Human Resources and Payroll in China: Fourth Edition

China Brieng The Practical Application of China Business
The Practical Application of China Business
Human
Resources
and Payroll
in China
Fourth Edition
China Briefing
The Practical Application of China Business
For further volumes:

http://www.springer.com/series/8839
http://www.asiabriefing.com
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment,
business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review ser-
vices to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into
one of Asias most versatile full-service consultancies with operational offices across China, Hong Kong, India,
Singapore and Vietnam as well as liaison offices in Italy and the United States.
We also provide useful business information through our media and publishing house, Asia Briefing Ltd.
This edition updated by a number of professionals at Dezan Shira & Associates led by Adam Livermore, including Helen
Kong and Sarah Wei. Eunice Ku, Samantha Jones and Christian Fleming acted as editors.
Michael Maeder of Direct HR (a boutique recruitment firm specializing in the China market with a presence in Shanghai,
Beijing, Shenzhen, Ningbo, and Macau) contributed the first chapter, with assistance from Chun Liew and Derrick Wong.
The cover and contents of the book for all editions were designed and laid out by Chris Wei.
Dezan Shira & Associates Chris Devonshire-Ellis
Christian Fleming Eunice Ku
Editors
Human Resources
and Payroll in China
Fourth Edition
13
Editors
Chris Devonshire-Ellis Christian Fleming
Founding Partner Editor in Chief
Dezan Shira & Associates Asia Briefing Ltd.
Publisher Shanghai
Asia Briefing Ltd. People's Republic of China
Kowloon
Hong Kong SAR
Eunice Ku
Senior Editor
Asia Briefing Ltd.
Shanghai
People's Republic of China
ISSN 2191-0634 ISSN 2191-0642 (electronic)

ISBN 978-3-642-36041-1 ISBN 978-3-642-36042-8 (eBook)
DOI 10.1007/978-3-642-36042-8
Springer Heidelberg New York Dordrecht London
Library of Congress Control Number: 2013939337
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v
Contents
1 Recruiting Professionals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Profiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Candidate Identification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.3 Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.4 On-Boarding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2 Hiring Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1 Contract Types. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2 Designing a Labor Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.3 Structuring a Salary Package. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.4 Mandatory Benefits (Social Insurance). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.5 Creating a Company Rulebook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3 Handling Payroll. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1 Calculating Overtime Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.2 Paying Mandatory Contributions (Social Insurance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.3 Additional Payroll Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.4 Distributing Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.5 Calculating and Filing Individual Income Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3.6 Outsourcing Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4 Managing the Employment Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

4.1 Performing Periodic Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.2 Long-Term Sick or Injured Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.3 Pregnant Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.4 Labor Unions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5 Terminating the Employment Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

5.1 The Importance of Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
5.2 Terminating During the Probation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
5.3 Terminating During a Fixed-Term Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
5.4 Terminating at the End of a Fixed-Term Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
5.5 Terminating During an Open-Term Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
5.6 Severance Pay and its Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
5.7 Mass Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6 Organizing Visas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
6.1 F Visa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
6.2 Z Visa and Residence Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
6.3 Sending Chinese Staff to Work Abroad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Further Reading: China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

vii
Introduction
A firm understanding of Chinas laws and regulations related to human

resources and payroll management is essential for foreign investors who
want to establish or are already running foreign-invested entities in
China, local managers, and HR professionals who may need to explain
complex points of Chinas labor policies in English.
The first chapter of this guide focuses on specifics of the recruitment

process in China. While the overall process for hiring people in China
does not differ much from elsewhere in the world, there are a number
of points that require special attention. The rest of the guide has been

designed to cover the most important issues relating to managing a
Chinese workforce in enough detail to satisfy the requirements and While the overall process
curiosity of most managers either working in China or involved in HR for hiring people in China
at headquarters abroad. does not differ much from
elsewhere in the world, there
In China, there are a wide range of government institutions, and while are a number of points that

