Employer of Record & PEO in China
Hire & manage teams remotely in China without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
How NNRoad Employment & PEO Services Work?
NNRoad provides professional employment organization (PEO) & employer of record (EOR) services for companies looking to hire and manage teams in China. Registering a legal entity in China as a means for employment is an outdated practice that takes both time (months) and money (thousands of USD). NNRoad’s employer of record and PEO services enables companies to hire and manage employees in India in full accordance with local labor laws in under a week.
Employer of Record in China
Employer of Record (EOR) services are for companies who do not have a legal entity in China, but who want to hire in China. Employment and full liability are outsourced to NNRoad.
➊ You interviews & select the candidates you want to hire in China.
➋ NNRoad arranges a local labor contract with your new employee.
➌ NNRoad arranges a service contract between your organization & NNRoad.
➍ NNRoad organizes, manages & processes payroll in China in full compliance with local employment laws.
➎ You maintain a normal working relationship and manage your team in China while NNRoad manages payroll & HR liabilities.
- Acting as the employer of record for your employees
- Recruiting service (if needed), including candidate search, screening candidates, interview, offer, negotiation and reference check, assistance with on boarding documents
- Hiring of and termination of employees/local labor contracts (contract administration – checking right to work legally in China, offer letter, appointment letter, relieving letter and experience/conduct certificate where necessary)
- On-boarding and off-boarding employees following local law practice
- Complete payroll solution and statutory benefit administration
- Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law
- Mandatory social security (provident fund and pension fund) compliance according to the local laws
- Statutory Benefits policy maintenance and updating on regular basis
- Maternity benefits management for expectant women employees
- Foreigner VISA application, if needed
- Income tax declaration administration (employee personal income tax reporting), if needed
Payroll & PEO in China
Professional Employment Organization (PEO) services are for companies who have a legal entity in China, and want to outsource their payroll. Employment liabilities are shared between your organization and NNRoad.
➊ You interviews & select the candidates you want to hire in China.
➋ NNRoad organizes, manages and processes payroll for your local employees in full compliance with local employment laws.
➌ You maintain a normal working relationship and manage your team in China while NNRoad manages payroll & HR compliance.
Setup and maintenance of payroll policies and templates
- Collection and review of raw information
- Payroll calculation from gross to net
- Payment disbursement
- Conduct online and offline formalities of mandatory benefits and employee tax (individual income tax) contribution
- Provide onboarding and off-boarding for new hires and exit employees
- Prepare and submit mandatory reports
- Handle employee tax annual filing formalities
- Keep and maintain records as required by local government
- Provide employee portal
Advantages of NNRoad's China Employment Services
- With EOR/PEO solutions you can manage client meetings, sales, quality control, marketing, R&D and customer support without a local company in China.
- Pay as you go
- Dedicated account manager – One point of contact for multiple locations
- Employment & termination processing
- Complete payroll solution and statutory benefit according to local laws
- With EOR/PEO solutions you can hire staff while waiting for the registration of your company in China.
- NNRoad only works with professional locally licensed partners
- GDPR compliant
- NNRoad manages employee record timekeeping, bonus and allowance, expenses claims and personal leaves according to local law.
- NNRoad provides foreigner VISA application services, if needed
Employment Compliance in China
Taxes & Payroll in China
Employee Income Taxes:
Individual income tax rates in China are based on progressive tax brackets.
Individual income tax in China is levied on both resident and non-resident taxpayers. A resident taxpayer who has the obligation to pay taxes in full must pay individual income tax on all income derived from sources within or outside China. The non-resident taxpayer shall pay individual income tax only on the income derived or sourced from China.
