China's business has been going strong in the past decades, enjoying double-digit growth in the past 30 years. As the world's largest economy, it is a very attractive location for business expansion. Shanghai especially, as the country's biggest city and global financial hub is getting much attention from businesses all around. To help companies prepare themselves for business, Links created a legislative page of the main employment laws and best practices in Shanghai. Please note that all the information listed below are to be used as a general guideline, for more detailed accounts of laws and regulations, please visit the official governmental websites.
These are your options when registering a business in China.
Benefits of a WFOE include the freedom to implement the worldwide strategies of its parent company without having to consider the involvement of a Chinese partner, the ability to formally carry on business rather than just a representative office function, the ability to issue invoices to their customers in RMB and receive RMB revenues, cheap labor, and no requirement to share profits with a Chinese counterpart.
The RO is an excellent means by which a foreign company can become further involved in the Chinese market. Advantages include that there is no registered capital required, it is easy to control compared to other business types in terms of HR or tax issues, and it is the fastest, least expensive and easiest way to set up a business in China.
1. Company RegistrationCompany registration is required for any person/ company conducting business in China. A branch office of a foreign company must also register with the Administration of Commerce and Industry.
New set up enterprise receives the business license as a legal person and other organization unified social credit code (referred as the “unified code”) from the Administration of Commerce and Industry, does not need tax registration, and no longer required to apply tax registration certificate from October 2015. After the completion of the supplementary information collection, the business license with uniform code can be used instead of the tax registration certificate.
This can be done once registration has been completed. For WFOE, you need to set up an RMB basic account and a foreign currency capital contribution account. Foreign investors for RO should open a bank account in China, as well. Requirement varies between different banks.
Typically documents required will include:
See here to read about more benefits of doing business in Shanghai.
In China, full-time employees are compulsory to submit Social Contribution, the specific insurance are pension insurance, medical insurance, unemployment insurance which are submitted by employer and employee accordingly and work-related injury insurance and maternity insurance which are submitted by employer only. The amount of social insurance is based on their average monthly income of last year. The rate of contribution differs in each city.
Employees’ CompensationSecurity Fund of wages in arrears will be charged once a year. Each Legal Entity receives the notice in every October.
As a general rule, any person other than those having the right of abode or land in China, must obtain a visa/permit before coming to China for the purpose of taking up employment.
Visas for foreigners to work in China as professionals are under the General Employment Policy, considerations for visa approval for each applicant include:
Once all required documents have been submitted to the Immigration Department, it takes about four weeks to process the visa application.
Employees who have worked over one year, he / she shall entitle the annual leave with pay. The accumulated work age of the employee which is less than 10 years, the annual leave is 5 days; more than 10 years and less than 20 years, the annual leave is 10 days, more than 20 years, the annual leave is 15 days.
Employees employed under a continuous contract are entitled to not less than one day of rest per week.
The employee with below situation, the employer is able to terminate the employee and without notice period:
The employee with below situation, the employer is able to terminate the employee, but should provide the formal written notice 30 days in advance:
Refer to the clause 25 & 26 of “Labor Law of the People's Republic of China”
The employer terminate the labor contract with the employee or the labor contract completed and employer not renew. The employer should pay the severance payment to the employee.
Benefits In Kind
Employers are not obligated to provide employees with additional medical insurance and additional housing fund. It’s a choice for companies to provide these as benefits to their employee.
Employees have to pay salaries tax on any benefits associated with stock-based awards arising from your office or employment.
Upon hiring new employee(s), the employer must report the personal details of the new employee(s), date of commencement and the terms of employment to the staffing agency within one month of the commencement date.
Maternity LeaveFemale employees meet the Population and Planned Parenthood Statute of Shanghai City are eligible for 128 days maternity leave and get birth allowance paid monthly and medical benefits from social Insurance centre.
In accordance with the laws and regulations, a new father shall enjoy the paternity leave for 10 days, the salary of the spouse during the leave period shall be paid according to his normal attendance.
In terms of the provisions of Shanghai, during the first year in the company, the medical treatment period shall be 3 months. After each year of work, the medical period is increased by one month, but no more than 24 months.
The standard of sick pay should be determined by the length of the medical treatment and the working age of the employee. If employee's disease or non-work-related injury takes a continuous leave within 6 months, the enterprise shall pay the sick leave salary according to the following standard :
1st January to 31st December of each year.
Individual income from wages and salaries shall be taxed at progressive rates ranging from 3 percent to 45 percent of which the tax threshold is 3500 RMB (4800 RMB for foreigners). Social insurance and housing fund amount and some other items stipulated by the law are tax-free income.
Employer withhold the tax and arrange the payment to authority. Employees earning more than 120, 000 RMB annually need to report their income directly to the tax authorities during March of each year.
Employer complete the monthly submission. The employee can get the record via government’s website.
Bank Accounts and Paying Salaries
The method used for wage payment is autopay or cash normally. The majority of Chinese employees are paid on a monthly basis.
For each pay period, employees will be paid the basic salary, allowances, bonus, commission, overtime, other ad hoc payments as required.
Although not required by law, it is common practice for employers in China to give employees a bonus at the end of the year. The bonus amount is determined by the company. Alternatively, companies provide employees with a 13-month salary.
Public Holidays 2019
|Holiday Name||2019 Holiday|
|New Year's Day||Dec. 30 2018 - Jan. 1 2019|
|Chinese New Year||Feb. 4 - 10|
|Qingming Festival||Apr. 5 - 7|
|May Day||May. 1 - 4|
|Dragon Boat Festival||Jun. 7 - 9|
|Mid-Autumn Day||Sep. 13 - 15|
|National Day||Oct. 1 - 7|
The work must stopped once temperature over 40℃; Over 37℃, lower than 40℃, the working hour should be within 6hours; The employee entitle to get the high temperature allowance from June to September. See here for more information.
Working Hours: 09:00-12:00 a.m. 13:00-16:00 p.m.
Standard time zone: UTC/GMT +8 hours