key laws are drafted by the central government, numerous bylaws and
requirespecial attention.
regulations are instituted at a local level. The topic is too complex to
be covered in complete detail in one book, so the term guide is quite
appropriate for the nature of this book. It should serve as a useful refe- Adam Livermore
rence; however, companies should still seek professional advice to deal Manager, Payroll
with any specific situation they face relating to HR. Dezan Shira & Associates
Dalian Office
This publication is based on the knowledge of Dezan Shira & Associates, china@dezshira.com
a specialist foreign direct investment practice providing corporate esta- www.dezshira.com
blishment, business advisory, tax advisory and compliance, accounting,
payroll, due diligence and financial review services to multinationals
investing in emerging Asia.
Since its establishment in 1992, the firm has grown into one of Asias
most versatile full-service consultancies with operational offices across
China, Hong Kong, India, Singapore, and Vietnam as well as liaison
offices in Italy, and the United States. Dezan Shira & Associates expe-
rienced business professionals are committed to improving the under-
standing and transparency of investing in emerging Asia.
1 1
Recruiting Professionals
Direct HR and Dezan Shira & Associates
Recruitment is defined as the profiling, attraction, search, selection,

and on-boarding of candidates for open positions. Due to Chinas his-
tory of rapid economic and social development, managers encounter a FOR MORE INFORMATION
unique set of challenges when seeking to recruit professionals in China. Human Resources and Payroll in
This chapter is meant to support human resource departments as well China presented
as functional and general managers in calibrating their recruitment acti- Adam Livermore answers popular questions
vities to the Chinese market, with a focus on recruiting white collar and concerning Human Relations and Payroll in
skilled senior technical professionals. China. Adam crystalizes the current payroll
and human relations concerns in China. He
took the most common mistakes firms make
China Recruitment Process when in China, and provides information to
allow firms to avoid those mistakes.
1.1 PROFILING
Analyze company needs www.dezshira.com/multimedia
Specify job content
Define job title
Define candidate profile
Research compensation details
1.2 CANDIDATE IDENTIFICATION

Attraction Search
Active applying candidates Passive candidates
Advertising jobs online Research databases

Advertising jobs offline Research target companies
Participating in events Contact target candidates
Involve recruitment firms
1.3 SELECTION
Screen CVs
Conduct interviews
Manage candidate expectations
Conduct assessment centers
Conduct reference checks
1.4 ON-BOARDING
Send candidates a letter of intent
Consider candidates notice period
Manage time and feedback
Consider impact of hukou and location
Dezan Shira & Associates (*)

Kowloon, Hong Kong SAR
Dezan Shira & Associates et al. (eds.), Human Resources and Payroll in China,
China Briefing, DOI: 10.1007/978-3-642-36042-8_1, Asia Briefing Ltd. 2014
2 Chapter 1 Recruiting Professionals
1 Finding qualified staff,

increase of labor costs, and
retaining qualified staff are the
What are the major recruitment challenges in China?
Challenges in the China recruiting process include:
top 3 business challenges for

5 Hard-to-fill positions
most companies in China. Rapid economic growth, insufficient capacity of the Chinese
education system, and high demand for skilled labor have
Chun Liew resulted in a shortfall in supply of professionals with multiple
Partner language abilities, in-depth technical and industry know-how,
international exposure, and familiarity with global best practices.
Direct HR
5 High personnel turnover and recruitment uncertainty
Shanghai Office
Professionals move quickly between jobs, particularly in first-
team@directhr.cn
tier cities such as Shanghai, Beijing, and Guangzhou. This
www.directhr.cn common job-hopping trend, coupled with high drop-out rates
during the on-boarding process, makes continuous recruit-
ment planning a challenge.
5 Low mobility of staff
There is a general reluctance for professionals to relocate within
China or to accept a longer commute to the work place. Therefore,
location is a particularly important factor to take into considera-
tion when choosing to establish a foreign-invested entity.
5 Misinterpretation of candidate credentials, profiles, and
presentations
Personality characteristics, such as being straight-forward (which
might be favorable in the Western hemisphere), or language skills,
such as the ability to communicate fluently in English, are often
misinterpreted or over-emphasized in the search for suitable can-
didates. Furthermore, academic credentials are often over-valued.
The Chinese education system still emphasizes learning facts by
heart rather than developing independent thinking and problem-
solving skills. Additionally, the frequent job changes of candidates
are often incorrectly interpreted by companies as a sign of imma-
turity. From the perspective of the candidate, changing jobs has
been considered for many years to be a means of rapidly gaining
experience and a way to speed-up professional growth.
5 CV and credentials fraud
Falsifying credentials are a prevalent problem which recrui-
ters face in China. Particularly when CVs are provided by
applicants in other languages than Chinese, these translation
mistakes are a convenient means to upgrade titles or certi-
ficates. Accordingly, the employment risk is amplified and
appropriate actions have to be taken to minimize these risks.
5 Challenges in title and salary assignment
Job titles are closely linked to social status in China; for
example the title manager is highly coveted. This, along
with lack of detailed market data about salary levels and can-
didates unrealistic expectations of foreign salary levels, makes
linking job title with the appropriate salary a challenge.
1.1 P
rofiling
3 1
1.1 Profiling
The profiling stage is a critical planning phase in the recruitment process

