Hiring Chinese Employees for Your WFOE in China: What to Know

If you are plan­ning to set up a whol­ly for­eign-owned enter­prise (WFOE) in Chi­na, one of the key issues you need to con­sid­er is how to hire Chi­nese employ­ees for your busi­ness. Hir­ing local tal­ent can help you reduce costs, access local mar­kets, and com­ply with local reg­u­la­tions. How­ev­er, hir­ing Chi­nese employ­ees for your WFOE also involves some chal­lenges and risks that you need to be aware of and pre­pared for. In this arti­cle, we will explain what you need to know about hir­ing Chi­nese employ­ees for your WFOE in Chi­na, includ­ing the legal require­ments, the best prac­tices, and the com­mon pitfalls.

Legal Requirements for Hiring Chinese Employees for Your WFOE

The basic rule for hir­ing Chi­nese employ­ees for your WFOE is that you can only do so after your WFOE is legal­ly reg­is­tered and has obtained all the nec­es­sary per­mits and licens­es to oper­ate in Chi­na. You can­not hire Chi­nese employ­ees before your WFOE is estab­lished, as this would vio­late the Chi­nese labor law and expose you to poten­tial penal­ties and lia­bil­i­ties. See Hir­ing Chi­na Employ­ees DUR­ING WFOE For­ma­tion and Hir­ing Chi­na Employ­ees BEFORE Your WFOE Is Reg­is­tered.

Once your WFOE is reg­is­tered, you can direct­ly sign labor con­tracts with Chi­nese employ­ees, as your WFOE is con­sid­ered as a Chi­nese legal enti­ty under the Chi­nese law. You do not need to hire employ­ees through inter­me­di­ary agen­cies or ser­vice providers, as this is only required for rep­re­sen­ta­tive offices of for­eign com­pa­nies. See How can I hire Chi­nese employees?

When hir­ing Chi­nese employ­ees for your WFOE, you need to com­ply with the fol­low­ing legal requirements:

• You need to sign writ­ten labor con­tracts with each employ­ee with­in one month of their employ­ment. The labor con­tracts should include the terms and con­di­tions of employ­ment, such as the job descrip­tion, the salary, the work­ing hours, the social insur­ance, the pro­ba­tion peri­od, the ter­mi­na­tion claus­es, etc.
• You need to pay social insur­ance and hous­ing fund con­tri­bu­tions for each employ­ee accord­ing to the local reg­u­la­tions. The social insur­ance includes pen­sion, med­ical, unem­ploy­ment, work-relat­ed injury, and mater­ni­ty insur­ance. The hous­ing fund is a manda­to­ry sav­ings scheme that helps employ­ees buy or rent hous­ing. The con­tri­bu­tion rates vary by city and are based on a per­cent­age of the employ­ee’s salary.
• You need to pay indi­vid­ual income tax for each employ­ee accord­ing to the nation­al tax law. The indi­vid­ual income tax is cal­cu­lat­ed based on a pro­gres­sive tax rate that ranges from 3% to 45%, depend­ing on the employ­ee’s month­ly tax­able income.
• You need to fol­low the nation­al and local labor stan­dards regard­ing the min­i­mum wage, the max­i­mum work­ing hours, the over­time pay, the annu­al leave, the statu­to­ry hol­i­days, the mater­ni­ty leave, etc.
• You need to respect the employ­ee’s rights and inter­ests regard­ing the equal oppor­tu­ni­ty, the non-dis­crim­i­na­tion, the pri­va­cy pro­tec­tion, the labor dis­pute res­o­lu­tion, etc.

Best Practices for Hiring Chinese Employees for Your WFOE

Besides com­ply­ing with the legal require­ments, you also need to fol­low some best prac­tices when hir­ing Chi­nese employ­ees for your WFOE. These best prac­tices can help you find and retain qual­i­fied and trust­wor­thy tal­ent for your busi­ness in Chi­na. Here are some tips:

