Employer of Record (EOR) in China

Employment Laws and Regulations in China

Employment Contracts

Employment in China is governed primarily by the Labor Law of 1994 and the Labor Contract Law of 2008, both enforced by the Ministry of Human Resources and Social Security and its local bureaus. A written labor contract must be signed within one month of the employee’s start date. Failure to do so exposes the employer to double wages for every month the contract is missing, and after one year of non-signature the contract is automatically deemed open-ended.

Labor contracts can be fixed-term, open-ended, or project-based. Under Article 14 of the Labor Contract Law, any employee who has signed two consecutive fixed-term contracts or has worked for the same employer for ten continuous years is entitled to an open-ended contract on renewal. Contracts must be in Chinese, and while a bilingual version is common, the Chinese text prevails in any dispute.

Working Hours and Overtime

The standard workweek in China is 40 hours, arranged as 8 hours per day over 5 days, with a hard legal ceiling of 44 hours per week under Article 36 of the Labor Law. Overtime is capped at 3 hours per day and 36 hours per month, and employers that exceed these limits risk administrative penalties and employee back-pay claims.

Overtime is paid at a statutory premium: 150% of the base wage for overtime on a standard working day, 200% for work on a scheduled rest day (if no compensatory time off is provided), and 300% for work performed on a statutory public holiday. In 2025 the Supreme People’s Court issued guidance reinforcing that so-called “996” schedules are unenforceable and that waivers of overtime pay are void, regardless of what the contract says (2025 SPC guidance).

The Labor Law of the PRC caps the standard workweek at 40 hours and layers statutory premium rates on top of it for any work beyond that ceiling. The table below shows the rate multipliers that an EOR must apply to each category of hour, the daily and monthly caps, and the relevant article of the Labor Law for each row.

These rates are statutory minimums. Collective agreements or company policy can grant more generous multipliers but never less. RemotePeople enforces the 3-hour-per-day and 36-hour-per-month overtime caps in every China payroll run and flags any manager request that would breach them.

Minimum Wage

China has no national minimum wage. Instead, each province and municipality sets its own monthly and hourly floor, which the Ministry of Human Resources and Social Security aggregates and publishes on 1 January each year. The 2026 rates range from around $190 to $380 per month depending on the city, and the Ministry requires a review at least every two to three years (L&E Global, January 2026 minimum wage release).

The highest rates apply in the first-tier cities. Shanghai leads at roughly $380 per month, followed by Beijing at about $352, Guangdong Class 1 (Shenzhen and Guangzhou) at around $350, and Jiangsu Class 1 at about $336. See the full city-by-city breakdown on our minimum wage in China page.

Probation Period

Probation periods in China are strictly tied to contract length under Article 19 of the Labor Contract Law. For contracts of three months to one year the probation cannot exceed one month; for contracts of one to three years the maximum is two months; and for contracts of three years or longer and for open-ended contracts the maximum is six months.

A single labor contract can only include one probation period, and wages during probation must be at least 80% of the agreed salary or the lowest wage for the position, whichever is higher. Full details are on our probation period in China page.

Leave Entitlements

China’s statutory leave framework is set at national level for annual, sick, and maternity leave, with paternity and extended parental leave added by each province. The Labor Law and the Regulation on Paid Annual Leave for Employees establish the minimum days, while provincial Population and Family Planning Regulations set the extended maternity and paternity rules.

Annual Leave

Paid annual leave is calculated on total years of work experience across all employers, not tenure with the current employer. Employees with less than 1 year of cumulative service receive no statutory annual leave, those with 1 to 10 years of service receive 5 days, those with 10 to 20 years receive 10 days, and those with 20 or more years receive 15 days. Unused annual leave must be paid out at 300% of the daily wage (the 100% already paid through salary plus a 200% premium) if the employer does not reschedule it within the year.

Sick Leave

Sick leave pay in China is tied to two factors: the employee’s years of service and the length of the medical treatment period. For sick leave shorter than six months, the pay scale runs from 60% of the regular wage for employees with under 2 years of service up to 100% for employees with 8 or more years of service.

Sick pay can never fall below 80% of the local minimum wage. The medical treatment period itself ranges from 3 months for employees with under 5 years of service to 24 months for employees with more than 20 years, and the employer cannot terminate the contract during this protected period.