to develop a resource-efficient, fast, and effective approach to ensure the
suitability of a new hire within an organization. The cultural and experi-
ence gaps between Chinese and foreign managers in companies opera-
ting in China often results in conflicting assumptions with regards to job
content and candidate qualification criteria during the hiring process. A
well-executed profiling exercise will serve to bridge these gaps to mini-
mize misunderstandings and avoid hiring unqualified employees.
Throughout the profiling stage, the HR representative should main-
tain close contact with the hiring manager. Strong communication is
necessary when specifying the company needs, job content, job title,
and candidate profile and compensation details. Especially when the HR
manager and hiring manager have different cultural backgrounds, good
communication ensures that assumptions for the position are aligned,
and complications throughout the recruitment process are minimized.
Analyze Company Needs
In order to assess a companys recruitment demands, an inventory has

to be conducted of the functional areas which need to be covered. The
defined functional areas are then broken down into specific job content,
which are then categorized into distinct positions. Finally, the number
of professionals needed is determined by the output required on the
demand side as well as the market availability of professionals with the
skill sets to cover areas of the predefined job content.
In China, companies have resorted to hiring more staff to counter
high fluctuation of employees. Additionally, a prevailing scarcity exists
for Chinese professionals with the necessary skill sets to fill senior
technical and management roles. Accordingly, companies have been
observed to hire a larger number of employees to fill such positions as
compared to other more mature markets such as the United States and
Europe. For example, a German engineering manager tends to have
more years of experience, is more versatile and is able to handle a larger
variety of tasks compared to a Chinese equivalent. This often results in a
company separating what would be done by one manager in other mar-
kets into two or more distinct positions in China.
Specify Job Content
Job content should include the jobs objectives, responsibilities, and

duties. Due to the scarcity of versatile Chinese professionals, it is com-
mon in China for the originally defined job content to be adjusted after
having reviewed the availability of skill sets in the labor market.
Define Job Title

1
Defining the right job title will have a significant impact on how well a
company will be able to attract qualified candidates. For instance a job
title at a multinational company might be team leader or senior engi-
neer, when a similar position would be designated as manager at a
local Chinese company. A problem arises when candidates who would
have considered the job opportunity for its content and compensation
would decline it simply because they would have to downgrade them-
selves from a manager to a non-manager title. Many international
companies have therefore implemented a unique system for job tit-
les in China in which the title manager is integrated into more posi-
tions, and even new job titles are created which do not exist in any other
country.
Generally, candidates in China expect faster promotions. Therefore,
to facilitate this demand a company might consider adding more inter-
mediate hierarchical levels. For example, whereas a companys home
market may only have account managers, this role could be split into
junior account managers, and account managers in China.
A lower level of standardization exists in China when it comes to job
titles and their related job content. This provides certain flexibility for
defining job titles within an organization.
Define Candidate Profile
It is increasingly common that companies in China are employing a

