Expand your business into China - without an entity
New Horizons provides global employment solutions for businesses wanting to hire workers in China. Through our China PEO & Employer of Record, we manage your company’s payroll, benefits, and expenses in China. Additionally, we oversee HR duties, as well as employment and tax compliance.
New Horizons will act as your workers’ China Employer of Record, which means you can begin doing business in China without a local entity. This not only allows your business to go to market faster, but also has the potential to save your business thousands in expansion costs.
As the only China PEO & Employer of Record with an in-house recruitment team, New Horizons will source, hire, and onboard your China workforce. We hire employees in accordance with China’s labor regulations and coordinate all expense claims and benefits payments. Although we act as your employees’ Employer of Record, you still maintain full autonomy and control over all employees.
Our China PEO simplifies your expansion
New Horizons enables your business to expand its operations into China – without setting up a legal subsidiary.
Labor Laws in China
Employment contract types
China requires all employers to provide a compliant employment contract that states the employee’s compensation, benefits, and termination requirements. Employment contracts in China should state the salary and any additional compensation in the local Chinese Yuan Renminbi.
By partnering with our China PEO & Employer of Record, New Horizons’ team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
Working hours in China
The People’s Republic of China operates with a standard five-day working week that should not surpass 8 hours of work per day or 44 hours per week. Companies typically run on an 8am to 6pm schedule with a one-hour lunch break.
Chinese national holidays
China has 7 national holidays that are celebrated annually:
New Year’s Day
Spring Festival Holiday
Chinese Coronavirus Public Holiday
International Women’s Day
Ching Ming Festival Holiday
Labour Day Holiday
Dragon Boat Festival
Dragon Boat Festival Holiday
Mid Autumn Festival, Chinese National Day
Chinese National Day Holiday
Chung Yeung Festival
Foreign employees in Shanghai are not yet required to pay the Chinese social security for foreign nationals. In other cities in China, foreigners must pay the full amount of Chinese social insurance.
Paid time off
The amount of paid time off employees are eligible to receive is based on how long they have been employed at their current company:
Sick leave in China
Employees are entitled to between 3 and 24 months paid leave to address medical ailments and treatment. The exact amount of time off will be based on how long the employee has been with the company. Sick pay should never drop below 80% of the local minimum wage.
Workers compensation for injuries or illnesses incurred while working cover employees with legal entitlements of up to one year’s leave at full pay to receive medical treatment.
Take a look at the chart below to learn more about the specifics of sick leave standards in China:
Less than 6 months of sick leave
(percentage of regular wages owed to the employee)
- Under 2 years of employment – 60%
- 2-4 years of employment- 70%
- 4-6 years of employment- 80%
- 6-8 years of employment- 90%
- 8+ years of employment- 100%
Over 6 months of sick leave
- Under 1 year of employment- 40%
- 1-3 years of employment- 50%
- 3+ years of employment- 60%
In order for employees to receive the full wages due to them, workers must present a valid medical certificate from a certified doctor to their employer.
Maternity leave in China
China provides all female employees with 98 days paid maternity leave. They have the option to begin this leave within 15 days prior to child birth. Depending on the city, women over the age of 24 are generally provided with an additional 30 days for their “late maternity leave.”
Women are traditionally granted full pay during their leave, which is either paid through social security or by their employers. China has laws in place that legally protect women from being terminated while pregnant or breastfeeding a newborn child.
The laws for paternity leave differ greatly by location, but typically do not exceed 14 days. Men in Shanghai usually receive 3 days of paternity leave while men in Shenzhen are typically granted 10 days.
Termination & severance in China
In order to terminate an employee in China, there must be strong cause for dismissal and clearly documented grievances leading up to the termination. The initial employment contract must contain an agreed upon probationary period that can last up to six months in length.
Specific time requirements for submitting a notice of termination vary widely by industry. Any employer terminating an employee of between one month and two year’s tenure must provide at least one week’s notice. Employees working for a company for over two years require notice of one week for each year of completed service up to 12 weeks of notice.
Employers have the option of including “payment in lieu of notice” in employee contracts which permit employers to pay employees instead of providing them with a notice of termination. This is common in Chinese business practice.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ China PEO can mitigate risk for foreign companies and provide guidance through this process.
China's tax laws
Chinese employees are provided with statutory benefits for the “five insurances” practice in China. These include health insurance, pension, worker’s compensation, maternity benefits, and unemployment insurance. However, additional benefits, such as housing, are predicated by the income tax bracket of the individual employee.
Individual income tax
China’s New Individual Income Tax Law
Effective as of January 1st 2019, China has adjusted tax brackets and changed residency rules in order to reduce the tax burden on low income earners, with new special additional deductions available for resident tax payers.
The Individual Income Tax is calculated on an annual basis. New Horizons will automatically withhold taxes in advance on a monthly basis on the accumulated income and deductions. Individuals may have additional taxes or tax returns to claim through the annual settlement process.
Standard health and pension insurance is provided through the national system, although supplementary health insurance can be provided to the employees.
