Using an Employer of Record can help an overseas company hire employees in mainland China without first establishing its own local entity. However, an EOR does not create an exemption from Chinese labor law.
The EOR’s local entity normally signs the labor contract and administers payroll, individual income tax, statutory benefits, and employment records. The overseas client manages the employee’s duties, objectives, and daily performance.
Both parties therefore affect compliance. The EOR handles formal employer processes, while the client must provide accurate instructions, maintain evidence, and involve the EOR before making important employment decisions.
This guide explains the seven areas of China labor law that matter most when using an EOR.
1. The Employee Needs a Written China Labor Contract
China’s employment framework is built around the written labor contract.
Under the Labor Contract Law of the People’s Republic of China, a written contract should be concluded when employment begins. If it is not signed immediately, it generally must be completed within one month of the employee’s start date.
Allowing an employee to work for more than one month without a written contract can expose the legal employer to double-salary liability for the applicable period.
The contract should clearly identify:
- The local legal employer
- The employee’s job and responsibilities
- The primary workplace
- The contract term
- Working hours, rest days, and leave
- Salary and payment arrangements
- Social insurance
- Working conditions and occupational protections
- Other agreed benefits and lawful obligations
The contract must also match the real arrangement. A document stating that an employee works in Shanghai, for example, may create problems if the person permanently works from another city and that difference has not been addressed in payroll and benefit administration.
An EOR should therefore review the employee’s actual role, location, compensation, and reporting structure before issuing the contract.
2. Probation Is Regulated and Does Not Allow Automatic Dismissal
Probation periods in China are tied to the length of the labor contract. They cannot be extended simply because a manager wants more time to assess the employee.
An employee may normally be placed on probation only once with the same employer. Certain short-term contracts cannot include probation, while longer contracts permit progressively longer probation periods up to the statutory maximum.
Most importantly, probation is not an at-will employment period.
Before terminating someone for failing to meet recruitment conditions, the employer should be able to show:
- The recruitment conditions were lawful and communicated
- The employee understood the required standards
- Performance or conduct was assessed against those standards
- The evidence was created during the probation period
- The legal employer followed the proper process
The overseas client should give performance feedback and documentation to the EOR promptly. Waiting until the final day of probation creates unnecessary risk.
3. Payroll, Working Hours, and Overtime Must Be Locally Compliant
Payroll is not simply an administrative service. It is part of the employer’s legal obligations.
China’s Labour Law requires wages to be paid in currency and on time. Employers must also follow the applicable local minimum wage and overtime rules.
For employees under the standard working-hours system, the commonly implemented schedule is eight hours per day and five days per week. Overtime compensation is generally calculated at no less than:
- 150% of the normal wage rate for overtime on a regular working day
- 200% for work on a rest day if compensatory time off is not provided
- 300% for work on a statutory holiday
Flexible or comprehensive working-hours systems may be available for certain roles, but they normally require local approval. A foreign company should not assume that calling an employee “senior,” “remote,” or “results-based” automatically removes overtime obligations.
Before onboarding, the EOR and client should agree on:
- The employee’s working-hours system
- How attendance will be recorded
- Who can approve overtime
- How commissions and bonuses enter payroll
- When monthly payroll inputs are due
- How salary adjustments will be documented
- Who retains payroll and attendance evidence
This is particularly important in multi-city China hiring, where minimum wages, contribution bases, and administrative practices can vary by location.
4. Social Insurance and Housing Fund Cannot Be Ignored
China’s statutory employment costs commonly include social insurance and the housing provident fund. Social insurance covers categories such as pension, medical, unemployment, work injury, and maternity benefits.
Employers generally must register employees and make the required contributions. Employees cannot simply waive mandatory contributions through a private agreement in exchange for additional cash.
Official government guidance notes that employers must register eligible employees for social insurance and pay contributions in full and on time. Local contribution bases, rates, filing procedures, and housing-fund requirements can differ by city.
For an EOR arrangement, confirm:
- Where the employee will be registered
- Whether registration matches the actual work location
- Which salary base will be used
- What the employer and employee contribution amounts are
- When enrolment will begin
- How contribution changes will be processed
- What evidence the employee will receive
Foreign nationals may also fall within China’s social insurance system, subject to applicable rules and any relevant treaty arrangements. Government guidance on social insurance for foreign employees illustrates the registration and contribution obligations that may apply.
An EOR quote should separate gross salary, employer statutory costs, employee deductions, service fees, deposits, and optional benefits.
5. Leave and Employment Policies Must Follow China Rules
Employees in China may be entitled to statutory holidays, annual leave, maternity-related leave, sick leave, marriage leave, and other locally regulated entitlements.
Employees who meet the continuous-service requirement generally receive paid annual leave based on their cumulative working experience:
- Five days for at least one but fewer than ten years
- Ten days for at least ten but fewer than twenty years
- Fifteen days for twenty years or more
Local rules can affect other forms of leave, especially maternity, parental, marriage, and sick leave. The EOR should apply the rules for the employee’s location rather than using one global leave schedule for every Chinese city.
The client should also understand that an overseas employee handbook cannot automatically be enforced in China.
