Many companies wish to expand to the Chinese market due to the strong economy, large market
Through outsourcing qualified Chinese employees, companies can hire employees in China who have a specific skill set and who are familiar with the local culture and work environment. Nevertheless, hiring Chinese employees through outsourcing still involves various regulations.
Using an experienced PEO like New Horizons Global Partners can allow a company to enter this promising market while maximizing its return on investment and minimize capital outlays. We help our clients enter the Chinese market quickly and handle all of the complications with local bureaucracies.
Regulations When Companies Hire Chinese Locals
The Chinese government has strict rules related to how foreign companies can hire Chinese workers.
If a foreign company does not have a legal entity in China, it is not legally permitted to directly hire an employee in China. Only companies based in the country are permitted by the Chinese government to hire Chinese workers.
If an individual provides professional services for your company and performs services similar to services an employee would provide, the individual is typically considered a China employee and the foreign company is required to comply with all labor and tax regulations related to establishing an employment relationship in China.
Alternatives to Establishing a Legal Entity in China
Establishing a legal entity in China like a wholly foreign-owned enterprise or joint venture in China can help your company receive the same type of legal recognition as companies based in the country. However, not all businesses are ready to make this leap. They may want to test the market or establish a team on the ground that can help gain momentum for the company or establish business relationships.
Chinese companies like New Horizons Global Partners can help provide the local workforce while minimizing the capital investment requirements and bureaucratic hassles.
The practice of hiring companies or employees in other countries is known as employee leasing or using the services of a Professional Employer Organization (PEO). With this arrangement, foreign companies can find top talent across the Asian market without having to go through the hassle or make such capital contributions that are necessary when establishing a legal entity or subsidiary in China.
The Chinese company is considered the legal employer of record, so the foreign company does not have to worry about compliance matters such as tax, licensing and regulatory rules. The Chinese company handles these responsibilities while the foreign company is able to tap into the company’s resources to find the most qualified staff available for the job.
New Horizons Global Partners’ business model allows you to add team members to your company’s global workforce so that you can emerge in a new market and establish a global presence. You can enter an emerging market within days. In addition to helping you find key members to add to your team, we also assist with the human resources responsibilities, including:
- Contracts – We use compliant labor contracts that have been successfully accepted by local labor organizations. We implement strong contract terms and best practices to establish clear employment relationships.
- Tax – We can help advise you on all tax matters related to operating your business in the Chinese market
- Compliance – New Horizons Global Partners can help you remain compliant with local labor and governmental agencies while managing the administrative duties of your local employees
- Payroll – We help with all aspects of payroll, including making salary payments, managing leave days and handling declaration and reimbursement.
If you want to establish a local presence in China but do not want to go through the time and expense of establishing a Chinese company, hiring Chinese employees from a China-based staffing agency is your best option.
This option allows you to hire employees for limited roles if you want them to work on time-limited projects or tasks. You can also hire employees for long-term roles.
New Horizons Global Partners provides PEO, human resources and accounting services to clients who do not have legal entities in China. We help companies find the talent they need through a convenient forum that respects foreign companies’ time and investment.
Problems with Other Chinese Employment Workarounds
There are a few other workarounds for hiring China employees, but they have significant drawbacks that make them unattractive options, including the following:
Have the Employee Hired by a Chinese Company
One option is to have the person you intend to serve as a Chinese employee hired by another company. Under this arrangement, you pay the Chinese company the equivalent of the employee’s wages and the costs to administer the employment relationship. However, this arrangement is not legally recognized by the Chinese government. It can potentially run afoul of Chinese labor laws.
Additionally, it can create confusion regarding who is the actual employer and to whom the employee should be loyal. The employer’s intellectual property may not be as protected through this method because another employer will have access to it through the Chinese employee.
Many companies that have used this method have come to regret it. Most foreign companies avoid this option because they consider it too risky and can jeopardize their company’s reputation and the reputation that it may later want to establish with foreign government agencies.
Hire a Chinese Employee Tied to a Local Chinese Company
One antiquated option is to hire a Chinese employee who is already tied to a local Chinese company. However, this option also has its drawbacks.
The local company can run into problems with the Chinese government, which may see that it is receiving monthly deposits in foreign currencies. The company may also face tax penalties if no taxes are paid on these contributions
Have a China Employee Form Their Own Company
A final option is to have your employee in China form their own domestic Chinese company. After this company is established and legally recognized, you can then form a contract with the company for the services you need.
While this option is perfectly legal, it has a significant drawback in that it requires extensive time and money to establish a Chinese company.
Additionally, once this business is established, it may decide to go after your clients rather than accepting only a partial payment for the services it renders for you.
How New Horizons Global Partners Can Help
New Horizons Global Partners helps foreign companies emerge into new, exciting markets through our comprehensive employment solutions.
We provide human resources and administrative responsibilities for companies that are looking to hire China employees and operate business activities in China.
Hiring Chinese employees can be a complex process, but New Horizons Global Partners can help you navigate through this process with the help of our expert professionals. Contact us today to find out how we can help your business.