Maternity Leave

Maternity leave in China is a national minimum of 98 days under the Special Provisions on Labor Protection of Female Employees, extended by provincial Population and Family Planning Regulations. Shanghai and Beijing provide 158 calendar days, most other provinces provide 128 to 190 days, and the leave is paid through the maternity insurance fund (part of medical insurance) rather than by the employer directly. A miscarriage before four months entitles the employee to 15 days of leave, and after four months the entitlement rises to 42 days.

Paternity Leave

Paternity leave is set by province rather than nationally and typically ranges from 7 to 30 days. Guangdong provides 15 days, Beijing and Shanghai provide 15 days each, and several provinces such as Gansu and Henan extend paternity leave to 30 days. Paternity leave is fully paid at the employee’s regular wage and is funded by the employer, not social insurance.

Other Statutory Leave

Chinese employees are also entitled to the following statutory time off:

• Marriage leave: 3 days nationally, extended by many provinces to 10 or 13 days.
• Bereavement leave: 1 to 3 days for the death of an immediate family member.
• Work injury leave: paid at 100% of the regular wage during the recovery period, funded by work injury insurance.
• Nursing leave (one-child policy legacy): 1 hour per day for female employees breastfeeding a child under 12 months.
• Childcare leave: 5 to 15 days per year for parents with children under 3 in provinces that have enacted the 2021 parenting leave reform.

Statutory Leave Summary

China’s labour code codifies every statutory leave type employers must grant, from annual leave to maternity, sick, and other protected absences (NPC Labor Contract Law). The table below summarises each statutory leave category with duration and eligibility so payroll and HR can plan accruals and cover without missing a mandatory entitlement.

Statutory Employee Benefits

Beyond leave, China’s mandatory employee benefit framework is built on the “five insurances and one fund” (五险一金) system: pension insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance, and the housing provident fund. Pension contributions feed into a pooled national account and an individual account that the employee draws on at retirement, medical insurance covers inpatient and outpatient care at designated hospitals on top of any commercial top-up, and unemployment insurance provides a partial wage replacement for up to 24 months. Work injury and maternity insurance are funded entirely by the employer.

The housing provident fund is a co-contribution scheme that the employee can draw on to buy a home, pay rent, or cover mortgage interest.

Both the employer and employee contribute at the same rate, typically 5% to 12% depending on the city; Shanghai applies 7% on each side. Exact contribution bases, caps, and rates vary by city and are reset annually.

For a full breakdown of what these benefits mean in practice, see our employee benefits in China guide. Employer-paid supplemental benefits such as commercial medical insurance, annual health checks, meal allowances, and transport subsidies are common but not statutory, and they are negotiated case by case.

Recent Regulatory Updates (2026)

Three material updates have shaped China’s employment framework for 2026. First, the Ministry of Human Resources and Social Security released updated provincial minimum wage standards on 1 January 2026, with Shanghai remaining the highest at roughly $380 per month and 19 provinces adjusting their Class 1 rates upward (State Council policy portal).

Second, the statutory retirement age is now being phased in under the 2024 National People’s Congress decision, rising progressively from 60 to 63 for men, from 55 to 58 for female white-collar workers, and from 50 to 55 for female blue-collar workers over a 15-year transition that started on 1 January 2025. Pension contribution obligations for employers continue unchanged during the transition, but the window before an employee draws a pension will lengthen.

Third, the Supreme People’s Court issued judicial guidance in late 2025 that declares “996” style overtime schedules (9 a.m. to 9 p.m., 6 days a week) unenforceable and confirms that any contractual waiver of overtime premiums is void. Payroll systems and working-time policies must now rigorously cap daily overtime at 3 hours and monthly overtime at 36 hours.

Work Permits and Visas in China

Work Permit Requirements

Who Needs a Work Permit

Any foreign national (non-Chinese citizen) who takes up paid employment with a China-based entity must hold a valid Z visa, a Foreigner’s Work Permit, and a residence permit. Hong Kong, Macao, and Taiwan residents are subject to a separate simplified scheme but still require a work-related document.

