How to hire employees in China

China offers foreign companies a compelling entry point into the world's second-largest economy. Massive consumer market, advanced manufacturing capabilities, growing tech ecosystem, and strategic position in Asia-Pacific supply chains.

But market size doesn't mean straightforward access.

China enforces complex, layered employment regulations with strict compliance expectations across national labor laws, provincial variations, and increasing scrutiny of foreign employers. Early missteps in contract structure, social insurance setup, or employee classification trigger costly disputes, regulatory penalties, and expansion delays that compound with every hire.

Hiring employees in China requires:

• Clarity on hiring models (entity vs. Employer of Record vs. contractor)
• Mandatory employer obligations under the Labor Contract Law
• Payroll tax structures and social insurance contributions
• Termination protections and notice requirements
• Legal distinctions separating compliant employment from misclassification risk

This guide walks you through each step: choosing the right hiring model, onboarding your first employee, managing payroll, navigating termination rules, and avoiding compliance traps that catch unprepared employers off guard.

Core truth: Hiring employees in China requires the right hiring model and strict adherence to local labor laws. One hire done wrong costs more than doing ten right.

What Are Your Employment Options When Hiring in China?

Before posting a job or signing an offer letter, decide how you'll employ talent. Foreign companies typically choose between three models: establishing a local entity, partnering with an Employer of Record (EOR), or engaging contractors. Each has distinct implications for compliance risk, cost structure, and operational control.

Entity setup → means full legal presence. Register a Chinese company (WFOE - Wholly Foreign-Owned Enterprise), handle all employer obligations directly, and bear complete liability.

EOR hiring → outsources employment compliance to a third-party legal employer while you retain operational control.

Contractor engagement → treats individuals as independent service providers, not employees. But only when the relationship genuinely reflects independence.

The stakes are higher than they appear. Misclassifying an employee as a contractor triggers back taxes, social insurance penalties, and reclassification claims. Setting up a local entity in China for hiring costs CNY 150,000–CNY 300,000 total, including registration fees, legal services, accounting setup, and regulatory approvals from the Ministry of Commerce (MOFCOM) and the State Administration for Market Regulation (SAMR).

Choosing the wrong model doesn't just slow hiring. It creates legal exposure that compounds with every additional hire.

1. Hiring Through a Local Entity

Establishing a Chinese entity gives you direct control over employment, payroll, and benefits administration. You become the legal employer. Full responsibility for Labor Contract Law compliance, tax withholding, social insurance contributions, and statutory filings.

This model makes sense when:

• You're committing to long-term operations in China
• Hiring at scale (typically 10+ employees)
• You need to own intellectual property and operational infrastructure locally

The trade-off: entity formation takes 4-6 months minimum, requires ongoing legal and accounting support, mandatory registered capital deposits, and locks you into administrative obligations even if hiring slows.

2. Hiring Through an Employer of Record (EOR)

An EOR becomes the legal employer in China while you direct the employee's day-to-day work. The EOR handles employment contracts, payroll processing, tax compliance, social insurance administration, and statutory filings.

You maintain operational control. They absorb legal liability.

EOR hiring suits:

• Companies testing the Chinese market
• Scaling quickly (hires live in days, not months)
• Expanding into multiple countries without establishing entities everywhere

It's not a workaround. It's a legitimate employment model under Chinese law, ideal when speed, compliance assurance, and low upfront cost matter more than direct entity ownership.

3. Hiring Independent Contractors

Contractors are appropriate for project-based work, specialized services, or genuinely independent engagements. Chinese law distinguishes employees from contractors based on subordination, exclusivity, and the nature of the working relationship. Not what the contract says.

Misclassification happens when companies treat contractors like employees:

• Setting their hours and work schedules
• Providing equipment and workspace
• Directing how work is done
• Maintaining exclusive relationships

Local Entity Vs EOR Vs Independent Contractor: Side-by-Side Comparison

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What Are The Legal Requirements for Hiring in China?

