When it comes to determining payroll setup of foreign companies operating in China, the options and requirements on employers are unlike the rest of the world.  In order to better assess the options available, it is important to understand the integral role that Human Resource Outsourcing plays in China.

Brief History of the China Market:

China was an agriculture-based country until 1979 when it changed policy to attract investment into manufacturing.  The Chinese government did not want outside providers servicing foreign employers in China, and thus they created Foreign Enterprise Service Corp (FESCO) and China International Intellect Corp (CIIC).  Originally, all foreign employers had to outsource business functions to FESCO or CIIC.  The China market took off in the late 1990s, and CIIC/FESCO could not service the influx of foreign business penetrating the Chinese Market.  The demand allowed for other HROs to infiltrate the market.

Understanding the Role of HROs:

Human Resource Outsourcing is one of the most common services used by foreign enterprises. China has sought to force foreign companies seeking to hire, in China, to form a company in China; those who do not must go through an HRO.  Foreign companies without independent legal entities need to hire a local workforce through Chinese HRO providers, as per government regulation.  The Government requires transparency regarding the HR functions, and thus HROs meet these requirements.  HRO providers specialize in employment and dismissal, payroll and benefits administration, personal income tax, personnel file management, and labor dispute resolution.

As of 2008, there has been tremendous growth in HROs; partly a result of the enactment of the new Labour Contract Law (LCL) from 1st January 2008.  LCL provides a much tighter framework of employment relationship than previous labor regulations, including job security and the provision of social insurance benefits.  It also gives employees more power to seek justice through legal channels when employers violate labor laws.

HR Outsourcing Services in China include:

  • Employee Relation Service Local staff outsourcing, employment & dismissal, certificate, contract, personnel file, legal consulting concerning labor affairs
  • Benefit Service Social insurance and housing fund, commercial insurance, corporate health insurance and annuity programs, supplemental benefits
  • Recruitment Service Headhunting service, talent recommendation, recruitment process outsourcing, background checking, campus recruitment, talent evaluation
  • Finance & Tax Service payroll, accounts payable, finance and accounting, tax outsourcing, and consulting services

If you want to know who are the HRO Providers and your options, please fill out the form: