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China boasts a colossal talent pool. However, China’s labor laws, employment regulations, and cultural nuances can pose significant hurdles for foreign employers. By partnering with an EOR in China, employers gain access to local expertise and infrastructure, letting them seamlessly tap into the vast talent pool. An EOR in China serves as an intermediary, assuming legal responsibility for employing workers on behalf of the foreign company while ensuring compliance with local labor laws and regulations.
Unlocking the potential of the Chinese labor market requires a deep understanding of its labor laws. China has complex employment regulations, making it daunting for foreign employers.
China’s labor laws are heavily influenced by central laws and collective bargaining agreements. In addition to these, laws around sick leaves, benefits, wages vary with each province. For example, hourly minimum wages in Shanghai is set at RMB 24, while employees in Beijing must receive at least RMB 26.4 on an hourly basis. This is different to laws in the USA where minimum wages and other employment laws are set at the national and state level. Unlike the USA, labor unions are extremely empowered in China, and laws can keep changing with the demands of the union.
A China EOR/PEO provides expertise in navigating Chinese labor laws, ensuring legal compliance for your business. They handle employee contracts, payroll processing, tax obligations, and administrative tasks according to Chinese regulations. By partnering with a China EOR/PEO, you gain access to local knowledge, networks, and cultural understanding, facilitating business establishment and growth in China.
EORs in China base their pricing on two common pricing models: fixed pricing and percentage-based pricing.
In a fixed pricing model, the EOR charges a predetermined fixed fee for each employee or service provided. Companies with long-term goals to grow in China can partner with EORs following fixed pricing. Such a model allows employers to plan their hiring budgets when hiring talent in China. This fee typically covers administrative costs, compliance management, and employer contributions.
Alternatively, the percentage-based pricing allows EORs in China to charge a percentage of the employee's salary - 3% to 10% - as their fee. The percentage depends on various factors- the number of employees, specific services required, and the duration of the engagement. Such a pricing model suits companies with fluctuating or project-based workforce needs. However, this pricing model becomes unsuitable for hiring high-salaried employees. As opposed to a fixed pricing model where the costs are stable regardless of salary, the percentage-based pricing becomes heavy on the employer’s hiring budgets as they hire high-income employees.
Discuss with your EOR partner prior about cost arrangements before expanding in China.
Key Metrics For Foreign Indicators
With a massive market, dynamic economy, skilled workforce, innovation hubs, and supportive government policies, working in China is a gateway to success. Join the vibrant tech ecosystem, tap into a diverse consumer base, and experience a rich cultural heritage.
Source: The Global Talent Competitiveness Index 2023
Through the Gloroots' Recrew platform, you can discover amazing talent in the China and grow your team effectively.
Navigating the complexities of employee classification is crucial when operating in China. Misclassifying workers can lead to legal liabilities and financial penalties. To safeguard your business, partnering with a reputable PEO/EOR in China is a wise choice.
By engaging a PEO/EOR, you ensure compliance with Chinese labor laws, accurate employee classification, and seamless payroll processing. These experts handle comprehensive benefits and ensure that your workforce receives the legal protections and entitlements they deserve. Focus on your core business operations while entrusting employment-related obligations to trusted professionals in China.
EMPLOYMENT CONTRACT
Employers and workers must abide by the Labor Law of the People’s Republic of China .
According to China's Labor Contract Law, employers are required to provide their employees with a written employment contract within one month of their start date, with different regulations applying to part-time employees.
Employment contracts in China can be established for a fixed-term, indefinite term, or for the duration necessary to complete a specific assignment. The agreement should include, at a minimum, the following details:
1. Identification of both parties involved
2. Start date and duration of employment
3. Workplace location
4. Job description, including position, duties, and responsibilities
5. Basic salary and any additional compensation or benefits
6. Working hours
7. Total number of holidays
8. Social insurance coverage
9. Workplace safety and protective measures
10. Any additional legal requirements
Optional information that can be included in the contract relates to probation periods, confidentiality agreements, training arrangements, and other relevant provisions.
This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.
Get an overview of what you need to know when hiring in China. Contact us.
Overtime
According to Chinese regulations, employees may engage in overtime work under specific circumstances, but the duration should not exceed one hour per day, or three hours per day in special cases, while being limited to a maximum of 36 hours within one month. Compensation for overtime work is determined as follows:
Minimum Wage:
China’s national minimum wage varies by region. For example, Beijing’s minimum wage is set at 2,320 CNY per month, while Shanghai’s is higher at 2,590 CNY.