Short business visitors on an M visa may not take up employment in China, and there are no bilateral exemptions that allow foreign nationals to work in China without a permit.

Eligibility and Required Documents

China classifies foreign workers into three tiers under the unified work permit scheme. Category A covers high-end talent (senior scientists, executives earning more than six times the city average wage, and scoring above 85 points on the points assessment), Category B covers professional specialists with a bachelor’s degree and at least two years of relevant experience, and Category C covers other roles under government quotas such as seasonal workers or interns.

Standard documents include a notarized degree certificate, a notarized criminal background check, a medical examination, an employment contract, and the employer’s business license and letter of invitation.

Processing Time and Validity

The end-to-end Z visa and work permit process typically takes 8 to 12 weeks. The Notification Letter of Foreigner’s Work Permit is issued in 10 to 15 working days, the Z visa is stamped at a Chinese embassy abroad in 4 to 8 business days, and the residence permit is issued by the local Public Security Bureau within 15 to 30 days of arrival. Initial work permits and residence permits are valid for 1 to 2 years for Category A and B applicants, renewable in country.

Renewal Process

Renewal applications must be filed at least 30 days before the current permit expires and require a fresh medical certificate, an updated employment contract, and proof that the employee has complied with Chinese tax and social insurance rules. The employee can continue working under the existing permit while the renewal is processed, and the renewed residence permit is usually issued within 10 to 15 business days. Dependents on S1 or S2 visas renew their own permits separately on the back of the principal’s approval.

Common Visa Types for Foreign Workers

Foreign nationals hired in China use one of several visa categories set by the National Immigration Administration. The table below maps the main types an EOR will encounter, which workers each one fits, and whether it allows paid employment.

The Z visa (Category B) is the workhorse for most EOR placements, covering professional hires on one to two year contracts. Category A and the R visa are reserved for senior or specialist talent, while M, S, and J visas do not authorize general employment and should not be used as a shortcut to onboard a foreign worker.

How an EOR Handles Work Permits

The EOR acts as the sponsoring entity on the Foreigner’s Work Permit application and handles every step inside China. This includes the online filing through the State Administration of Foreign Experts Affairs platform, the medical examination appointment, and the residence permit conversion at the Public Security Bureau.

The employee is responsible for the Chinese embassy consular Z visa application in their home country and for gathering notarized documents. Adding a Z visa extends the onboarding timeline from the roughly two weeks described in the How an EOR Works section to between eight and twelve weeks. Labor dispatch-style EORs are permitted to sponsor foreign nationals in all major cities; see our China work visa guide for city-level nuances.

Payroll, Taxes, and Social Security in China

Employer Contributions

Employer social security contributions in China are levied on top of gross salary through the five-insurances and housing fund system. Rates are set at city level, so the totals below reflect Shanghai 2026 benchmarks, which are broadly representative of first-tier cities. The contribution base is capped at three times the local average wage (about $5,076 per month in Shanghai for 2026).

On a Shanghai hire the employer burden totals roughly 33.76% on top of the gross salary, meaning that a $1,389 gross wage becomes an all-in cost of about $1,858 before any EOR fee. Work injury insurance varies with the industry risk class assigned by the social security bureau, and the housing fund rate can be set between 5% and 12% by company choice, although the employer and employee rate must always match.

Employee Contributions

Alongside income tax, employees in China pay statutory payroll deductions that fund social security, health cover, and other state schemes (PwC China other taxes). The table below summarises the employee-side contribution rates payroll must withhold from gross pay each month.

Income Tax

China applies a progressive individual income tax (IIT) to residents’ comprehensive income (wages, service fees, author remuneration, and royalties) at seven brackets ranging from 3% to 45%. Residents benefit from a standard deduction of $8,333 per year, plus itemized deductions for children’s education, housing mortgage interest, elder care, and continuing education. Employers withhold IIT monthly using the cumulative withholding method set by the State Taxation Administration.

All USD amounts are approximate conversions at the April 2026 exchange rate. Non-residents who spend fewer than 183 days in China are taxed only on China-sourced income at the same rates applied on a monthly basis without the standard annual deduction.