Chinese employment law is governed by the Labor Contract Law, which establishes employment contracts, working conditions, termination procedures, and employee protections. China's regulatory framework includes national laws supplemented by provincial and municipal regulations that vary significantly across regions.

Key employer obligations:

• Provide written employment contracts within one month of the hire date
• Register employees with the local Human Resources and Social Security Bureau (HRSS)
• Make monthly contributions to five mandatory social insurance funds (pension, medical, unemployment, work injury, maternity)
• Contribute to Housing Provident Fund
• Withhold individual income tax according to State Taxation Administration schedules
• Maintain accurate payroll and employment records
• Comply with maximum working hours (44 hours per week standard)
• Provide mandatory leave entitlements (annual leave, sick leave, statutory holidays)

Employment relationships are presumed indefinite after two consecutive fixed-term contracts or ten years of continuous service. Probationary periods cannot exceed six months and vary based on contract length.

China's enforcement environment is not theoretical. Local HRSS bureaus conduct regular audits. Employees can file complaints through labor arbitration committees. Non-compliance with payroll or contract standards results in financial penalties, back-payment orders, and potential business license suspension.

The presumption favors employee protection, not employer flexibility.

What Are the Employment Contract Rules in China?

Written, locally compliant employment contracts are not optional. They're legally required.

Verbal agreements or contracts not provided within one month of the hire date expose employers to double-pay penalties. The contract must be in Chinese, signed by both parties, and registered with local authorities before or immediately upon the employee starting work.

Types of Employment Contracts

• Fixed-term contracts specify a definite end date and are the most common initial contract type. These typically run 1-3 years and can be renewed once. After two consecutive fixed-term contracts, the third contract must be open-ended unless the employee requests otherwise.
• Open-ended contracts (indefinite-term) continue until lawfully terminated by either party with proper notice. These become mandatory after two fixed-term contracts or ten years of continuous service with the same employer.
• Task-based contracts terminate upon completion of a specific project or assignment. These are appropriate for clearly defined, time-limited work with specific deliverables.

Full-time employment follows a standard 40-44-hour workweek (8 hours per day, 5-5.5 days per week depending on industry). Part-time arrangements exist but carry specific hourly rate requirements and simplified benefit obligations.

Probationary clauses allow employers to assess new hires during the first 1-6 months (depending on contract length), with simplified termination rules during this window.

Probation periods are capped: 1 month for contracts under 1 year, 2 months for 1-3 year contracts, 6 months for open-ended contracts.

What to Include in an Offer Letter?

Employment offers must specify the job title, duties, reporting structure, and work location.

Essential contract elements:

• Contract term (fixed period or open-ended)
• Job position and duties
• Work location and hours
• Gross monthly salary and payment method
• Social insurance and Housing Provident Fund arrangements
• Working hours and rest periods
• Labor protection and working conditions
• Probation period (if applicable)
• Termination conditions and notice periods
• Dispute resolution mechanisms

Clarity matters. Ambiguous job descriptions or vague compensation terms create disputes during performance reviews or terminations. Chinese labor arbitration committees interpret contract ambiguities in favor of employees.

NDAs and Confidentiality Agreements

Confidentiality clauses are enforceable under Chinese law, particularly when protecting trade secrets, client information, or proprietary processes. Intellectual property (IP) created during employment typically belongs to the employer for work-related inventions.

Post-employment non-compete clauses are valid but must meet strict requirements: maximum 2-year duration, apply only to senior management/technical staff with access to confidential information, limited geographic scope, and require monthly compensation during the restriction period (typically 30% of prior monthly salary). Non-compete agreements without compensation are unenforceable.

Overly broad non-competes risk being struck down as unenforceable.

How Payroll Costs and Taxes Work in China?

China's labor cost structure varies significantly by region. But only if you understand the full employer burden.

As of 2026, China's average urban wage is approximately CNY 2740 per month, with regional minimum wages varying substantially. For example, Shanghai's minimum wage is approximately CNY 2,690 per month in 2026. Typical total employer costs for mid-level hires range from CNY 15,000 to CNY 40,000 per month, including gross salary and mandatory contributions.

