By Globalization PartnersNovember 2020
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As the world’s second-largest economy, China can be an attractive place for businesses in other countries looking to expand. Whether you want to open up a new sales office, manufacturing facility, or center for research, you’ll need to hire employees in China to join your team. We’re going to explain hiring practices in China to help you with this process.
Note that, while Hong Kong is part of China, it is a special administrative region with its own employment laws and business practices. If you’re interested in hiring employees in China, consult our guide to hiring employees in Hong Kong. For other cities and regions in the country, this guide will help you understand how to take on Chinese employees.
What to Know Before Hiring in China
Before you begin hiring new employees in China, you’ll want to develop a thorough understanding of the labor laws in China. Let’s take a look at some of the most important things employers should know before they take on Chinese employees. Keep in mind that working with an Employer of Record (EOR) can save you from having to understand the nuances of Chinese employment laws.
1. Languages Spoken
China is a diverse country with about 56 ethnic groups and close to 300 living languages currently being spoken. The official language of China and the most widely spoken language in China is Standard Mandarin, also called Standard Chinese, which is based on the Beijing dialect of Mandarin. After English, Mandarin is the second most widely spoken language in the world.
This is the language many Chinese businesses will use to communicate, though businesses in different regions may operate in their regional dialect of Chinese. For example, in eastern China, you may encounter the Wu Chinese dialect. Companies in English-speaking countries will appreciate the fact that around 10 million people in China speak English, though this is quite a small percentage of the total population. You should research the region where you plan to recruit and find out what language or dialect is most commonly spoken there so you can hire a translator if necessary.
2. Employment Contracts
Employment contracts are legally required in China. When hiring someone in China, you must present them with a contract and make sure they agree to it and sign it before starting work. The contract should include the employee’s and company’s identifying information, the job description, and the terms of employment, including the compensation in Chinese Yuan Renminbi and the benefits they will receive.
Make sure you consult an expert on labor law in China to ensure your contract includes all the necessary provisions. If you work through an intermediary company, they can provide their format for creating a contract or work with you to create a legally compliant contract and will help you set out clear expectations for your employees.
3. Working Hours and Minimum Wage
Labor law dictates that employees should not work more than eight hours a day and no more than 44 hours a week on average. A standard schedule for most offices is to be open from 8:00 a.m to 6:00 p.m., with employees breaking for two hours midday for lunch. When an employee works overtime hours during the workweek, they should receive at least 1.5 times their normal wages. On off days, that minimum goes up to two times their normal wages, and on holidays, it is three times their normal wages.
There is no universal minimum wage in China. Instead, it is up to provinces, municipalities, and autonomous regions to set their own minimum wages. Beijing currently has the highest minimum wage in China, set at 24 yuan per hour. Rural areas tend to have lower minimum wage requirements than metropolitan centers. There is no legal requirement to offer your Chinese employees an annual bonus, but most employees will expect it. It is customary to award a 13th-month bonus each year.
4. Statutory Benefits
In China, employees are entitled to five types of insurances:
- Health insurance
- Unemployment insurance
- Workers’ compensation
- Maternity benefits
- Pension plan
Another statutory benefit is the housing fund, which helps employees build up savings to purchase a home.
Both employees and employers must contribute to these funds. The rates of contribution vary depending on where your business is located and how much your employees earn. You may want to offer higher contribution rates to an employee’s housing fund or other benefits that go beyond the base requirements to appeal to top talent you want to recruit, especially if you’re going to convince them to leave their current job to join your company.
5. Holidays and Required Leave
There are seven public holidays where employees are entitled to a paid day off to celebrate. If one of these holidays falls on a Saturday or Sunday, employees should still receive a day off from work during the workweek. In addition to these required holidays, employers often give their employees some extra time off around Chinese New Year. An extra day or two around a holiday allows employees to travel to visit family or friends.
Chinese law also sets minimum requirements for offering employees vacation leave, though these minimums are lower than in many other countries. Therefore, you may want to offer vacation leave that exceeds the legal requirements. The amount of paid leave an employee gets depends on how many years they have worked.
After working for one year, employees get at least five days of paid leave. After 10 years, that minimum goes up to 10 days. After 20 years of work, an employee should get at least 15 days of leave. If an employee ends the year with unused leave and doesn’t want to carry it over, you must pay them double their daily wage for each unused day of leave. Employees also get sick leave, which can range from a few months to two years depending on the employee’s work history and length of service with your company.
The Cost of Hiring an Employee in China
Recruiting new employees is a financial investment, no matter where you’re hiring. There are some unavoidable costs involved with the hiring process, but these costs are worth it when you find the perfect candidate to join your team. When you’re hiring in China for the first time, you’ll run into some additional costs associated with hiring. In all, you should budget for:
- Establishing your business: You cannot directly hire employees in China as a foreign employer, so you need to establish an office or subsidiary of your company there. The most popular option for foreign companies is a wholly foreign-owned enterprise (WFOE). Establishing a WFOE usually means hiring a legal firm to handle the complexities of this process.