mix of local and foreign staff for reasons such as communication, mana-
gerial experience, and trust. The right mix of employees can positively
enhance efficiency and create a better working environment. A general
categorization will help employers in China to come up with the opti-
mal mix for their workforce.
At present, many foreign companies in China are forced to hire pro-
fessionals with less practical working experience and lower technical
qualification compared to employees in their home country who fulfill
the same role. The solution implemented by numerous foreign compa-
nies in China lies in hiring comparatively younger high-potentials who
are able to handle a steep learning curve, and eventually undertake the
required responsibility on their own, while initially receiving guidance
from a more experienced foreign professional.
Besides listing candidate qualification criteria for a vacancy in an
ideal candidate profile, it is advisable to scrutinize each qualification cri-
teria by asking the following two questions:
1. Is the qualification criteria kick-out, required or preferred?

Kick-out criteria =candidate should no longer be considered if any
1 is not fulfilled.
Required criteria =candidate may still be considered if only 1 or 2
are not fulfilled.
1.1 P
rofiling
5 1
Types of employees to recruit to work in China
China Chinese English Other Know-how Employment Market Salary

cultural language language language of industry stability availability expectations
fit ability ability ability best practices
Local +++ +++ + + + +++ +

Chinese
(no overseas
experience)
Chinese ++ +++ ++ + ++ ++ + ++
returnees
(with
international
exposure)
Overseas ++ ++ +++ ++ ++ ++ ++ ++
Chinese
in Asia (e.g.,
Singapore,
Taiwan,
Hong Kong)
Overseas + + +++ ++ +++ ++ ++ +++

Chinese
outside
Asia (e.g.,
America,
Europe)
Foreigners +++ +++ +++ ++ ++ +++

(Non-Chinese)
Preferred criteria =candidate will still be considered even if criteria

is not fulfilled.
2. What is the relative importance of the qualification compared to

other criteria?
These qualifying questions will provide a clearer picture of the
vacancy internally and throughout the selection process. A key benefit
is that individuals responsible for the selection of suitable candidates
will have a clearer framework within which they can assess candidates.
1 Candidate profile: Senior quality engineer
Candidate details KO Weight
Educational REQ Bachelor degree or higher, major in casting or mechanical engineering 10

background
PRE Alternatively a professional college education with focus on casting
Professional REQ Above 4years hands-on supplier development and production KO 20

experience experience in casting
Above 3years of quality control and assurance experience in casting

and machining
In-depth understanding of quality control and assurance processes
PRE Knowledge of EU and international regulations and standards for

casting components in controls, fittings, and instruments
Technical skills REQ In-depth and solid knowledge of metallurgy KO 20
In-depth know-how of casting techniques
PRE Familiarity with ISO9000 and PED system
Soft skills REQ Strong work spirit and ethic 20
Good coordination and communication skills
Good organizing and planning skills
PRE Good coaching skills
Language skills REQ Fluent in spoken and written English (TEM 8) KO 10
Fluent in spoken and written Chinese
PRE Knowledge of spoken German is a plus
Personality REQ Meticulous/pays attention to detail 10

requirements
Punctual and precise
PRE A strong self-initiator
Motivational REQ Willing to travel extensively within China 5

requirements
PRE Willing to live and work in Nanjing
Desired age PRE >28 3
Other requirements REQ In good physical and mental health 2
PRE Driving license for passenger cars

*REQ=required, PRE=preferred but not necessary, KO=Kick-out criteria (max. 3); Weight=Category importance
(tot.=100)
1.1 P
rofiling
7 1
Research Compensation Details
Conducting research on compensation in China will allow a company

to more effectively attracts the best talents in the market. This can be
done by engaging professional service providers. External data on com-
pensation is also available on various job web sites or from comprehen-
sive salary surveys which can be used as a reference to track main trends
in the Chinese market.
It has to be taken into consideration that there is a large variance
between salary reports from different sources in China. This is mainly
due to the lack of region- and industry-specific data as well as differing
assumptions on language requirements, international exposure, know-
how of industry best practices, and job content amongst companies.
Compensation research channels
Channels Quality Price per Comments Sources in Website

report (RMB) China
Consultancies +++ >2,000 Large sample source Hewitt www.hewittassociates

