For international companies operating in China, hiring local employees is often the first step toward building a presence in the market. From dealing with labor laws to managing cultural differences, the decisions you make early on can significantly affect your local success. In this article, we outline several employment options – freelance hiring, payroll-only services, and Employer of Record (EOR) solutions – highlighting their benefits, risks, and suitability for different business stages.
Whether you’re testing the waters, haven’t set up a legal entity yet, or are managing operations in multiple destinations throughout China, understanding your employment options is crucial.
Hiring Freelancers
Over the past decade, freelance jobs have become increasingly popular in China, particularly among people who have moved from rural areas to large cities. These roles provide flexibility and a sense of independence. Common examples include online marketing, live streaming, and ride-hailing services. Some international companies also use freelancers for sales and marketing roles.
The Advantages:
Freelancer arrangements simplify your relationship with the worker. Individual Income Tax (IIT) and social insurance payments are handled by the freelancer, and many candidates, especially younger ones, are highly motivated and eager to prove themselves.
The Limitations:
You’ll have limited control over how your brand is presented in the market, and visibility into customer interactions can be low. Payment from overseas to a personal bank account in China can also be complicated.
The Potential Risks:
Freelancers are not bound by formal agreements to your company. Without clear expectations and strong oversight, some may work for competitors or misrepresent your brand—without your knowledge.
When is this a good fit?
This solution may work if you plan to visit China regularly and maintain close communication with your freelancers. It can be a temporary way to launch operations but is not recommended for the long term.
A note on payment:
Because transferring foreign currency to individuals in China is complex, it’s best to use online payroll tools or partner with a local entity that can manage salary, tax, and social insurance contributions on your behalf.
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Payroll-Only Solutions
Some companies offer online or offline payroll services to help foreign businesses pay local employees without setting up a Chinese entity. This approach helps overcome payment challenges, but it’s important to understand its limits.
The Advantages:
This solution is cost-effective and provides a legal way to pay employees in China’s closed financial system. It can also work for companies that already have a WFOE but want to pay employees in different cities based on their hukou (household registration).
The Limitations:
Because the legal employment relationship is not formalized, you may be exposed to compliance risks. Contracts alone don’t guarantee protection, especially if you’re unfamiliar with local business culture.
The Potential Risks:
Similar risks to those with freelancers apply here – limited legal recourse, unclear obligations, and weak brand control.
When is this a good fit?
This option may be suitable for short-term arrangements or companies focused on minimizing costs. Just keep in mind that cheaper solutions may come with hidden risks—especially in China’s regulatory environment.
Employer of Record (EOR) Services
If you’re ready to establish a more stable presence in China, EOR services provide a comprehensive and reliable employment solution. The EOR company becomes the legal employer of your local staff, handling payroll, taxes, social insurance, and employee welfare on your behalf.
The Advantages:
Your employees receive legal protection, reliable HR support, and a stronger connection to your company. This improves brand representation, builds employee loyalty, and helps create a professional image with local clients and partners. It also demonstrates your commitment to the Chinese market.
The Limitations:
This is a more expensive option, as the EOR provider takes full legal responsibility for your employees and offers a broader range of HR services.
The Potential Risks:
In cases of employee termination, disputes may go to arbitration, which can be lengthy. However, with an experienced HR partner, most issues can be resolved through open dialogue and fair negotiation.
Choosing the Right Hiring Solution for Your China Operations
Hiring a local representative is often the first step in developing your business in China—sometimes even before setting up a legal entity. Whether you choose to work with freelancers, use a payroll-only solution, or partner with an EOR provider, it’s important to align your hiring model with your business goals.
Each option has pros and cons, depending on your budget, risk tolerance, and level of involvement. Need help exploring the right solution for your company? Contact our China employment experts today.