• Define your needs and expec­ta­tions clear­ly and real­is­ti­cal­ly before you start look­ing for Chi­nese employ­ees. You should know what kind of skills, qual­i­fi­ca­tions, expe­ri­ence, per­son­al­i­ty, etc. you are look­ing for in your poten­tial candidates.
• Search for poten­tial employ­ees from var­i­ous sources, such as online plat­forms, trade shows, indus­try asso­ci­a­tions, refer­rals, etc. You should com­pare and eval­u­ate the resumes and port­fo­lios of dif­fer­ent can­di­dates and short­list the ones that meet your cri­te­ria and expectations.
• Con­duct inter­views and back­ground checks with the short­list­ed can­di­dates. You should ask rel­e­vant ques­tions and sce­nar­ios that test their knowl­edge, skills, atti­tude, etc. You should also ver­i­fy their iden­ti­ty, edu­ca­tion, work his­to­ry, ref­er­ences, etc.
• Nego­ti­ate the salary and ben­e­fits with the select­ed can­di­dates. You should research the mar­ket and indus­try trends, the aver­age salary, the tax and social insur­ance impli­ca­tions, etc. relat­ed to your job offer. You should also con­sid­er the employ­ee’s expec­ta­tions, moti­va­tions, and bar­gain­ing power.
• Sign labor con­tracts and on-board the new employ­ees. You should draft clear and com­pre­hen­sive labor con­tracts that cov­er all the impor­tant terms and con­di­tions of employ­ment and pro­tect your inter­ests and rights. You should also pro­vide ori­en­ta­tion and train­ing for the new employ­ees to help them adapt to your com­pa­ny cul­ture, poli­cies, and procedures.
• Mon­i­tor and eval­u­ate the per­for­mance and sat­is­fac­tion of your employ­ees. You should com­mu­ni­cate and coör­di­nate with your employ­ees reg­u­lar­ly and pro­vide them with feed­back or sug­ges­tions if nec­es­sary. You should also con­duct per­for­mance appraisals and reward or dis­ci­pline your employ­ees accordingly.

Common Pitfalls for Hiring Chinese Employees for Your WFOE

Hir­ing Chi­nese employ­ees for your WFOE can also involve some chal­lenges and risks that you need to be aware of and pre­pared for. Here are some com­mon pit­falls that you should avoid:

• Hir­ing employ­ees before your WFOE is reg­is­tered. This is ille­gal and risky, as you may face penal­ties from the author­i­ties or law­suits from the employ­ees. See Hir­ing Chi­na Employ­ees DUR­ING WFOE For­ma­tion and Hir­ing Chi­na Employ­ees BEFORE Your WFOE Is Reg­is­tered.
• Hir­ing employ­ees with­out writ­ten labor con­tracts. This is ille­gal and risky, as you may face fines from the author­i­ties or dis­putes from the employ­ees. You may also lose the evi­dence to prove your employ­ment rela­tion­ship or terms in case of any con­flict or litigation.
• Hir­ing employ­ees with­out pay­ing social insur­ance and hous­ing fund con­tri­bu­tions. This is ille­gal and risky, as you may face penal­ties from the author­i­ties or claims from the employ­ees. You may also lose the trust and loy­al­ty of your employ­ees or dam­age your rep­u­ta­tion in the market.
• Hir­ing employ­ees with­out pay­ing indi­vid­ual income tax. This is ille­gal and risky, as you may face sanc­tions from the author­i­ties or com­plaints from the employ­ees. You may also expose your employ­ees to tax lia­bil­i­ties or penalties.
• Hir­ing employ­ees with­out fol­low­ing the labor stan­dards. This is ille­gal and risky, as you may face admin­is­tra­tive actions from the author­i­ties or griev­ances from the employ­ees. You may also vio­late the employ­ee’s rights and inter­ests or cause dis­sat­is­fac­tion or turnover among your staff.
• Hir­ing employ­ees with­out respect­ing their cul­ture and eti­quette. This is unwise and risky, as you may face com­mu­ni­ca­tion bar­ri­ers, mis­un­der­stand­ings, con­flicts, delays, etc. when deal­ing with Chi­nese employ­ees or part­ners. You may also offend or alien­ate your employ­ees or dam­age your rela­tion­ship with them.

Conclusion

Hir­ing Chi­nese employ­ees for your WFOE in Chi­na can be a reward­ing and chal­leng­ing process that requires care­ful plan­ning and exe­cu­tion. You need to com­ply with the legal require­ments, fol­low the best prac­tices, and avoid the com­mon pit­falls when hir­ing Chi­nese employ­ees for your WFOE. By doing so, you can find and retain qual­i­fied and trust­wor­thy tal­ent for your busi­ness in China.

Frequently Asked Questions

Sources

1. Chi­na Pay­roll | Best way to Hire employ­ees in Chi­na in 2023
2. 中华人民共和国国务院 | 中华人民共和国劳动合同法实施条例（2013 年修订）
3. 中华人民共和国国务院 | 中华人民共和国社会保险法实施条例（2019 年修订）
4. 中华人民共和国国务院 | 中华人民共和国住房公积金管理条例（2019 年修订）
5. 中华人民共和国国务院 | 中华人民共和国个人所得税法实施条例（2018 年修订）
6. 中华人民共和国国务院 | 中华人民共和国劳动法（2018 年修订）
7. Har­ris Brick­en | Hir­ing Chi­na Employ­ees DUR­ING WFOE Formation
8. Har­ris Brick­en | Hir­ing Chi­na Employ­ees BEFORE Your WFOE Is Registered
9. Lehman­Brown | How can I hire Chi­nese employees?