.com
Customized report Watson Wyatt www.watsonwyatt.com
D
etailed data collation Mercer www.mercer.com
process
S uitable for middle- Hudson www.hudson.com

executive level positions
Job boards ++ >500 Large sample source 51Job www.51job.com
Less customized report ChinaHR www.chinahr.com
S uitable for entry-middle Zhaopin www.zhaopin.com

level positions
Websites + Free Large sample source PayScale www.payscale.com
Based on anonymous data
S uitable for quick and

rough benchmarking
Government ++ Free Large sample source National www.stats.gov.cn

statistics Bureau of
Reliable data
Statistics of
S uitable to observe China
market trends
1.2 Candidate Identification
In general, there are three types of candidates that can be identified

during the recruitment process: active, passive database, and passive
direct contact.
1 Job candidate types and relevant characteristics
Candidate type Definition Pros Cons Comments
Active Candidates who Large pool Low hit rate Most suitable for
send their resume to junior positions
Interested candidates Fraud sensitive
apply for an online and mass
and/or offline job Marketing intensive recruitment
advertisement
E asy to obtain T ime consuming
candidate profile screening
Passive database Candidates who Large pool Costly Most suitable for
have published their generic mid-level
C
andidate profiles Low candidate interest
profiles in databases positions
available
and who are not T ime consuming
actively applying to a D
etailed search search
job advertisement specifications
possibilities
Passive direct Candidates who have Q

ualified pool of D
ifficult to identify Most suitable for
contact not published their candidates and contact target executive-level
profiles in databases candidates positions and
High hit rate
and who are not specialists
actively applying to a L ower fraud O
nly able to assess
job advertisement sensitivity candidate suitability
after having obtained
the candidates profile
Low candidate interest
Resource consuming
Small pool
Due to the high activity level of the recruitment market in China, many
demanded candidates do not publish their information in generic databa-
ses as this might lead to them being overloaded with irrelevant job offers.
Many of these candidates are therefore only approachable via direct contac-
ting, and often only promote themselves via niche (e.g., industry-specific)
channels and their personal network. This also has the benefit that the can-
didates are able to realize a higher market value compared with finding jobs
via the generic strategies (actively applying, publishing profile in databases).
Professional clusters can be broken down in China according to
major Chinese cities. For example Shanghai boasts industries such as
automotive, banking and finance, IT and trading, so companies in these
industries might consider concentrating on allocating resources in this
region to find qualified professionals.
Attraction (Active Applying Candidates)
The usage rate of candidates searching for career opportunities on

online recruitment channels in China is comparable with mature mar-
kets such as the United States and Europe. There are many online
1.2 C
andidate Identification
9 1
advertising channels that exist in China. According to statistics by
iResearch.com, the total value of the e-recruitment market in China as
of 2011 was valued at RMB 2.18 billion, with the biggest online plat-
forms being 51 job (36.7%), Zhaopin (28.9%), and China HR (15.6%).
China E-recruitment Website Revenue Market Share (2011)
Others
18.8%
51job
36.7%
ChinaHR
15.6%
Zhaopin
28.9%
Online recruitment channels examples
Type Sample Regional Industry Target Comments Price per

strength strength group ada (RMB)
Generic 51Job.com East China, General Generic Large market share in China 30
Shenzhen,
A
bout 1025 active applicants
Beijing
per day
www.51job.com
ChinaHR.com First-tier General Generic Large market share in China 20

cities in
A
China
per day
www.chinahr.com
Zhaopin.com North China General Generic Large market share in China 20
A
per day
www.zhaopin.com
Region ZJRC.com Zhejiang General Generic O

ne of the government websites 15
specific in China that focus on recruitment
www.zrjc.com
JobsDB.com Hong Kong General Generic L arge job portal which spans 180
across different cities in Asia
and USA
www.jobsdb.com
1 Online recruitment channels examples
Type Sample Regional Industry Target Comments Price per

strength strength group ada (RMB)
Language German Beijing, General German C

hinese-German speaking 2,000
specific Chamber of Shanghai, spea- professionals
Commerce Guangzhou, king
German native professionals
Website Hong Kong profes-
(AHK) sionals www.china.ahk.de
The American Beijing, General English C