Payroll Cycle

Chinese payroll runs on a monthly cycle. Wages must be paid in the local currency on a fixed day each month by bank transfer; cash payments are uncommon and are forbidden in most cities by municipal labor bureau rules. Employers must issue a monthly pay slip showing gross salary, five insurances and housing fund deductions, and IIT withheld.

Individual income tax returns are filed monthly through the State Taxation Administration online system by the 15th of the following month, social insurance declarations are filed with the city social security bureau by the 15th, and housing fund contributions are filed with the local Housing Fund Management Centre.

13th Month Salary and Bonus Pay

A 13th month salary is not mandatory in China. It is, however, a near-universal market practice: about 72% of Chinese employers pay a year-end bonus equal to one month of salary, and in many industries it is expected as part of the compensation package (MSA 13th month guide). The bonus is typically paid before the Spring Festival in January or February and is taxable under the IIT framework.

Employees can elect to have the bonus taxed either as a separate lump sum at a preferential rate or rolled into annual comprehensive income, with the separate-lump-sum treatment extended to 31 December 2027 by the State Taxation Administration. Where a 13th month is written into the labor contract or the employee handbook, it becomes legally enforceable regardless of national law.

Cost of Hiring Through an EOR in China

EOR Service Fees

EOR services in China typically cost between $300 and $600 per employee per month, depending on salary level, city, and whether the hire is a Chinese national or a foreign national requiring Z visa sponsorship. The fee covers the local entity licence, labor contract drafting, monthly payroll, five-insurances and housing fund administration, IIT withholding, and standard HR support. Foreign national hires often sit at the upper end of the range because work permit sponsorship adds administrative overhead.

Total Employment Cost Breakdown

The all-in cost of employing someone in China goes well beyond gross salary. The table below walks through a realistic cost build-up for a typical hire, layering mandatory employer social contributions, statutory benefits, and payroll taxes on top of base pay so finance teams can budget accurately before an offer goes out.

Statutory employer contributions add roughly 33.76% on top of the gross salary in Shanghai, and the EOR service fee is a flat USD charge on top of that. Other first-tier cities fall within a 32%–37% employer burden, with the variation driven mainly by housing fund rates and work injury classification.

All USD amounts are approximate conversions at the April 2026 exchange rate. See our China payroll and tax guide for city-by-city rates.

Ready to hire in China? Get started with RemotePeople and we will handle labor contracts, five-insurances payroll, IIT withholding, and full China compliance. No WFOE needed.

Benefits of Using an EOR in China

The core advantage of an EOR in China is speed to market. A WFOE takes six to nine months to register, requires registered capital, and commits you to annual audits and corporate income tax filings.

An EOR onboards a Chinese national in one to two weeks with no capital commitment and no long-term entity obligations, so companies can test the market, retain a local hire, or cover a short-term project without waiting for entity setup. This is especially valuable for companies that are still validating their China strategy and do not want to sink fixed costs into incorporation.

The second advantage is compliance risk transfer. China’s labor rules change frequently at municipal level, with social insurance bases reset each July, minimum wages reset each January, and parental leave entitlements varying by province.

An EOR tracks these changes across every city, updates payroll and contracts automatically, and absorbs liability for missed filings. For a team of one to fifteen employees, that is meaningfully cheaper than building an in-house HR function that understands the Shanghai, Beijing, and Shenzhen bureaus.

The third advantage is flexibility. Scaling down through an EOR is as simple as terminating an employee and giving statutory notice; no legal dissolution is needed. Scaling up is equally quick: new hires are added to the same master services agreement without any change to the underlying entity.

For companies that want a local employee experience (five insurances, housing fund, labor contract in Chinese) without the overhead of running their own entity, the EOR model delivers the employee’s expectations and the employer’s simplicity at the same time.

Termination and Offboarding in China

Notice Periods

The standard statutory notice period in China is 30 days, applicable to both employer and employee terminations after probation under Article 37 of the Labor Contract Law. During probation the notice period drops to 3 days.

Employers can pay one month of salary in lieu of notice, and this is where the “N+1” severance formula originates (see below). Fixed-term contracts end automatically at the agreed expiry date without statutory notice, but the employer must still pay economic compensation if the contract is not renewed.