1. Payroll and Salary Structure in China

Salaries are quoted and paid in Chinese yuan (CNY). Compensation typically includes base salary, performance bonuses, allowances (housing, transportation, meals), and mandatory benefits.

Employers must meet regional minimum wage thresholds, which vary by province and city tier.

2. Employer Payroll Obligations

Employers face substantial mandatory contributions totaling 28-40% of gross salary, depending on the province:

• Pension insurance: 16-20% of salary
• Medical insurance: 6-10% of salary
• Unemployment insurance: 0.5-1% of salary
• Work injury insurance: 0.2-1.9% of salary (varies by industry risk)
• Maternity insurance: 0.5-1% of salary (some regions have merged with medical insurance)
• Housing Provident Fund: 5-12% of salary (employer portion)

Social insurance contribution bases are capped at 300% of the local average salary and floored at 60% of the local average salary. Actual employer burden varies significantly by city: Beijing, Shanghai, and Shenzhen typically have higher rates than second and third-tier cities.

These contributions sit on top of the employee's gross salary. Not embedded within it.

3. Employee Tax Contributions

Employees contribute approximately 10.5-11% toward social insurance and Housing Provident Fund:

• Pension insurance: 8% of salary
• Medical insurance: 2% of salary
• Unemployment insurance: 0.5% of salary
• Housing Provident Fund: 5-12% of salary (employee portion)

Individual income tax (IIT) is withheld at source using progressive rates:

Annual income tax brackets (2026):

• CNY 0 – CNY 36,000: 3%
• CNY 36,001 – CNY 144,000: 10%
• CNY 144,001 – CNY 300,000: 20%
• CNY 300,001 – CNY 420,000: 25%
• CNY 420,001 – CNY 660,000: 30%
• CNY 660,001 – CNY 960,000: 35%
• Above CNY 960,000: 45%

Employees can claim deductions for special items (children's education, continuing education, housing loan interest, elderly care, serious illness) that reduce taxable income.

Total employee deductions range from 20-35% of gross salary, depending on income level.

4. Social Security Contributions

Both employer and employee contribute to China's unified social insurance syste,m covering five mandatory insurances plus Housing Provident Fund. Contribution rates and bases are set by provincial and municipal governments, creating significant regional variation.

Foreign employees can be exempt from Chinese social insurance if they have valid social security certificates from their home countries proving coverage under international agreements (China has bilateral agreements with select countries, including Germany, South Korea, and others).

5. Minimum Wage and Statutory Pay Requirements

Regional minimum wages vary substantially across China. First-tier cities (Beijing, Shanghai, Shenzhen, Guangzhou) have the highest minimums, while inland provinces set lower thresholds.

Shanghai minimum wage example: approximately CNY 2,690 per month (2026)

Beijing minimum wage example: approximately CNY 2,420 per month (2026)

Employers must also pay:

• Overtime premiums (150% for weekdays, 200% for rest days, 300% for statutory holidays)
• Annual leave pay (5-15 days based on tenure)
• Statutory holiday pay (11 national holidays annually)
• Sick leave pay (varies by tenure, typically 60-100% of salary)

In practical terms, employers should budget 30-45% above gross salary for statutory obligations. For professional roles, this puts the true monthly cost of hiring in China between CNY 15,000 and CNY 40,000, depending on seniority, role, and location.

How Employers Pay Employees in China?

1. Payment Methods

Salaries are paid via bank transfer to the employee's Chinese bank account. Payment must be made in Chinese yuan (CNY).

Cash payments are restricted and create significant compliance risks.

Payslips must contain:

• Gross salary and all components (base, bonuses, allowances)
• All deductions (individual income tax, social insurance, Housing Provident Fund)
• Net pay
• Pay period
• Employer and employee social insurance/fund contributions

Payslips must be provided monthly, typically electronically or in print.