3%: 0 – 36,000 CNY
10%: 36,000 – 144,000 CNY
20%: 144,000 – 300,000 CNY
25%: 300,000 – 420,000 CNY
30%: 420,000 – 660,000 CNY
35%: 660,000 – 960,000 CNY
45%: >960,000 CNY
Yearly income = 1,000,000
45% * 40,000 = 18,000
35% * 300,000 = 105,000
30% * 240,000 = 72,000
25% * 120,000 = 30,000
20% * 156,000 = 31,200
10% * 108,000 = 10,800
3% * 36,000 = 1080
18,000+105,000+72,000+30,000+31,200+10,800+1080 = 268,080
Yearly income tax = 268,080 CNY
Employer Costs in China
Employers must pay income taxes based on the salary of their employees:
16%: Pension (capped at 26,500 CNY)
10%: Medical Insurance (capped at 29,700 CNY)
2%: Trade Union fee (if company has over 25 employees)
12.00%: Housing Fund (capped at 29,700 CNY)
2%: Medical Insurance
12%: Housing Fund
The social insurance system in China is a mandatory system of contributions from both employers and employees. The employer is responsible for withholding the employee’s contribution each month. The amount of the employer’s and employee’s contributions can vary depending on the city in which the contributions are being made.
The purpose of the social insurance system is to provide social security for employees in case of sickness, injury, work-related accidents, unemployment, or retirement. The system also provides benefits for families of workers who die while working.
There are several different types of social insurance funds in China, including the Basic Pension Fund, the Basic Medical Insurance Fund, and the Unemployment Insurance Fund. Contributions to these funds are used to pay for benefits such as pensions, medical insurance, and unemployment insurance.
The Basic Pension Fund is used to provide pensions for retired workers. The Basic Medical Insurance Fund is used to pay for medical expenses not covered by the social security system. The Unemployment Insurance Fund provides benefits for unemployed workers.
Employers are required to contribute to the social insurance system on behalf of their employees. The amount of the employer’s contribution is based on a percentage of the employee’s salary. The employee’s contribution is also a percentage of their salary, but the amount they pay can vary depending on their income level.
Both the employer’s and employee’s contributions are deducted from their salaries each month. The social insurance system is administered by the government and managed by local social insurance agencies.
Working Hours in China
Working Hours per Week
Full time employees in China typically work 40 hours per week and must have at least 1 day off per week at the minimum, although the typical 2 day weekend is the norm.
Overtime in China is allowed and must be compensated unless otherwise stated in the employment contract depending on the industry and type of work. The legal maximum overtime per day is 3 hours per day and no more than 36 hours per month.
996 in China
The 996 working hour system is a work schedule that is practiced by some companies in China. The name comes from the requirement that employees work from 9 am to 9 pm, 6 days per week, totaling 72 hours of work per week. This type of schedule has been adopted by many internet companies in China as their official work schedule. However, this system has been criticized because it violates Chinese Labour Law and has been referred to as “modern slavery.”
Benefits & Insurance in China
It is mandatory for Chinese employees to receive health insurance, a housing fund and a pension fund paid for by both the employee and the company.
Employees in China benefit from a pension fund. This is an employer cost set at 16 % of the employee’s salary (capped at 26,500 CNY per year).
The China pension system is composed of a number of different state-administered retirement benefits programs. The basic retirement benefits program is designed to provide retirees with a basic level of income to meet their needs in retirement.
The base pension portion of the benefit is equal to (the average of Social Average Annual Salary of the year prior to retirement time and the insured’s indexed salary) × years of contributions (including those regarded as contribution period) × 1%. The individual account pension portion is equal to the retiree’s individual retirement account balances divided by the number of months stipulated by the Government.
In order to receive these benefits, workers must have made contributions to the pension fund for a certain number of years. The normal retirement age is 60 for males and 55 for female workers.
China’s pension system is designed to provide retirees with a basic level of income to meet their needs in retirement. However, retirees should be aware that the benefits may not be enough to cover all of their expenses. Therefore, it is important to plan for retirement by saving additional money outside of the pension system.
Healthcare insurance is a mandatory employer cost set at 10% of the employee’s salary (capped at 29,700 CNY per year)
China’s health insurance system is a two-tiered system that includes both state-administered and pooled public medical care benefits. The state-administered benefits are for normal clinical expenses, copayments of critical illness and hospitalization expenses. The pooled public medical funds are used for reimbursement of critical illness and hospitalization expenses. There is a threshold of 10% of the local social average annual salary for reimbursement from the pooled public medical funds. The maximum benefits from the pooled public medical funds are four times the local social average annual salary. China’s health insurance system provides good coverage for citizens’ health care needs.
The housing fund is a mandatory employer cost set at 12% of the employee’s salary (capped at 29,700 CNY per year)
Termination Laws in China
Severance is mandatory in the case of termination of contract and in the event that a contract is not renewed. The severance package payout is 1 month’s salary per year of service and half a month’s pay if the employee has been employed for less than a year.
