Employer of Record in China

An Employer of Record addresses this complexity. The EOR becomes your company’s legal employer in China, enabling you to hire full-time employees without registering a WFOE (Wholly Foreign-Owned Enterprise), maintaining a local office, or establishing a separate legal entity. The EOR handles employment contracts, payroll administration, tax withholding, and mandatory social insurance contributions. You retain operational control over the employee’s work; the EOR manages legal and administrative compliance.

This guide covers the full scope of China EOR hiring: applicable labor law, payroll and tax mechanics across different cities, city-specific social insurance rates, work permits for foreign nationals, leave entitlements, termination procedures and severance requirements, and the legal structures EOR providers employ. If you are an HR leader, operations manager, or finance professional evaluating EOR options or currently managing China-based hires through an intermediary, you will find here the information required for informed decision-making.

China’s labor arbitration system operates with speed and accessibility. Filing a claim costs employees virtually nothing, and arbitration panels consistently rule in favor of workers when procedural requirements are not met. Foreign companies that cut corners on employment contracts, social insurance registration, or termination procedures face substantial exposure in arbitration and enforcement proceedings. Correct implementation from day one is more critical in China than in most other employment markets.

An Employer of Record is a third-party company that serves as the legal employer for your workers in a given country. The EOR signs employment contracts, administers payroll, withholds and remits taxes, and makes mandatory social insurance contributions. You retain responsibility for day-to-day management and performance oversight; the EOR assumes legal and administrative obligations.

China does not have a dedicated EOR statute. The concept of “Employer of Record” is not formally defined in the Labor Contract Law or other Chinese legislation. Instead, most EOR providers operate through one of two structures: the labor dispatch system (劳务派遣, láo wù pài qiǎn), which is regulated under Articles 57–67 of the Labor Contract Law, or a direct employment model where a licensed domestic entity acts as your company’s legal employer.

Labor dispatch is the primary mechanism used. A domestic entity—often a state-owned organization such as FESCO or CIIC, or a privately licensed HR services firm—holds a labor dispatch license, signs the employment contract, and positions the worker in your operation. The direct employment model operates similarly but avoids the labor dispatch designation while still using a local Chinese entity as the legal employer. Both structures carry specific compliance requirements. Both function within what Chinese legal practitioners characterize as a regulatory area with ambiguous boundaries. Neither model receives explicit governmental validation specifically for foreign company use through intermediaries.

Regardless of which structure your EOR employs, the provider must hold appropriate licenses, maintain registered capital, and demonstrate on-the-ground experience with city-level regulatory requirements. Before signing, request direct clarification: does the provider operate its own labor dispatch license, or does it outsource to a licensed partner? Your risk profile depends entirely on this arrangement.

In most jurisdictions, an EOR signs an employment contract and becomes the legal employer through a straightforward process. In China, this arrangement operates with greater structural complexity. Without a statutory EOR framework, providers execute employment through the labor dispatch system—a regulated mechanism with licensing requirements, workforce limitations, and position restrictions. Foreign companies require clear understanding of the legal mechanism they are entering.

Every EOR arrangement in China involves three parties:

1. The dispatching entity (your EOR or labor dispatch company) serves as the legal employer. This entity holds the employment contract, processes payroll, withholds applicable taxes, and makes social insurance contributions.
2. The client company (your organization) enters into a service agreement with the dispatch entity and executes a separate labor dispatch agreement specifying roles, contract duration, and work conditions.
3. The employee signs the employment contract with the dispatch entity and receives direction and work assignments from your organization while performing duties within your operations.

Formally, the employee’s legal employer is the dispatch entity. Practically, the employee reports to your management team and executes your company’s strategic objectives. This three-party structure permits foreign companies without Chinese legal registration to employ workers in compliance with Chinese law, despite the fact that the regulatory framework predates the modern EOR model.

FESCO (Foreign Enterprise Service Company) and CIIC (China International Intellectech Corporation) are China’s two largest state-owned labor dispatch organizations. Both have facilitated international company hiring since the 1980s and remain dominant providers in this service category.