Rules concerning attendance, discipline, performance, confidentiality, expenses, leave, and termination should be:
- Consistent with Chinese law
- Adapted to the local employment structure
- Adopted through any required employee consultation process
- Properly communicated to the employee
- Supported by evidence that the employee received them
Policies are especially important when misconduct or repeated rule violations may later become grounds for disciplinary action.
For a broader lifecycle review, see the China HR compliance guide.
6. Termination Requires a Lawful Ground and Proper Procedure
China is not a general at-will employment jurisdiction. A manager cannot safely tell an employee that employment ends immediately and ask the EOR to complete the paperwork afterward.
The legal employer first needs to identify a valid route, which may include:
- Mutual termination by written agreement
- Employee resignation
- Termination for serious misconduct
- Termination for failure to satisfy recruitment conditions during probation
- Termination based on qualifying incapacity or incompetence
- Economic redundancy where the statutory requirements are met
- Expiration of a fixed-term contract
- Another legally recognized circumstance
The required notice, evidence, consultation, and severance depend on the selected route.
Statutory economic compensation is commonly calculated using the employee’s service with the employer and average monthly salary, subject to the legal calculation rules and caps. An unlawful termination may result in reinstatement or compensation calculated at twice the statutory economic-compensation amount.
Before communicating a termination, the client should provide the EOR with:
- The proposed reason
- The relevant contract and policy provisions
- Performance or misconduct evidence
- Prior warnings and employee responses
- The requested termination date
- Information about unused leave and outstanding payments
- Company property and access details
The EOR should then assess the legal route, required documents, severance exposure, final payroll, benefit deregistration, and employee communication.
A provider that promises an “easy exit” without examining these points is creating risk rather than removing it.
7. Foreign Employees Need Separate Work Authorization
When the employee is a foreign national physically working in China, a compliant labor contract is only one part of the process.
The employee must also have the correct work and residence authorization. China’s National Immigration Administration states that foreigners cannot work without the required work permit and work-type residence permit or outside the authorized scope.
Before the employee starts, verify:
- Which Chinese entity will sponsor the application
- Whether the role meets the relevant eligibility criteria
- Whether the job title and location match the application
- Whether the employee’s qualifications satisfy local requirements
- Whether the work permit and residence permit have been issued
- How changes of employer, title, city, or employment status will be reported
The official Rules for the Administration of Employment of Foreigners in China provide the underlying employment-permission framework.
An EOR may support work authorization, but sponsorship is not automatic. The employee, position, location, EOR entity, and proposed arrangement must all be assessed.
What the EOR and Client Are Each Responsible For
The EOR is the formal employer, but the client still controls many facts that create employment risk.
The EOR normally handles:
- Preparing and signing the local labor contract
- Payroll and individual income tax withholding
- Social insurance and housing-fund administration
- Statutory employment records
- Local HR documentation
- Formal employee communications
- Compliant onboarding and offboarding procedures
The client normally handles:
- Selecting the employee
- Defining the position and workplace
- Setting objectives and daily duties
- Approving salary, bonuses, leave, and expenses
- Recording working hours and performance
- Supplying evidence for disciplinary action
- Consulting the EOR before changing or ending employment
- Funding payroll and employment costs on time
These responsibilities should be documented in the service agreement and operating process. If neither side clearly owns a task, it is unlikely to be handled consistently.
Questions to Ask a China EOR Provider
Before selecting a provider, ask practical questions rather than relying on a general promise of compliance:
- Which local entity signs the labor contract?
- In which city will the employee be registered?
- When will the written contract be signed?
- How are payroll, IIT, social insurance, and housing fund handled?
- How are overtime and leave recorded?
- Which employee handbook and policies apply?
- Who supports performance and misconduct documentation?
- What happens when termination is proposed?
- Can the provider support the required foreign work authorization?
- Which responsibilities and liabilities remain with the client?
- How will the employee move to the client’s entity later?
A mature provider should explain both its service capability and its limitations.
Conclusion
A China Employer of Record can provide the local employer infrastructure required to hire without establishing your own mainland China entity. It does not, however, remove labor-law obligations.
The arrangement depends on timely contracts, accurate payroll, locally administered benefits, controlled working hours, valid policies, properly managed leave, and lawful termination procedures. Foreign-national hires add a separate work-authorization requirement.
The most effective approach is to involve the EOR before making the offer and before changing salary, duties, location, working hours, or employment status.
Read HROne’s complete China EOR guide for the full hiring model, or contact HROne to discuss hiring and employing workers in China.
Frequently Asked Questions
Does using an EOR avoid China labor law?
No. The EOR becomes the local legal employer, but the employment relationship must still comply with Chinese rules governing contracts, wages, working hours, benefits, leave, and termination.
Who signs the labor contract in an EOR arrangement?
The EOR’s local employing entity normally signs the labor contract. The overseas client should not be presented as the formal local employer if it has no employing entity in mainland China.
Can an employee waive social insurance?
Mandatory social insurance obligations generally cannot be removed through a private agreement between the employer and employee.
Can a client terminate an EOR employee immediately?
The client should consult the EOR before communicating any termination. The legal employer must establish a lawful route, review the evidence, calculate potential severance, and follow the required procedure.
Can an EOR employ a foreign national in China?
Potentially, but the employee must qualify for the appropriate work and residence authorization. Sponsorship availability should be confirmed before making a binding offer.