2. Salary Payment Frequency

Payroll runs monthly, with salaries typically paid by the 15th of the following month for work performed in the prior month. Some companies pay on the last day of the current month.

Delays in payment beyond the agreed date breach the Labor Contract Law and give employees grounds for immediate contract termination without notice, with full severance entitlements.

How To Onboard Employees in China?

1. New Hire Onboarding Checklist

Register the employee with local HRSS and Housing Provident Fund Management Center before their first working day. Provide signed employment contracts, company policies, role-specific training materials, and access to payroll/benefits systems.

Onboarding essentials:

• Sign the employment contract within one month of the start date
• Register with the local HRSS bureau for social insurance
• Open a Housing Provident Fund account
• Register for individual income tax withholding
• Collect employees' social insurance registration documents
• Provide the company handbook and policies
• Complete workplace safety orientation
• Set up payroll and benefits access
• Assign a direct manager and clarify expectations
• Conduct pre-employment health examination (required for certain industries)

Schedule orientation sessions covering workplace health and safety (mandatory under Work Safety Law), data privacy policies, and reporting structures. Ensure the employee understands leave policies, overtime rules, and performance review timelines.

2. Required Employee Documentation

Chinese employment and tax regulations require employers to collect specific employee documents at the time of onboarding. These records support payroll processing, social insurance registration, and statutory compliance.

Documents you need from new hires:

• National ID card (for Chinese citizens)
• Passport and valid work permit/visa (for foreign nationals)
• Social insurance card or registration certificate
• Educational certificates and diplomas
• Previous employment termination certificate (from last employer)
• Health examination certificate (if required by industry)
• Bank account details for payroll (Chinese bank account)
• Photos for employment records
• Household registration (Hukou) information

Maintain signed copies of the employment contract, confidentiality agreements, and acknowledgment of company policies in the employee's personnel file. These documents become critical during audits or disputes.

What Are The Best Practices Of Interviewing and Hiring in China?

Chinese employment law prohibits discrimination based on ethnicity, race, gender, religious belief, disability, or infectious disease carrier status. Interview questions must focus on job-related qualifications and competencies.

• Avoid questions about marital status, family planning intentions, or health conditions unless directly relevant to the role's requirements and legally justified.
• Data privacy matters. Under the Personal Information Protection Law (PIPL), China's data protection regulation, candidate information must be collected with consent, stored securely within China (for certain data categories), and used only for recruitment purposes. Candidates have rights to access and correct their information.
• Document retention and processing justifications carefully.
• Chinese candidates value company reputation, career development opportunities, and work-life balance.
• Communicate hiring timelines, provide prompt feedback, and set realistic expectations about compensation and role responsibilities.

A sluggish or opaque hiring process signals organizational dysfunction.

Work Permits and Right to Work in China

1. Chinese citizens have unrestricted work rights and require no permits to work in China.

2. Hong Kong, Macau, and Taiwan residents require Mainland Travel Permits and employment registration, but have simplified processes compared to foreign nationals.

3. Foreign nationals require valid work permits issued by local HRSS bureaus and work-type residence permits issued by the National Immigration Administration before starting employment. China operates a points-based classification system (A, B, C categories) for foreign workers.

Common work authorization pathways:

• Category A (High-end talent): Top executives, specialized experts, innovative entrepreneurs
• Category B (Professional talent): Management, technical, and professional positions requiring a bachelor's degree minimum
• Category C (Unskilled workers): Temporary or service positions (very limited)

Key considerations for foreign national hires:

• Processing times: expect 1 to 3 months for complete work permit and residence permit process
• Employers must obtain a Foreign Employment License before an employee applies for a work permit
• Work permits tie employees to specific employers and positions
• Minimum requirements: bachelor's degree, 2 years relevant experience (for Category B)
• Age restrictions: typically 18-60 years old
• Annual quota limitations exist in certain regions

Hiring foreign nationals without valid work authorization exposes employers to fines (CNY 10,000-100,000 per violation), potential business license suspension, and employee deportation.