hinese-English speaking Only for
Chamber of Tianjin, spea- professionals members
Commerce Wuhan king (three free
American professionals
(AmCham) profes- postings
sionals www.amchamchina.org per month)
aMany online channels require companies to purchase package deals which include numerous job posting credits and
numerous CV credits
Printed media recruitment channel examples
Type Sample Regional Industry Target group Comments Price per

strength strength ad (RMB)
Generic China Trade All China General Job seekers Strongly focused on >450
Newspaper (51 the recruitment of
job) talents in China
Industry oaotu All China Automotive Management Analysis of the overall >500
specific Magazine auto industry trends,
countrys policies and
regulations
Caijing North, East, Finance Management Tracks the most >75,000

South academics important aspects
of Chinas economic
reforms, developments,
and policy changes,
as well as major
events in the capital
markets. It also offers
a broad international
perspective through
first-hand reporting on
international political
and economic issues
Region Jiefeng Shanghai General Job seekers Include updates on >1,000

specific Daily Group current HR news and
Newspaper articles with dedicated
job section
theBeijinger Beijing General People living English language >4,800

in Beijing magazine about the
Managers city and lifestyle for
Students locals and expatriates
1.2 C
11 1
Recruiting event examples
Type Sample Regional Industry Target group Comments Price for

strength strength participation
(RMB)
Industry Orient Shanghai Automotive Automotive O

ver 1000 participating >600
specific express professionals candidates
O
ver 20 participating
companies
www.01h.com
Region BJRC Beijing General Job seekers O

specific candidates
O
companies
www.bjrc.com
NBRCW Ningbo General Job seekers O

candidates
O
companies
www.nbrcw.com
High- Shenzhen Shenzhen General Senior O

ver 3000 participating >4,000
end top talent management candidates
specific job fair and technical
7
080 participating
specialists
companies
www.dazhonghr.com
CEIBS Shanghai General MBA An event that serves as a Complimentary,

meet and students and platform for company by invitation
match graduates representatives to meet only
high potential candidates
from the CEIBS in short
prescheduled
interviews
http://ceibs.directhr.cn
Search (Passive Candidates)
Online databases are also useful to reach passive candidates. Depending

on the type of candidate, there are different databases (China-focused or
international-focused).
1 Online candidate database examples
Region Database Users Ability to Quantity of Number of Price per

specify candidate candidates profile (RMB)
search profiles having know-
how of industry
best practices
China-focused 51Job.com Chinese Average- >49 Million Low-average RMB15

high
ChinaHR.com Chinese Average- >28 Million Low-average RMB10

high
Zhaopin.com Chinese Low >38 Million Low RMB15
Renren.com Chinese Low >150 Low Free

Million
International- LinkedIn.com American/ High >150 Average-high RMB160/month,

focused European Million 300 profiles
Viadeo European High >35 Million Average-high RMB90/month,

(French) unlimited profiles
Monster.com Global High >150 Average-high RMB6,500/month,

Million unlimited profiles
*Many databases require companies to purchase package deals which include numerous job posting credits and numerous
CV credits
Research Target Companies
Establish lists of target companies consisting of direct competitors

and other firms who might have suitable candidates. This is followed by
cold-calling target companies to obtain the name and contact details of
the target candidates.
FOR MORE INFORMATION Legal note

Contact: No statutory law exists against cold-calling. However, we recommend
Direct HR that companies engage a third party, usually a recruitment firm, to
team@directhr.cn make the initial contact so that there is no clear connection to the
www.directhr.cn company at this stage.
Contact Target Candidates
When contacting target candidates whose profiles are not known, the
purpose of the call is to introduce the opportunity and obtain candi-
date interest for the job opportunity. When the candidate indicates
1.2 C
13 1
interest, the next step is to have the candidate send his/her CV. Only at
this stage will one be able to assess whether the candidate is suitable for
the position or not. This means that a significant amount of resources
are required to obtain profiles which are eventually not suitable for the
position. In China, it may still occur that senior Chinese professionals
do not have a digital resume; in such cases making a structured inven-
tory via the phone may be a feasible alternative to obtain a short candi-
date profile.
When the profiles of target candidates are already on hand, one can
beforehand do a proper CV screening before contacting the candidate
to introduce the job opportunity and obtain candidate interest.
Involving Recruitment Firms
Companies have a number of internally controllable channels to find