Not all international EOR providers maintain their own labor dispatch license in China. Many operate through partnerships with FESCO, CIIC, or other licensed entities. This arrangement is standard practice. It does not, in itself, indicate deficiency. However, it does introduce an additional layer in the service relationship. When issues arise with payroll processing or termination procedures, the distinction between providers who maintain independent license authority and those who outsource to licensed partners becomes operationally significant. Clarify this arrangement before engagement.

A common and costly mistake occurs when foreign companies classify Chinese workers as independent contractors to reduce employment-related expenses and administrative obligations. This misclassification never withstands scrutiny. Labor arbitration bureaus evaluate the actual working relationship rather than contractual designations. An employee working fixed hours, using company-provided equipment, reporting to your management team, and deriving primary income from your organization will be reclassified as an employee regardless of contract language.

Misclassification reclassification triggers substantial financial obligations. Organizations face liability for all unpaid social insurance contributions (employer and employee portions) retroactively from the employment start date. Labor bureau administrative penalties apply. Back tax assessments accrue with daily surcharges. Employees are entitled to double wages for each month without a written employment contract (up to 11 months). In serious cases, responsible officers face personal criminal liability.

In 2023, Meituan (a major delivery platform) experienced reclassification of thousands of gig workers to employee status following a large-scale regulatory enforcement action. This enforcement activity prompted regulators—including the Ministry of Human Resources and Social Security—to intensify scrutiny of contractor arrangements across all industry sectors, including foreign companies. The underlying principle is straightforward: if an individual depends primarily on one company for income, works according to that company’s schedule, uses that company’s resources and tools, and performs work under that company’s direction, the relationship constitutes employment under Chinese law.

Using an EOR mitigates this risk substantially. Workers are classified correctly from the employment start date. Social insurance registration, housing fund contributions, and individual income tax withholding are implemented in compliance with applicable requirements. For foreign companies with fewer than 20 employees in China, proper classification through an EOR eliminates the single most significant compliance exposure.

• Signed labor contract in Chinese (with authorized English translation if applicable) delivered within 30 days of the employment start date
• Social insurance registration completed in the employee’s designated work city
• Housing Provident Fund account established with employer and employee contribution rates documented
• Chinese bank account opened in the employee’s name for CNY salary deposits
• Work permit and Z visa secured for foreign nationals before they commence work
• Probation terms documented and communicated to the employee in both Chinese and English
• Company policies and employee handbook translated into Mandarin Chinese
• IT equipment, system access credentials, and orientation materials prepared
• Intellectual property assignment and confidentiality provisions included in the employment contract
• Employee registered with the municipal tax authority for individual income tax withholding

Three primary statutes form the foundation of China’s labor system: the Labor Law (1994), the Labor Contract Law (2008, amended 2012), and the Social Insurance Law (2010). These are supplemented by hundreds of provincial regulations, municipality-specific requirements, and authoritative interpretations issued by the Supreme People’s Court. The following provisions are most material to EOR hiring arrangements:

Chinese law requires all employment relationships to be documented in writing. Three contract types are recognized:

• Fixed-term contracts constitute the most common arrangement. These contracts specify both a start and termination date. While contracts can be renewed, after two consecutive fixed-term contracts expire, the employer must offer an open-ended (permanent) contract if the employee requests continuation of employment.
• Open-ended contracts establish an indefinite employment relationship with no specified end date. These are mandatory after two consecutive fixed-term contracts or after an employee completes ten years of continuous service.
• Project-based contracts tie the employment duration to completion of a specified task or project. Employment terminates upon project completion.

Overtime compensation rates are established by the Labor Law and are not subject to negotiation:

• Weekday overtime: 150 percent of the standard hourly wage
• Weekend overtime without compensatory rest: 200 percent of the standard hourly wage
• Public holiday overtime: 300 percent of the standard hourly wage

In China, payroll administration encompasses two primary components: employer social insurance contributions and employee individual income tax withholding. Both are processed on a monthly basis.