Annual Leave:
The number of paid vacation days an employee is entitled to depends on their tenure with the company. Employees who have completed one or more years of service receive five days of annual leave. For employees with a tenure ranging from ten to twenty years, their annual leave increases to ten days. Those who have been with the company for more than 20 years enjoy a generous entitlement of 15 paid days off each year.
Maternity Leave and Paternity Leave
China's legal provisions for parental leave underwent a reform in 2016, resulting in an extension of the basic maternity leave entitlement of 98 days. The duration of maternity leave can vary by province, with some provinces offering an additional 30 days. More recently, in November 2021, certain provinces, such as Shanghai and Beijing, have introduced even more generous maternity leave policies, extending the duration to 158 days.
During maternity leave, employees receive maternity benefits from the Chinese social security agency. Depending on the province, employers may be required to contribute to maternity allowances.
While there is no national law mandating paternity leave, fathers in China can claim paid leave following the birth of their child under provincial regulations. Most provinces grant fathers up to 20 days of paternity leave. In some regions, there is even the option for the mother to transfer her unused maternity leave to the child's father.
It's important to note that specific parental leave entitlements and requirements may vary by province, and employers should consult the relevant local regulations to ensure compliance with the applicable provisions.
Sick Pay:
In China, the entitlement to sick leave and sick pay is determined based on the employee's tenure with their current employer and their overall work experience. The duration of sick leave can range from three months to 24 months, while the rate of sick pay varies between 60% and 100% of the employee's regular salary. The specific sick leave entitlements and corresponding pay rates are outlined in the following table:
Income Tax
Note: CNY stands for "Chinese Yuan," which is the official currency of China.
Other Taxes and Social Security Contribution
Employer Payroll Contributions
Employee Payroll Contributions
Please note that the contribution rates and components may vary depending on the specific location in China. The example provided here is based on the rates in Shanghai.
Termination Process
China does not follow the "at-will" employment principle. This means that employers must have a justified legal reason to terminate an employee.
Valid grounds for termination include:
- The employee does not meet job requirements during the probation period.
- The employee seriously violates company policies or rules.
- The employee engages in misconduct, such as gross negligence or corruption, causing significant damage to the employer.
- The employee takes another job that interferes with their current role.
- After a designated medical treatment period, the employee is still unable to return to their original position or take on a new role.
- The employee remains unfit for the role even after training or reassignment.
- The company is undergoing restructuring, downsizing, or bankruptcy.
Employers may also end a contract through a Mutual Termination Agreement, which includes negotiated severance, no less than the statutory minimum. For unilateral terminations, the employer must notify the trade union (if applicable) in advance and provide a valid explanation for the decision.
Notice Period
In China, employers or employees must give 30 days’ written notice for termination. No notice is needed for misconduct or probation failure. During probation, employees can resign with 3 days’ notice. Employers may also offer pay in lieu of notice.
Severance Pay
In China, severance pay equals one month’s average wage for each year of service, rounded up to the nearest half or full year. If an employee's wage exceeds three times the local average, severance is capped at 12 months, calculated using the employee’s average salary over the past year. Gloroots ensures accurate, compliant severance calculations aligned with local regulations.
Probation Periods
In China, probation periods are regulated based on contract type and duration. For indefinite-term contracts, the maximum probation period is 6 months. For fixed-term contracts, it varies:
- 3 months to 1 year: up to 1 month
- 1 to 3 years: up to 2 months
- Over 3 years: up to 6 months
Only one probation period can be set per employee. If an employer terminates the contract during probation, they must clearly communicate the reason to the employee.
With Gloroots, you can confidently structure contracts and manage probation terms in full compliance with Chinese labor laws.
When hiring globally, ensuring compliance comes with its own set of battles. Employers must ensure all hiring and onboarding activities adhere to employment laws, payroll procedures, DE&I compliance, GDPR and similar data protection, etc. If you think it is hard to set up local entities and start hiring, keeping up with a dynamic compliance landscape is far harder.
Gloroots helps you minimise all these efforts by providing a single window to manage all these tasks. Our in-house experts fully shield you from cross-border employment and payroll compliance risks. They do this by helping you with generate employment contracts, make on-time payments, offer compliant benefits, while you focus only on screening talent.
Our promise is a stress-free global employment experience for both you and your employee.
Contact our experts today to kickstart your global hiring campaign.

Employers in China must have a local legal organization and utilize local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in China makes compliance with employment laws demanding.
With Gloroots' global Employer of Record (EoR) service, you can let Gloroots handle the heavy lifting of payroll, tax, benefits, and compliance, allowing you to concentrate on what matters most: your employees and company growth.
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