How Does Employment Termination Work in China?

1. Lawful Grounds for Termination

• Employers can terminate for cause (serious misconduct, gross negligence, criminal conviction, fraud) or without cause (economic layoffs, incompetence after training, fundamental contract changes).
• Termination for cause requires documented evidence and must meet one of the specific statutory grounds listed in the Labor Contract Law. Without-cause terminations require advance notice and severance payment.
• Employees enjoy extremely strong protections against unfair dismissal. Certain employee categories cannot be terminated (pregnant women, employees on medical leave, work-injury victims, employees within specified protected periods).

2. Notice Periods

Notice periods for without-cause termination:

• 30 days' written advance notice, or
• Payment of one additional month's salary in lieu of notice

During probation period: 3 days' advance notice. 

Fixed-term contracts expiring naturally require no notice but trigger severance if the employer does not renew on equal or better terms (unless the employee refuses renewal).

Both parties must provide written notice under Labor Contract Law provisions.

3. Severance Requirements

Severance pay is mandatory for most without-cause terminations, calculated as:

• One month's salary for each completed year of service
• Pro-rated for partial years (1/12 of the monthly salary per month worked)
• Capped at 3x local average monthly salary for high earners
• Based on the average salary of the previous 12 months

Examples:

• 3 years service: 3 months severance
• 5.5 years service: 5.5 months severance
• 10 years service: 10 months severance

Termination for cause (serious misconduct) requires no severance payment but demands strong documentation. Employers losing termination disputes face reinstatement orders or double severance payments (economic compensation).

Mutual agreement terminations also trigger severance obligations unless the employee initiates the discussion.

Employee vs Contractor Classification in China

Chinese authorities assess classification based on subordination, integration into business operations, economic dependence, and provision of tools/equipment. The Labor Contract Law presumes employment relationships when individuals provide labor with subordination characteristics. Contracts labeled "independent contractor" mean nothing if the working relationship resembles employment.

Misclassification consequences include:

• Retroactive social insurance contributions (28-40% employer share on all past payments)
• Back payment of Housing Provident Fund contributions
• Individual income tax adjustments and penalties
• Double-pay penalties for not providing written employment contracts
• Severance payments calculated from the actual start date
• Open-ended contract status after cumulative service periods
• Labor arbitration claims with a presumption favoring employee status

The "one contractor won't attract attention" myth dies fast when labor arbitration claims begin. Chinese labor arbitration committees heavily favor employees in classification disputes.

What Compliance Risks Should Employers Know When Hiring in China?

• Payroll non-compliance (incorrect tax withholding, missed social insurance payments, failure to register employees properly, or inaccurate contribution calculations) results in financial penalties, back-payments with interest, and potential business license suspension. HRSS bureaus and tax authorities conduct regular audits with increasing scrutiny of foreign employers.
• Contract violations (failure to provide written contracts within one month, missing mandatory clauses, unclear terms, or unregistered contracts) trigger double-pay penalties for the period without proper contracts and heavily favor employees in disputes. Labor arbitration committees presume employment relationships exist even with deficient documentation.
• Termination disputes arise when employers bypass proper procedures, fail to document cause adequately, miscalculate severance, or terminate protected employee categories. Chinese labor arbitration committees strongly tilt toward employee protection. Weak documentation guarantees costly settlements including double severance or reinstatement orders.

With urban unemployment at 5.1% (November 2025) and forecasted around 4.9% for 2026, talent competition remains intense in skilled segments despite youth unemployment (16-24, excluding students) at 16.9% with a record 12.7 million graduates entering the market. GDP growth projections of 4.5% for 2026 support selective hiring in technology and specialized sectors.

Compliance failures don't just cost money. They damage the employer brand in a market with structurally high labor force participation and growing employee awareness of labor rights.

How an Employer of Record (EOR) Helps You Hire in China?