- Partnering with a FESCO: If you would prefer not to establish a legal business entity in China, then you’ll instead need to partner with an Employer of Record or, as it is deemed in China, a Foreign Enterprises Service Company (FESCO). Partnering with a third-party Employer of Record comes at a cost but will save you a great deal of time and other expenses.
- Going through a recruitment agency: Hiring through a recruitment agency can help you identify quality candidates in China and accelerate the process of hiring, but of course, partnering with a hiring agency entails a cost.
- Paying your hiring committee: If you don’t work with a recruitment agency, then you can instead handle hiring internally with a hiring committee. Your committee’s time spent on the hiring process will be a significant part of your hiring costs.
- Traveling to China: If you’re sending a hiring committee or other team members to China to set up an office there or conduct interviews, you’ll need to budget for travel costs.
- Hiring a translator: You will likely need a translator to help you with multiple stages of the expansion and hiring process. To help foster an ongoing relationship between your company and your Chinese employees, consider taking on a multilingual employee who can help both groups communicate with each other.
- Advertising job vacancies: Posting your job ad on various job boards can also add a bit to your recruitment costs. There are some sites, though, where you can post for free.
- Conducting background checks: If you need to conduct background checks of any kind to verify an applicant’s credentials, this can also add to your total hiring costs.
What Does a Company Need to Hire Employees in China?
There are some essential things you need in place before you can begin hiring new employees in China. This includes:
- A legal business presence: You will need to establish your business in China before you can hire employees. The three main options are a joint venture (JV), representative office (RO), and a WFOE. Most companies will need to establish a WFOE, which is a fairly drawn-out process in China.
- Registrations: As part of establishing your WFOE, you will need a business license, organization code, tax registration, social security registration, and statistical registration.
- Licenses or permits: As with many other countries, in China, you may need to obtain specialized permits or licenses to allow you to operate in specific industries or undertake certain business activities. Make sure you consult a local expert to ensure you have any necessary permissions you need.
If you partner with an Employer of Record to hire your employees, you won’t need any of these in place and can jump straight to hiring right away.
Steps to Hiring in China
Let’s turn our attention now to how to hire in China. This process follows a basic series of steps that you’re likely used to in your home country. However, some aspects of the process may be a bit different when you’re hiring internationally in China.
1. Share Job Ads
First, create a job ad for any vacant positions you want to fill and post them in various places online, including general job board sites and any job boards tailored to your industry. The most popular job board site in China is called 51job. Zhaopin and ChinaHR are two other popular options. China’s equivalent to LinkedIn has also taken off in recent years. Wherever you post your job ad, make sure the ad is in Standard Chinese or, for regional sites, the local dialect or language.
2. Evaluate Applications
Next, you should evaluate the applications that come in to create a shortlist of the most qualified candidates. Chinese job seekers typically focus on their resume rather than the combination of a resume and cover letter, so they may include more details about their work history on their resumes. Chinese resumes also typically include a lot of personal information you won’t see on resumes in western countries, such as the applicant’s date of birth, where they were born, and their marital status.
3. Conduct Interviews
Once you’ve identified your top candidates, you can begin to schedule interviews. If you’re hiring remote employees in China, you may want to conduct these interviews through a video call. Keep in mind that China’s firewall may not allow certain apps or websites, so you’ll need to make sure you use a video calling service that is available in both your country and China. You’ll also need to consider the time difference when scheduling virtual interviews. Despite its size, all of China shares one time zone: China Standard Time.
4. Make Offers
You may choose to do multiple rounds of interviews or employ other means to arrive at the best candidates for a job. Once you’ve chosen your top candidates, reach out to offer them a position with your company. Now is the time to negotiate things like salary and benefits. Remember that the employment contract is mandatory in China, so you will also need to create an employment contract that reflects all the terms you have discussed and have the employee sign it.
5. Onboard Your New Hire
Now you can welcome your new hires onto your team by having them fill out all the necessary paperwork to establish payroll and add them to your internal company systems. If you’re working with an Employer of Record, you won’t need to go through all this paperwork as the EOR will be the one to onboard your new hire and establish payroll for them. The EOR can also ensure all of this is done legally and complies with Chinese law.
Hire Employees in China With Globalization Partners
If you’re ready to start hiring employees in China and you want to skip the extensive time and expense required to legally establish your business in the country, Globalization Partners offers an ideal solution. We have a presence in China and 186 other countries across the world, so we can serve as your EOR wherever you choose to expand. We’ll serve as the Employer of Record for your Chinese employees and ensure that all aspects of their employment comply with the law so you can focus on helping your business succeed and making this new endeavor a successful one. Request a proposal to learn more.