Compensations & benefits
China compensation laws
The minimum wage in China varies greatly between provinces and cities. In Shenzhen, the minimum wage is 1,808 yuan per month. This is only slightly less than Shanghai, which has a monthly minimum wage of 1,820 yuan. However, in Guizhou, the monthly minimum drops significantly to 1,030 yuan. In nearly all circumstances, employers pay employees via cash or bank transfers.
New Horizons China PEO can provide expert guidance to help simplify the process of expanding into China.
13 month salary in China
The 13th month salary is the standard type of bonus provided to employees working in China at the end of the year. Rewarding employees with the 13th month salary is extremely common in China. As such, we recommend being clear with the employee during the employment contract phase so the employee is aware of the bonus stipulations regarding their annual salary and bonus structure.
Chinese employees are provided with statutory benefits for the “five insurances” practice in China. These include health insurance, pension, worker’s compensation, maternity benefits, and unemployment insurance.
They are all funded through social pooling, formed from payments made by the state, employer and employee, to varying degrees. Entitlements are then acquired through contribution.
However, additional benefits, such as housing, are predicated by the income tax bracket of the individual employee. China’s housing fund system allows Chinese employees to save money towards purchasing their own house, thus providing a way for local employees to have the means to ensure social security and stability in the country. The Housing Fund has no social pool, since the entire amount goes directly to employees’ personal Housing Fund accounts.
In China, companies are responsible for withholding social insurances and housing fund contributions from their employees’ salaries.
Employees in China receive a housing fund from their employers as part of their employment benefits. Chinese employers are mandated to contribute between 5% and 25% of an employee’s annual salary to this fund. The purpose of this fund is to provide a subsidy to the employee’s rent or housing purchasing expenses. It is common for employees to negotiate a higher housing fund percentage than is federally required.
The calculation basis of the corresponding social insurance and housing fund contributions are subject to annual changes by the Chinese Labor Bureau.
China benefit management
As well as standard Chinese compensation laws, there are a host of guaranteed benefits and supplemental options available to employees. As China celebrates seven national holidays, the statutory minimum notes that employees be paid leave for each holiday. And while this is the statutory minimum, there are a number of employers that elect to provide employees with greater flexibility around holidays like the Chinese New Year.
In addition to national holidays, annual vacation is another form of benefits management in China. Depending on how long an employee has been with an organization, there will be a set number of vacation days each year. In China, vacation days follow the following criteria:
Chinese benefits administration outsourcing
In relation to benefits management in China, there are two options that employers can choose from:
Benefits & compensation restrictions
For foreign employers, it is paramount they understand employment legislation that relates to the Chinese market. Companies need to comply with standard benefits and compensation restrictions that include minimum wage, working hours, and annual vacation time.
New Horizons will help your business to stay compliant with employment regulations and ensure that your employees receive their entitled benefits and compensation.
Frequently asked questions
New Horizons can hire employees of all nationality as long as their profiles match with the requirements established by the Chinese immigration authorities.
New Horizons can hire your staff everywhere in China through its PEO network of local entities specialized in HR management services.
New Horizons prepares all payroll calculation (including social charges, taxes, benefits, expenses claim, etc.) on your behalf – as the employer of records of your employee(s) in China. All procedures, from onboarding to termination, are handled by New Horizons and only require your validation.
All mandatory social charges contributions, housing fund contributions and income tax payments are paid directly to the Chinese authorities and relevant third-parties by New Horizons. Both the foreign company and its employee(s) can access the records of all payments at any time.
The number of employees dispatched in China is not limited and can vary according to the ongoing projects and business development.
All mandatory payments stated on the labor contract shall be paid by New Horizons. Additional payments (e.g. expenses) can be reimbursed by new Horizons on your behalf.
No severance pay has to be paid during the probationary period, then the amount of the termination pay is usually 1 or 2 months salary per year of seniority, depending on the labor contract nature and the reason for termination.
In China, work from home is authorized as long as the employer gives its approval. Nonetheless, the employer shall ensure the maintain of a local office space available for the staff at any time, while keeping New Horizons informed.
New Horizons provide China recruitment services and PEO services, available for both foreign and local professionals from any background.
New Horizons can implement any changes directly with the employee on your behalf.
The overall salary package of employees in China includes base salary, top-ups and any benefits. The key elements include:
- Base Salary
Optional 'top ups', such as a performance bonus, commission or remote work stipend
'13th month' salary
Compulsory benefits including leave entitlements, the five social insurances and contributions to the housing fund
Additional (optional) health insurance.
When expanding internationally, it is crucial to calculate what the total cost per employee (the 'payroll cost') will be. In China, this means adding together the cost of net salary, employer and employee social insurance contributions, any additional allowances and income tax.
Paid public holidays in China are:
- New Year’s day (1 day paid leave)
- Chinese New Year (3 days paid leave)
- Qing Ming Festival (1 day paid leave)
- Labor Day (1 day paid leave)
- Dragon Boat Festival (1 day paid leave)
- Mid-Autumn Festival (1 day paid leave)
- China National Holiday (3 days paid leave).
Special rates apply if organizations require staff to work on public holidays.