An EOR eliminates entity formation delays, absorbs compliance risk, and handles payroll, tax, social insurance, Housing Provident Fund, and benefits administration.

What you gain with an EOR:

• Speed: Hires go live in days instead of months
• Certainty: Labor Contract Law adherence, contract compliance, accurate social insurance, and tax remittance
• Control: Employee reports to you, performs work under your direction
• Risk mitigation: EOR handles complex regional variations, contribution calculations, and changing regulations

EORs don't replace strategic workforce planning. They enable it.

• Testing the Chinese market without committing to entity setup costs? An Employer of Record (EOR) model makes sense.
• Scaling from 2 to 20 employees within six months? An EOR enables rapid, compliant growth.
• Hiring across multiple Asia-Pacific countries without setting up local subsidiaries? An EOR keeps expansion flexible and manageable.

The model works because it's legally recognized: the EOR is the statutory employer, you're the operational employer, and the employee receives full Labor Contract Law protections.

How Gloroots Simplifies Hiring in China?

When hiring in China through Gloroots, the entire process is managed for you end-to-end. You do not need to coordinate vendors, navigate local regulations, or manage administrative steps.

Gloroots runs the complete hiring workflow:

• Candidate sourcing, shortlisting, and background verification
• Initial screening to assess skills, experience, and role fit
• Interview coordination for final selection
• Offer issuance and compliant employment setup
• Statutory registrations (HRSS, social insurance, Housing Provident Fund, tax), payroll setup, and benefits administration
• Employee onboarding aligned with Chinese labor regulations

This model removes operational overhead entirely, allowing you to focus on building and managing your team while Gloroots handles hiring execution, compliance, and onboarding from start to finish.

Gloroots provides end-to-end EOR services in China, handling employment contracts, payroll processing, tax compliance, social insurance administration, Housing Provident Fund contributions, and statutory filings. Local compliance expertise ensures your hiring aligns with Labor Contract Law requirements, from contract drafting to termination procedures.

The platform combines self-service functionality (contract management, onboarding workflows, payroll visibility) with dedicated customer success support.

With Gloroots, you get:

• Audit-ready reporting
• Transparent cost breakdowns
• Finance-team-friendly invoicing with country-level detail
• GL mapping

Gloroots scales with you: whether hiring your first Chinese employee or expanding a distributed team across 140+ countries, the infrastructure supports growth without the complexity of multi-entity management.

It's not a vendor relationship. It's workforce infrastructure that adapts to your expansion strategy.

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Frequently Asked Questions

1. Can a foreign company hire employees in China without setting up a local entity?

Yes. Foreign companies can hire through an Employer of Record (EOR) without establishing a Chinese entity. The EOR becomes the legal employer, handling compliance, payroll, tax, and social insurance obligations while you direct the employee's work.

2. What are the legal requirements for hiring employees in China?

Employers must provide written contracts within one month of hire, register employees with local HRSS bureaus, make monthly social insurance (28-40% of salary) and Housing Provident Fund contributions, withhold individual income tax, maintain payroll records, and comply with Labor Contract Law provisions on hours, leave, and termination.

3. What taxes and social security contributions do employers pay in China?

Employers contribute 28-40% of gross salary toward social insurance (pension, medical, unemployment, work injury, maternity) plus 5-12% for Housing Provident Fund. Employees pay progressive income tax (3-45%) plus approximately 10.5-11% toward social insurance and Housing Provident Fund. Total employer cost for mid-level roles ranges from CNY 15,000 to CNY 40,000 monthly.

4. How long does it take to hire and onboard an employee in China?

Through an EOR, hiring and onboarding can occur within 5 to 10 business days. Establishing a local entity (WFOE) first adds 4 to 6 months for registration and regulatory approvals.

5. What is the easiest way to hire employees in China compliantly?

Partnering with an EOR is the fastest, lowest-risk path. The EOR handles contracts, payroll, tax, social insurance, Housing Provident Fund compliance, and benefits while you maintain operational control, eliminating entity formation costs and enabling hiring within days.

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