China applies a single 30-day notice rule to most terminations, with a compressed 3-day version for probationary staff and immediate dismissal only for serious misconduct. The table below shows the statutory notice schedule by employment situation and the labour code article that governs each case.

Because the Labor Contract Law does not tier notice by seniority or job grade, RemotePeople applies the same 30-day minimum to every EOR hire in China and uses the 1-month-pay-in-lieu option only when the business needs an immediate exit and has valid Article 40 grounds.

Severance Pay

Article 47 of the Labor Contract Law sets a single severance formula that scales with years of service and tops out at a city-level cap for high earners. The table below walks through worked examples at realistic tenure points, shows how the base salary is defined, and highlights the exceptions for unlawful termination and for service periods under 6 months.

RemotePeople runs this calculation automatically in every China exit and issues an itemised severance statement against the employee’s 12-month average wage before the final payroll is released.

Calculation Method

Severance pay (economic compensation) is calculated as one month of the employee’s average monthly wage for every full year of service, with 0.5 month paid for service of 6 months or less and a full month paid for service between 6 months and a year. “Average monthly wage” is calculated over the 12 months preceding termination and includes base salary, bonuses, allowances, and overtime. Under Article 47 of the Labor Contract Law, where the 30-day notice is not given the employer must add one additional month of salary, creating the familiar “N+1” formula.

Caps and Exceptions

Severance is capped for high earners: if an employee’s average monthly wage exceeds three times the local city average wage, the severance base is capped at three times the city average and the total years of service counted are capped at 12 years. Employees terminated for cause under Article 39 (serious breach of discipline, fraud, criminal conviction, etc.) are not entitled to severance. Where an employer terminates in violation of the law, Article 87 doubles the economic compensation to “2N”, and the employee can also demand reinstatement.

Grounds for Termination

China is a “for-cause” jurisdiction. An employer can lawfully terminate a labor contract only under the grounds listed in Articles 39 and 40 of the Labor Contract Law: serious breach of company rules, serious dereliction of duty, criminal conviction, incompetence after training and reassignment, long-term illness beyond the medical treatment period, or a material change in circumstances that makes the contract unperformable.

Protected categories include employees during pregnancy, maternity leave, and the breastfeeding period, employees within the medical treatment period for non-work-related illness, and employees who have worked 15+ years and are within 5 years of retirement. Terminations of these categories face a very high legal bar.

EOR vs. Other Hiring Models in China

EOR vs. Setting Up a Local Entity

Choosing between an Employer of Record and setting up your own legal entity in China comes down to timeline, upfront cost, ongoing administrative burden, and how quickly you can scale up or wind down. The table below lays out both paths side by side across setup time, cost, compliance risk, and flexibility so you can match the right model to the size and duration of your China hiring plan.

A WFOE is the traditional structure for foreign companies that plan to operate in China at scale. It gives you full ownership, the right to issue fapiao (tax invoices), the ability to sign direct labor contracts, and eligibility for government contracts and licences. The trade-off is a long incorporation process that runs through the Ministry of Commerce, the State Administration for Market Regulation, the State Taxation Administration, and the State Administration of Foreign Exchange, plus ongoing annual audit, corporate income tax, and social insurance obligations.

An EOR removes all of that for companies that are still at the early stage. You skip the WFOE, skip the registered capital, and skip the annual audit, and you pay a flat monthly fee per employee instead.

The right hiring model depends on headcount and commitment: under 15 people and under 18 months of runway, an EOR is usually the cheaper and faster option. Above 15 people or when you need to sign local commercial contracts, a WFOE becomes worth the upfront investment.

Companies sometimes run both structures in parallel: a WFOE for the core sales and operations team that needs the fapiao and the banking relationship, and an EOR for remote engineers, customer success staff, or short-term project teams scattered across other cities. See our China PEO overview for the hybrid model.

EOR vs. Hiring Independent Contractors

Classifying a China-based worker as an independent contractor rather than an employee can expose you to back-taxes, unpaid social contributions, and reclassification penalties if the working relationship looks like employment in practice. The table below contrasts EOR employment with contractor engagement across legal relationship, tax and benefits treatment, IP ownership, and misclassification risk so you can pick the right model role by role.

