Employer of Record (EOR)

An Employer of Record (EOR) is a third-party provider that formally employs workers through a local employing entity while another business directs their day-to-day work. The arrangement can help an overseas company hire employees in a country where it does not have its own employing entity. The EOR typically signs the employment contract, administers payroll and required contributions, and handles agreed employment processes. The client remains responsible for the work it assigns and for providing accurate information and timely employment decisions. In China, the EOR label describes a commercial service model, not a separate employment category established by statute. For the employment workflow, see how an EOR works in China.

How Does an Employer of Record Work?

Suppose a company based outside China wants to employ a sales specialist in Shanghai but has not established a Chinese subsidiary. Under an appropriately structured EOR arrangement, a Chinese employing entity signs the worker’s local labor contract. The overseas company agrees on business objectives and manages the person’s daily work, while the local employer administers the employment relationship.

The practical workflow begins with confirming the proposed role, location, employee status and employing structure. Employment terms are agreed before onboarding; the EOR then coordinates required records, payroll registration and applicable statutory administration. Each month the client supplies approved payroll inputs, and the EOR calculates and processes pay and related deductions. Contract changes, leave records and any eventual separation require coordination rather than unilateral assumptions by either party.

What Is the Legal Position of EOR in China?

China’s employment legislation regulates labor relationships and specific models such as labor dispatch, but it does not create a universal legal exemption simply because a service is marketed as EOR. The actual contract, employing entity, place of work and daily operating arrangement matter. A foreign client should confirm how the proposed structure is supported under Chinese law rather than assuming that one EOR label is suitable for every role.

Labor dispatch is a distinct regulated arrangement. Where the facts and agreements constitute labor dispatch, the amended Labor Contract Law requires the dispatch business to hold the relevant permit and restricts dispatch to temporary, auxiliary or substitute positions. The Ministry of Human Resources and Social Security’s explanation of the interim dispatch rules also addresses the 10% staffing cap for qualifying receiving entities. These rules should not be mechanically applied to every arrangement bearing an EOR label, but neither can the label be used to bypass them when dispatch rules actually apply.

Whether a proposed structure is workable can also depend on the client’s business activities, whether it has a local presence, the worker’s duties and any sector-specific requirements. An EOR is therefore not an automatic substitute for assessing establishment, regulatory or employment risks.

Who Is Responsible for the Employee?

Responsibility follows the actual legal and operational structure, not merely the marketing description. In a typical China EOR service arrangement, the responsibilities are divided as follows:

• Local employing entity: Signs the labor contract, maintains agreed employment documentation, processes salary and individual income tax withholding, and administers statutory social insurance and housing-fund matters as applicable.
• Client business: Selects the candidate, sets work objectives and reporting lines, approves compensation changes, provides accurate attendance and bonus inputs, and raises performance or conduct issues promptly.
• Both parties: Coordinate employment changes, employee communications, confidentiality and intellectual-property arrangements, workplace protections and lawful separation procedures. The service contract should describe who initiates, approves and documents each action.

Contract wording can allocate tasks between provider and client, but it cannot erase mandatory employee rights or automatically remove statutory responsibilities. The employee should know which entity is the legal employer and who to contact about payroll, leave, benefits and workplace concerns.

EOR vs. PEO vs. Payroll Outsourcing

The most useful distinction is who employs the worker. These terms are often used differently across countries, so the following describes the common China-focused service models rather than a universal legal classification.

• EOR: The provider’s Chinese employing entity ordinarily contracts with the employee; the foreign client may not need its own China employing entity, subject to suitability of the arrangement.
• PEO: In the China service model described here, the client already has a Chinese employing entity and remains the legal employer, while the provider supports agreed HR and payroll operations.
• Payroll outsourcing: The client continues employing staff and delegates selected payroll calculations, filings or administration to a service provider.

The PEO definition explains why the term should not automatically be equated with US-style co-employment in China. For an existing China entity, payroll or PEO support may be more appropriate than introducing a separate employing structure.

What Employment Requirements Must Be Addressed?

A sound EOR arrangement must account for the employee’s specific work city and employment terms. China’s Labor Contract Law sets requirements concerning written employment contracts, wages, working conditions, leave and lawful termination. Social insurance obligations are governed separately by the Social Insurance Law, while housing-fund administration has its own regulatory framework. These are related obligations, but they do not all arise from a single statute.

The employer must also address individual income tax withholding, payroll records, applicable minimum wages, work-hour systems and employment protection. Social insurance contribution bases and housing-fund practices vary by location and circumstance. For foreign nationals, immigration permission and any applicable treaty-based social-insurance exception require separate review. A provider’s service promise does not guarantee that every worker, position or proposed activity qualifies.

When Is EOR a Good Fit — and When Is It Not?

An EOR may be worth evaluating when a company needs a genuine employment relationship in China, lacks an appropriate local employing entity, and has a role for which a legally workable arrangement can be confirmed. It can be useful for a defined initial hiring need, but ongoing operations should be reassessed as the workforce and the company’s local activities expand.

It may be a poor fit if the company already has a suitable entity, needs direct employer authority, or is undertaking activities that require a different establishment or licensing approach. The proposed role also needs attention where labor-dispatch restrictions could be relevant. The commercial arrangement does not, by itself, resolve corporate tax, permanent-establishment or immigration questions.

Costs usually include the employee’s gross salary, employer statutory contributions where applicable, agreed benefits and the EOR service fee. Before signing, the parties should clarify deposit terms, payroll funding dates, service exclusions, offboarding costs and the allocation of unexpected employment liabilities. A provider’s quote should distinguish recurring employer costs from service fees and explain how changes, employee disputes and the end of the arrangement affect the total cost.

A Practical China EOR Example

A UK company plans to hire one China-based employee to support regional customers. It asks a local EOR provider to explain the employing entity, legal structure, proposed contract and statutory administration. The parties review whether the role and operating model are suitable, agree on salary and reporting responsibilities, and document who approves leave, expenses and performance actions. The local employer then handles the agreed employment and payroll administration while the UK team manages customer-facing work. If the role changes or the company establishes its own Chinese entity, the parties reassess the arrangement rather than assuming the original structure remains suitable indefinitely.

Whether the EOR model remains appropriate should be reconsidered if the role, headcount or the client’s activities in China change. The China EOR guide explains these responsibilities and risks in context, while HROne’s China EOR service sets out the operational scope available for a particular hiring plan.