Individual income tax operates on a seven-bracket progressive structure. The standard monthly deduction is ¥5,000 (approximately $690 USD). Additional deductions are permitted for qualifying education expenses (dependent children and employee education), housing costs, and elderly parent support obligations. The State Administration of Taxation (SAT) oversees and publishes the complete Individual Income Tax schedule.

The tax year runs from January through December. Employers implement cumulative withholding on a monthly basis per SAT regulations, which means the effective tax rate increases as income accumulates throughout the calendar year. Annual reconciliation and any required adjustments are due by June 30 of the following year.

Monthly tax payments must be filed and remitted by the 15th of the following month. Late submissions are subject to daily penalties of 0.05 percent. Annual reconciliation procedures operate from March 1 through June 30. Employees with multiple income sources or total annual income exceeding ¥120,000 are required to file a full annual tax return. The EOR provider manages both monthly withholding and annual filing procedures.

China does not establish a national minimum wage. Instead, each province and municipality sets its own minimum wage threshold through the Ministry of Human Resources and Social Security (MOHRSS), which is reviewed and adjusted annually. The following table presents the current minimum wage rates for major hiring cities in 2025–2026:

An important distinction: Shanghai excludes social insurance and housing fund contributions from its minimum wage calculation. Most other cities include these contributions when calculating minimum wage compliance. This means Shanghai’s effective minimum wage floor, when accounting for employer contributions, is higher than the published monthly rate.

For professional-level hiring through an EOR, minimum wage requirements are typically not a binding constraint. However, minimum wage thresholds apply to internships, part-time positions, and probation period compensation (which must equal at least 80 percent of post-probation salary while not falling below the municipal minimum wage floor).

China’s mandatory social security system is structured as “five insurances and one fund” (五险一金, wǔ xiǎn yī jīn), governed by the Social Insurance Law (2010). All employers, including EOR providers, are required to register employees within 30 days of employment commencement. The Ministry of Human Resources and Social Security (MOHRSS) establishes the national regulatory framework, while individual cities and provinces determine specific contribution rates and administration procedures. The International Labour Organization (ILO) provides additional comparative resources on China’s labour standards.

1. Pension Insurance (养老保险)— Employer contribution: 14 to 16 percent; employee contribution: 8 percent. This insurance provides retirement benefits upon meeting the minimum contribution period, currently set at 15 years and scheduled to increase to 20 years by 2030 under pending reform legislation.
2. Medical Insurance (医疗保险)— Employer contribution: 6.85 to 10 percent; employee contribution: 2 percent. This insurance covers outpatient and inpatient medical expenses. Certain cities also administer a supplementary medical savings account component.
3. Unemployment Insurance (失业保险)— Employer contribution: 0.5 to 0.8 percent; employee contribution: 0.2 to 0.5 percent. This insurance provides income replacement benefits if an employee experiences involuntary job termination.
4. Work Injury Insurance (工伤保险)— Employer contribution: 0.16 to 1.9 percent (adjusted by industry risk classification); employee contribution: 0 percent. This insurance covers workplace injuries and occupational disease claims.
5. Maternity Insurance (生育保险)— This insurance has been consolidated with medical insurance in most municipalities. It covers wages during maternity leave and prenatal and postnatal medical services.

Annual leave entitlement is determined by cumulative service across all employment relationships under the Regulations on Paid Annual Leave for Employees, not limited to tenure with a single employer:

• 1 to 10 years of total service: 5 days of paid annual leave
• 10 to 20 years of total service: 10 days of paid annual leave
• 20 or more years of total service: 15 days of paid annual leave

These represent statutory minimums. Employers in major cities frequently provide more generous leave policies. Unused annual leave that the employer prevents the employee from taking must be compensated at 300 percent of the employee’s daily wage.

China currently provides 13 statutory paid holidays per year (expanded in 2025 to include two additional observances). The major holiday periods are:

• Spring Festival (Lunar New Year): 8 to 9 days (2026 provides 9 consecutive days)
• National Day: 7 days
• Labor Day: 5 days (extended in 2025)
• New Year’s Day: 3 days
• Qingming Festival, Dragon Boat Festival, Mid-Autumn Festival: 3 days each

Paternity leave varies significantly: Shanghai provides 10 days while Henan offers 30 days. No national standard exists; paternity leave is entirely determined by provincial legislation. Sichuan operates at the mid-to-high end with 20 days. Parental leave represents a newer policy mechanism designed to address demographic concerns by encouraging workforce participation after parental leave concludes. Most provinces grant each parent 5 to 10 days of additional leave annually until the child reaches age three, supplementing maternity and paternity leave entitlements.