Hiring contractors in China looks cheaper on paper because there are no five-insurances or housing fund obligations, but the misclassification risk is real. If a labor arbitration tribunal or a local human resources bureau finds that the relationship is effectively one of employment (the worker uses your equipment, follows your schedule, reports to your manager, and is economically dependent on you), the engagement can be reclassified as a de facto labor contract, triggering back pay, unpaid social insurance, double wages for missing written contracts, and severance on termination.

Contractor arrangements are only appropriate in some cases: short-term project work, specialized consulting, roles with genuine autonomy, and businesses where the worker has multiple clients and sets their own hours. For any ongoing, integrated role that would normally sit inside your organization chart, an EOR is the safer structure. RemotePeople also offers a compliant contractor management solution; see our China contractor management page.

The practical rule of thumb is that if you would describe the person as part of your team, they should be employed through an EOR. If you would describe them as a vendor you pay for deliverables, a contractor agreement is fine, but it still needs a clear scope of work, a written IP assignment clause, and invoicing in line with the individual industrial and commercial household rules.

EOR vs. PEO (Professional Employer Organization)

EORs and PEOs both simplify international hiring, but only an EOR becomes the legal employer of record in China — a critical distinction when you don’t have a local entity of your own. The table below maps the practical differences across legal employer status, entity requirement, liability allocation, and scope of coverage.

The key difference between EOR and PEO in China is whether you already own a local entity. A PEO in China is not a separate legal category: it usually describes an HR outsourcing arrangement where a local provider runs payroll, handles the five-insurances filings, and advises on labor issues on behalf of an existing WFOE. The WFOE remains the legal employer and carries the compliance liability directly.

An EOR, by contrast, acts as the legal employer through a FESCO or labor dispatch licence, so you do not need a WFOE at all. Most foreign companies starting in China begin with an EOR and then graduate to a WFOE plus PEO once they have 15 or more employees and a clear long-term business case. This lets them test the market with minimal commitment and then bring operations in-house once they have confidence in the opportunity.

Regulatory caution: labor dispatch in China is limited by the 2014 Interim Provisions on Labor Dispatch, which cap dispatched workers at 10% of an entity’s total headcount in standard cases. A reputable EOR works within these limits by scaling across multiple licensed entities and by treating dispatch as one of several compliant structures.

Public Holidays in China

China observes a defined set of official public holidays on which most private-sector employers must give staff a paid day off (State Council 2026 holiday notice). The table below lists the statutory holidays employers need to build into payroll calendars and leave planning for the year, along with the date rule for each.

China has 13 statutory paid public holidays in 2026 following the 2024 State Council reform that added two statutory days (one to Spring Festival and one to Labor Day). Extended breaks are created by swapping adjacent weekends into working days, so payroll teams must track the adjusted work-day calendar closely to avoid miscalculating overtime at the 300% holiday rate.

How to Get Started with an EOR in China

• First, define your hire: the job title, compensation, benefits package, and whether the candidate is a Chinese national or a foreign national who needs Z visa sponsorship.
• Second, choose a city. Shanghai, Beijing, Shenzhen, and Guangzhou have the deepest talent pools and the most mature EOR infrastructure, but second-tier cities such as Chengdu, Hangzhou, and Xi’an often offer lower cost bases and strong engineering talent.
• Third, sign the EOR master services agreement with RemotePeople and provide employee details.
• Fourth, the EOR drafts the bilingual labor contract, registers the employee with the local social insurance bureau and housing fund, and, for foreign nationals, files the Foreigner’s Work Permit application.
• Fifth, payroll is configured, the employee signs, and work begins, usually within one to two weeks for Chinese nationals and eight to twelve weeks for foreign hires.

Ready to build your China team? Contact RemotePeople for a free consultation on hiring costs, timelines, and compliance for your first China hire.

Where companies hiring in China expand next

Employers with teams in China often extend across Northeast Asia, where advanced manufacturing and deep tech ecosystems cluster together. Common expansion paths include South Korea (deep Asian tech and services talent) and a team in Hong Kong (the parent jurisdiction’s framework extending to this market). Teams scaling further usually add operations in Taiwan for Asia-Pacific connectivity and English-proficient hires, with Japan extending coverage through the Asia-Pacific gateway with multilingual workforce.