Understanding China's Labor Law to Hire Employees in China

China is the fastest growing economies in the world, and it is continuing to rise in the world economy. With your new expansion plan for your business in China, understanding China's labor law is the key to success. 

It is essential to have a registered legal entity in China to hire staff. Without a legal entity, it is only possible to hire staff through a licensed HR vendor who has the correct business license. These companies are able to provide contracts for staff and organize payroll. Whilst foreign HR companies can receive a recruitment license, they cannot be issued with a business license that allows them to hire staff on behalf of the company.

Establish your brand. A well-known brand is more attractive to Chinese candidates than lesser known companies. A start-up might have to pay as much as 15 percent above the market average to attract the right member of staff due to a lack of brand recognition. 

Make sure to retain staff. The cost of hiring new team members is much higher than keeping and training existing staff. As well as annual pay rises and good holiday packages, staffs respond well to training and options for promotion.

Ensure you have a good company culture and localize accordingly. Understand the Chinese way of thinking and working and be aware that different mindsets might lead to a different approach in order to get results. Be flexible. 

It is getting harder to hire non-local staff. In 2016, a policy was introduced to regulate foreigners working in China and to protect the local employment rate.

It is also important to be sensitive and aware of local culture and customs. Unlike in the UK, few people in China work part-time or on short-term contracts. And it is essential to provide an annual bonus – normally around one month of salary – which should be given before Chinese New Year. The labor law in China is very much in favor of the employee and it is recommended that you sign a fixed term rather than an open-ended contract. 

Salary is still very much the main reason talent will take a job or not. Although do keep in mind also what opportunities for promotion and development you can provide them. The company's brand and images are also important, as is the staff member's relationship with their line manager. And, of course, employees want to ensure they have a good work-life balance. 

Pay and promotion are the main motivators that get Chinese staff working well. Also keep in mind training and some flexibility on holiday time off.

It's essential to check references of new staff. Make sure you speak to their previous employers, especially those that are new to western firms. Don't hire anyone without first getting references or it may cost you further down the line. 

Talent Spot International is a leading one-stop HR solutions provider. We help you to quickly familiarize the China market environment, easily register a company, employees recruitment, administrative services, and other supporting services. Talent Spot International also can provide advisory and practical services for investors regarding China company formation to minimize the future rises to our clients.