  • Stated notice periods and termination conditions.
  • Reference to the applicable labor laws and any collective agreements.

Working Hours:

In China, the typical work schedule consists of 8 hours per day and 40 hours per week, with the possibility of extending up to a maximum of 45 hours per week.

Overtime:

Overtime work exceeding the standard weekly hours must be compensated and is governed by the terms of the employment contract or collective agreements. Generally, employees are allowed up to one hour of overtime daily, with exceptions for special situations where it can extend to three hours per day, not exceeding 36 hours for the entire month. Overtime compensation is set at 150% of the regular pay rate for weekdays, 200% for weekends, and triples to 300% on public holidays, applicable across all positions, including those in management.

Minimum Wage:

In China, the minimum wage varies by region, with typical rates being 2,320 CNY in Beijing and 2,590 CNY in Shanghai.

Payroll laws in China

Payroll Cycle:

Payroll maintains a monthly payroll cycle, with employee wages paid by the last working day of each month, ensuring predictability for financial planning.

13th Salary:

In China, it's a common practice to award employees with a 13th or even a 14th-month salary as a bonus during the Lunar New Year or Spring Festival, as specified in the employment contract.

Employment benefits in China

Leave Policies in China 

1. Annual Leave (Vacation)

In China, the allocation of paid annual leave, which is over and above all public holidays, is determined by the duration of service as outlined in the employment contract. Employees do not qualify for paid leave during their first year of employment. Following this period, entitlement to paid leave begins, with employees receiving 5 days of leave after one to ten years of service. This entitlement increases to 10 days for those who have been employed for 10 to 20 years, and reaches a peak of 15 days for employees with over 20 years of service.

2. Public Holidays

 China observes 11 public holidays, with certain regions offering additional days off.

3. Sick Days

Sick Leave Entitlement Based on Years of Service:

Years of Service Sick Leave Entitlement
Less than 5 years Up to 3 months
5 – 10 years 6 to 9 months (region-specific)
10 – 15 years 12 to 18 months (region-specific)
15 – 20 years 18 months
More than 20 years Up to 24 months

Sick Pay Entitlement for Sick Leave of Fewer Than Six Months:

Years of Employment Percentage of Regular Wages
Less than 2 years 60%
2 - 4 years 70%
4 - 6 years 80%
6 - 8 years 90%
8+ years 100%

Sick Pay Entitlement for Sick Leave of More Than Six Months:

Years of Employment Percentage of Regular Wages
Less than 1 year 40%
1 - 3 years 50%
3+ years 60%

4. Maternity Leave

Region Total Maternity Leave Period
Chongqing, Guangdong 178 days
Tianjin 128 days
Henan, Hainan 190 days
Jiangxi, Hebei (for the third child), Zhejiang (for the third child) 188 days
Gansu, Heilongjiang, Fujian 180 days
Guangxi 148 days
Jiangsu 128 days
Other regions (including Beijing) 158 days

Additional Leave Entitlements:

Type of Leave Entitlement
Prenatal examination Doctor visits during the first 12 weeks
Difficult delivery Basic maternity leave + 15 days
Multiple deliveries Basic maternity leave + 15 days + 15 extra days per additional baby
Prenatal leave (from 7th month) Optional 1-hour daily break; 2.5 months with employer approval
Breastfeeding leave Two feeding periods per day (30 minutes each) for a child under a year; 6.5 months leave upon approval
Abortion or Miscarriage (within first 4 months) 15 days
Abortion or Miscarriage (after first 4 months) 42 days
Termination Protection During pregnancy and up to 1 year post-delivery is prohibited

Maternity Compensation:

Calculated by the Social Security Bureau based on either the employee's average monthly salary from the previous year or three times the local minimum wage, whichever is higher. This calculation varies by province.

5. Paternity Leave

In most areas, male employees are generally granted 15 days of paternity leave. However, the duration can differ based on the location. Cities and regions deviating from the 15-day standard include:

  • Tianjin, Shandong – 7 days
  • Shanghai – 10 days
  • Liaoning, Chongqing, Sichuan, Hunan – 20 days
  • Ningxia, Guangxi, Inner Mongolia – 25 days
  • He’nan, Jiangxi, Anhui, Yunnan, Gansu – 30 days

Filing tax in China

Income Tax:

In China, the income tax structure for employees is tiered, starting at a rate of 3% for annual incomes up to 36,000 CNY. This rate increases progressively across several brackets, reaching 10% for incomes between 36,001 and 144,000 CNY, 20% for the range of 144,001 to 300,000 CNY, and continues to escalate through higher income bands, peaking at 45% for earnings above 960,001 CNY. This progressive tax system is designed to ensure fairness, with the tax burden adjusted according to an individual’s capacity to pay, and supports the financing of public services and social welfare initiatives.

Other Tax and Social Security Contributions:

In China, employer and employee payroll contributions are structured to fund pensions, health insurance, unemployment, work-related injuries, and housing, varying by city. For example, in Beijing, employers contribute between 31.50% and 40.20%, while employees pay 15.5% to 22.5%. Shanghai sees employer contributions from 32.66% to 41.02%, with employees contributing 15.50% to 22.5%. In Guangzhou, employer contributions range from 26.85% to 35.05%, and employees' from 15.2% to 22.20%. These contributions reflect China's approach to social security, ensuring comprehensive coverage across various sectors, albeit with regional differences in the specific percentages and maximum salary bases for calculations.