the right candidates to fill vacant positions. However, it is more chal-
lenging to find qualified candidates for specialist and managerial posi-
tions as the supply of candidates becomes scarcer. Recruitment firms are
often used to reach talents in the market who are generally passive can-
didates, and are not actively looking for a change in their career path.
As being introduced via a third party comes natural to most Chinese
in various social settings, they are receptive to being introduced to an
employer by a recruitment firm. This is in contrast with other markets
where candidates prefer direct contact with the employer and might
consider intermediaries to be annoyance.
Companies considering engaging a search firm to find specialists
or managers should decide whether to use a contingency or retained
search agreement. There are two main differences between contin-
gency and retained search: methodology of selecting candidates and
payment.
PROS and CONS of involving recruitment firms in the search process
PROS CONS
Increase speed Reduced talent pool for large search firms

Recruiters are more aggressive in the search process than Search firms often have agreements not to recruit
corporate teams to find the right candidate from their existing clients and this might be a down-
side for large recruitment firms that have a big list of
clientele in a particular industry
Increased cost
The cost of filling a vacancy may often be higher via a
recruitment firm compared to an in-house search
1 BEIJING
Automotive, chemicals, pharmaceuticals, IT
TIANJIN
Automotive, communications, IT, metals
Banking and finance, communications, elec- Biotechnology, electronics and electrical
tronics and electrical equipment, industrial equipment, energy, industrial machinery
machinery and parts, medical products, metals and parts, textile, transportation and logistics
ZHENGZHOU
Manufacturing, textiles Breakdown of
Banking and finance, electronics and electrical
equipment Professional
WUHAN
Clusters in China
Banking and finance, IT, trading
Automotive, biotechnology, manufacturing,
metals, transportation and logistics
CHANGSHA
Automotive, industrial machinery and parts
Chemical and pharmaceutical, manufactur -
ing, metals, textile
CHENGDU
Industrial machinery and parts, IT, medical
products
Banking and finance, electronics and electri -
cal equipment, manufacturing, outsourcing
services
CHONGQING
Automotive, manufacturing
GUANGZHOU
Automotive, banking and finance, manufac-
turing
Electronics and electrical equipment, IT, pet -
rochemical, transportation and logistics
DONGGUAN
Industrial machinery and parts, trading
Electronics and electrical equipment, IT,
manufacturing, metals, textile
FOSHAN
Manufacturing, metals
JIANGMEN
Industrial machinery and parts, manufac-
turing, textile
Chemical and pharmaceutical, electronics
and electrical equipment, IT, metals
MACAU
ZHUHAI Banking and finance, tourism
Electronics and electrical equipment, Trading, outsourcing services
manufacturing
1.2 C
15 1
DALIAN SHENYANG
Electronics, electrical equipment, Industrial machinery and parts, manufacturing, trading
IT, manufacturing, petrochemical Banking and Automotive, chemical and pharmaceutical, electronics and
finance, industrial machinery and parts, metals electrical equipment, medical products, metals
NANJING
Electronics and electrical equipment, metals, out-
sourcing services
Automotive, biotechnology, chemical and pharma-
ceutical, industrial machinery and parts, IT, manufac-
turing, petrochemical
YANGZHOU
Automotive, electronics and electrical equipment,
textile
Chemical and pharmaceutical, manufacturing, med -
ical products, metals, petrochemical
SUZHOU
Chemical and pharmaceutical, industrial machin-
ery and parts, IT
Communications, petrochemical, textile
SHANGHAI
Automotive, banking and finance, IT, trading
Biotechnology, chemical and pharmaceutical, elec-
tronics and electrical equipment, industrial machin-
ery and parts, manufacturing, metals, petrochemical,
transportation and logistics
HANGZHOU
IT, manufacturing, textile
Automotive, chemical and pharmaceutical, com-
munications, electronics and electrical equipment,
medical products, metals
NINGBO
Manufacturing, textile, trading
Automotive, communications, electronics and elec-
trical equipment, industrial machinery and parts,
metals, petrochemical
SHAOXING
Industrial machinery and parts, textile
Chemical and pharmaceutical, metals, petrochemical
WENZHOU
Electronics and electrical equipment, manufacturing
Automotive, chemical and pharmaceutical, metals,
textiles
HONG KONG SHENZHEN