Sick leave compensation is contingent on tenure and illness duration. Typically, employees receive 60 to 80 percent of normal wages during sick leave, with rates varying by city and contract provisions. Long-term illness involving serious medical conditions may extend for months but at reduced compensation levels. Sick leave rules and calculation methodologies differ substantially across municipalities, creating administrative complexity. This represents another area where partnership with a knowledgeable local provider offers substantial value.

Hiring foreign nationals requires a work permit and a Z visa (employment-based residency visa). China classifies foreign workers into three categories, administered through the State Administration of Foreign Experts Affairs (SAFEA) system. The China Government Portal provides additional official documentation on immigration policy.

Category A encompasses senior executives, doctoral researchers, leading scientists, and recognized subject-matter experts. Category A applications receive expedited processing. Documentation requirements are less extensive than lower categories.

Category B is the most common classification for typical EOR hiring. This category requires a bachelor’s degree minimum, a minimum of two years of professional experience in a relevant field, and demonstrated field-specific qualifications or certifications.

Age restrictions apply to work permit eligibility. Male applicants typically must be between 24 and 60 years old; female applicants between 24 and 55. Category A applicants may receive exceptions to these age ranges. Category B applicants outside these age parameters face increased scrutiny, longer processing times, and reduced approval certainty.

Standard application documentation includes: a valid passport, the signed employment contract, employer business registration documentation, verified educational credentials, documented work history, a completed background check, and a medical examination (conducted in China after arrival).

Termination practices represent an area where foreign companies frequently encounter legal exposure. At-will employment does not exist in China. Every employer-initiated termination requires a specific legal ground established in the Labor Contract Law, or the employer must negotiate a mutual separation agreement with appropriate severance compensation. Disputes over termination proceed to labor arbitration. The Supreme People’s Court has issued multiple authoritative interpretations that define employer obligations and employee rights in termination scenarios.

The Labor Contract Law establishes an exhaustive list of permissible termination grounds. The primary categories are:

1. Immediate termination for serious cause (no notice required): This applies to serious violations of workplace rules, serious negligence resulting in material damage or loss, criminal conviction of the employee, or acceptance of employment elsewhere that materially impairs job performance.
2. Termination with 30 days’ advance notice or one month’s compensation in lieu of notice: This applies when an employee is unable to perform their duties following completion of medical treatment, when an employee fails to meet performance standards despite training or role reassignment, or when fundamental business circumstances change, rendering contract performance impossible.
3. Economic restructuring terminations (affecting 20 or more employees or 10 percent of total workforce): This requires advance notification to the employee representative committee or labor union and filing with the labor bureau. Legal protections and retention priorities apply, emphasizing longer-tenured employees and sole household earners.

An important distinction applies between severance scenarios. Voluntary employee resignation triggers no severance obligation. Severance is owed only in cases of employer-initiated termination or mutual separation agreements. However, if an employee resigns in response to employer failure to remit social insurance contributions, wage withholding, or unilateral modification of employment terms, the resignation is characterized as constructive dismissal, and severance obligations apply.

Certain categories of employees cannot be terminated under any circumstances. Termination grounds are irrelevant for these protected groups:

• Employees on maternity or pregnancy leave
• Employees in an ongoing medical treatment period
• Employees with an occupational disease or work-related injury
• Employees with 15 or more years of continuous service within five years of the retirement age

Attempting to terminate a protected employee results in labor arbitration orders requiring reinstatement, back wages, and related damages.

EOR providers typically employ one of two pricing models. Percentage-based pricing (10 to 15 percent of salary is common) increases substantially for senior-level hires. Flat monthly fees per employee offer greater cost predictability and are typically more economical for higher-salary positions.