It is illegal for the employer to terminate labor contracts with laborers without a legal a procedure. If the employer proposes to terminate the labor contract through negotiation, the employer shall pay compensation. If the employer illegally terminates the labor contract, it shall offer the severance package.
Employers in Australia must provide employees with a minimum statutory notice period between 1-4 weeks in the event of termination.
- Employed for 1 year = 1 week’s notice
- Employed for 1-3 years = 2 weeks notice
- Employed for 3-5 years = 3 weeks notice
- Employed for more than 5 years = 4 weeks notice
Mutual Agreement Termination
Termination through mutual agreement in China is when the employer and employee mutually agree to terminate the relationship, but the employer generally provides severance payment to the employee in order to obtain employee consent on separation. For example, if an employer needs to downsize or restructure their business, they may reach a mutual agreement with employees to terminate their contracts. In these cases, employers will often provide severance payments as well as other benefits, such as outplacement services, to employees.
It is important to note that even in cases of mutual agreement, employees are still entitled to severance pay and other benefits under Chinese law.
Termination due to Fault
Termination due to fault or misconduct occurs when the employer terminates the employment relationship based on the employee’s material breach or other stated causes. This may include:
-If the employee has not satisfied employment conditions during the probation period.
-If the employee has severely violated the company’s rules or procedures.
-If the employee has committed a crime.
When an employer terminates an employee for fault or misconduct, notice and severance are not required. Depending on the company and situation, there may be different types of misconduct that warrant termination.
Public Holidays in China
There are seven official public holidays in China. The General Office of the State Council is responsible for announcing the holiday schedule about three weeks before the start of the year.
Public Holidays in China
- New Years Day – Jan 1
- Chinese New Year – Feb 1
- Qingming Festival – Apr 5
- Labour Day – May 1
- Dragon Boat Festival – Jun 3 – 5
- Mid-Autumn Festival – Sep 10 – 12
- Golden Week – Oct 1 – 7
Employment Contract in China
The contract must include aspects like employer and employee information, salary, working hours, leaves, employee’s responsibilities, duration of the contract, social insurance, work-related safety. The main type of contract used are: fixed-term employment contract and non-fixed term employment contract. The main difference is related to the duration of the contract.
Employers can put their employees on a probationary period to assess if employees are suitable for the role and business.
The maximum probation time allowed are as follow:
1 month for a 3 month to 1 year contract
2 months for a 1 to 3 year contract
6 months for a 3 to indefinite year contract
Types of Leaves in China
Paid Leave in China
Employees in China are entitled to 5 days paid annual leave after working for their employer for 1 year. Employees who have worked less than 10 years are entitled to 5 days paid annual leave. Employees who have between 10 – 20 years of experience are entitled to 0 days paid annual leave. Employees with over 20 years of experience are entitled to 15 days of paid annal leave.
The number of annual sick leaves allowed is pre-decided and written in the employment contract of the employee. In case of severe illness, employees with 1 year of employment are entitled to a sick leave of 3 months with an additional month of sick leave for every year working for the company, up to a total of 24 months of sick leave.
Maternity leave in China is normally 128 days with extra days in the following situations: In the case of a difficult or complicated delivery, 15 days are added. For each additional baby, 15 days are added.
In the case of a miscarriage in the first 4 months of pregnancy, the maternity leave is 15 days. In the case of a miscarriage after the first 4 months, the maternity leave is 42 days.
After the 7th month of pregnancy, the employee is entitled to a one hour break from work per day, usually going home one hour earlier.
Full-time employees who are new fathers are entitled to 10-15 days of unpaid leave (depending on the city) starting from the birth of their newborn child.
Leave taken as a result of a loss of someone in the employee’s immediate family or in the case of a miscarriage. Full-time employees in China are entitled to 1 to 3 days paid leave.
Immigration Laws in China
As of June 6, 2022, China has waived the special invitation letter requirement for work visas. All Chinese visa applications need a passport, photograph, health certificate, and official employment license from the Chinese authorities.
Foreign Employees in China must apply for a work permit and then use the work permit to obtain a work (Z) visa to work and reside in China.