Business culture in China

  • Chinese business culture highly values hierarchy, with a significant emphasis on respecting seniority and authority.
  • Building strong personal relationships, or "Guanxi," is essential for successful business operations, emphasizing trust and mutual respect.
  • Communication tends to be indirect and non-confrontational, with importance placed on reading between the lines and understanding non-verbal cues.
  • Decisions are often made through consensus, reflecting the collective nature of Chinese society and the value placed on group agreement.
  • Patience and a long-term perspective are key in business dealings, focusing on the long-term benefits and relationships over immediate gains.
  • Business interactions are formal, including practices like exchanging business cards with both hands, highlighting the importance of etiquette.
  • Punctuality is crucial and seen as a sign of respect and reliability in professional settings.
  • The exchange of gifts can play a role in building and maintaining business relationships, with attention to the appropriateness of the gift.
  • Negotiations may be lengthy, with initial offers considered starting points for discussion, requiring patience and flexibility.
  • Business often extends to social settings, with dinners and events serving as important components of the relationship-building process.

Top sectors to hire from in China

The top sectors to consider for hiring in China, based on their contributions to the GDP and growth trends, include:

Service Sector:

As the largest contributor to China's GDP at 54.6%, this sector is vibrant and diverse, spanning finance, tech services, e-commerce, and more. It's ideal for companies looking to tap into innovative services and digital markets.

Industry Sector:

Accounting for 38.3% of the GDP, the industry sector in China includes manufacturing, construction, and several sub-sectors focused on export and domestic markets. This sector is ripe for hiring skilled labor, engineers, and professionals in manufacturing processes and technologies.

Agricultural Sector:

Despite a smaller contribution of 7.1% to the GDP, agriculture remains significant due to China's large rural population and the sector's role in food security and export. Opportunities exist for agri-tech, sustainable farming initiatives, and supply chain management.

High-Tech and Innovation-Driven Industries:

China's shift towards high-tech and service-oriented economic models suggests growing hiring potential in tech industries, including AI, biotechnology, and renewable energy, aiming to lead in global innovation and sustainable development.

E-Commerce and Digital Services:

With China's robust digital infrastructure, the e-commerce sector offers vast opportunities for digital marketing, logistics, and customer service professionals, reflecting the country's push towards a more service-oriented economy.

Top cities to hire from China

Beijing:

As the capital city, Beijing is a hub for political, educational, and cultural activities. It's also a leader in technology and innovation, with numerous tech companies and startups, making it ideal for hiring in IT, digital media, and research and development.

Shanghai:

Known as China's financial and commercial center, Shanghai offers a talent pool in finance, international trade, and creative industries. Its cosmopolitan nature attracts multinational companies and professionals from around the globe.

Shenzhen:

Often dubbed China's Silicon Valley, Shenzhen is renowned for its rapid growth in technology, electronics manufacturing, and innovation. It's a prime location for hiring in high-tech industries, including software development and engineering.

Guangzhou:

This city is a key manufacturing and industrial hub in China, especially strong in automotive, electronics, and textiles. Guangzhou is also known for its trade fairs, making it a strategic city for hiring in manufacturing, export-import businesses, and logistics.

Hangzhou:

Home to Alibaba, Hangzhou is emerging as an e-commerce and tech startup haven. It's an attractive city for hiring in e-commerce, digital marketing, and tech startups.

Chengdu:

With a focus on electronic manufacturing, IT, and pharmaceuticals, Chengdu is also emerging as a center for finance and cultural industries. It's an excellent place for hiring in tech, finance, and creative sectors.

Nanjing:

Known for its strong educational institutions, Nanjing offers a pool of young, educated talent, especially in research, IT, and high-tech industries.

Tianjin:

A significant industrial and logistics base near Beijing, Tianjin specializes in aerospace, petrochemicals, and automotive industries, offering opportunities for hiring in manufacturing and engineering.

Hire in China compliantly with Gloroots

In China, Gloroots acts as an Employer of Record (EOR), providing a seamless approach to navigating the intricacies of the French labor market. Our EOR service streamlines the candidate onboarding process, ensuring a smooth transition into operational activities while complying with local and international standards. Tailored for businesses ranging from startups to large corporations, our platform offers a comprehensive solution for payroll, benefits administration, and tax compliance, without the necessity of establishing a local presence. This enables companies to efficiently expand their remote workforce within China To learn more about how Gloroots can assist with your hiring initiatives in China, please contact us.

Frequently Asked Questions

1. What are the key legal requirements for hiring in China?

Employers must formalize employment with a written contract, adhere to minimum wage laws that vary by region, and contribute to social insurance and housing funds for each employee.

2. How does the probation period work in China?

The duration of probation in China is contingent upon the total length of the employment contract, with specific limits set by labor laws. Employers are advised to specify the probation terms explicitly in the employment contract.

3. Can foreign companies hire directly in China?

Foreign companies can hire employees in China either by establishing a legal entity such as a Wholly Foreign-Owned Enterprise (WFOE) or by partnering with a local Employer of Record (EOR) service.

4. What is the process for terminating an employment contract in China?

Termination must comply with Chinese labor law, which protects employees against unjust dismissal. Employers need a valid reason, as defined by law, and may have to provide severance pay.

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