Banking and finance, outsourcing services, trading Banking and finance, IT, manufacturing
Communications, electronics and electrical equip- Biotechnology, communications, electronics and electrical
ment, IT, transportation and logistics equipment, textile, transportation and logistics
1 PROS and CONS of involving recruitment firms in the search process
PROS CONS
Increase candidate reach N

eed for knowledge transfer
Recruiters will be able to find and introduce candidates Hiring firms will have to invest time in the relationship
in a myriad of channels and networks that might not be with recruitment firms to have the recruitment firms
accessible to an organization fully understand the company, its culture, the position,
Increase confidentiality and what the company believes the ideal candidate
Search firms can be hired to operate in secrecy when should look like
companies do not want to disclose their search for
strategic or competitive reasons
Increase assistance in negotiation process
Recruiters are more in-tune with the current market
trends, and can therefore offer advice on compensation
and benefits
Replacement guarantees
Recruitment firms often provide candidate replacement
guarantees, meaning that the recruitment firm will
replace a selected candidate who leaves the client within
a certain predefined time-frame, without any further
service charges
Characteristics of contingency and retained searches
Contingency searcha Retained search
Payment Transaction-oriented; payment only when a Consulting-oriented: progressive

candidate is hired payment on a predetermined
amount
Time required 48weeks 812weeks
Exclusivity Each candidate is generally presented to Exclusive with one recruitment

many firms, not necessarily exclusive with firm, refined searches to find a few
one recruitment firm suitable candidates
Confidentiality level Moderate High, therefore more suitable for

sensitive issues such as replacement
positions
Client commitment level to Moderate High

fulfilling vacancy
Suitability by position Low- to mid-level positions Mid- to high-level positions

aMore commonly used in certain industries, e.g., IT, and first-tier regions
1.3 S election
17 1
1.3 Selection
Selection in the recruitment process means choosing the most suita-

ble profiles from a pool of potential candidates. This section illustrates
some important insights in the selection process in China that should be
taken into account.
Screen CVs
CV screening should be done in relation to the candidate profile which

has been defined during the profiling stage. Several China-specific can-
didate skills to be checked in an applicants CV include:
5 Knowledge of Chinese business culture, laws, and company

structure.
5 Intercultural exposure and competence (e.g., former working experi-
ence abroad).
5 Knowledge of global best practices.
5 Work experience at foreign companies.
5 English/Chinese language skills (e.g., certificates like TOEFL, CET).
Conduct Interviews
Due to the average-high number of candidates screened per posi-

tion, initial structured telephone interviews are often conducted by a
companys HR representative prior to face-to-face assessments to assess
language skills and to clarify CV details. It is often a challenge for for-
eign managers to conduct an interview with a Chinese candidate due to
communication and cultural barriers.
1 Typical interview structure in China
Interview stages Warming-up (58min)of greater importance in China
Longer with Chinese than with Western candidates due to Chinese culture specific behavior Offer tea
Introductory questions create a more relaxed interview atmosphere for the candidate
Introduction (24min)
All interviewers should be introduced by name and function
Company presentation (510min)
Presenting materials should include bilingual company flyer, companys strategy in Chinese,
economic performance, HR development strategy, etc.
Candidate questions and answers (3040min)most important/longest part of the interview
Includes career development, former employment, project work, achievements, responsibilities
Ending (35min)
Candidate should leave with a positive impression
Provide clear indications on how you will follow-up in terms of time-line and activity
Legal note
No statutory law exists regarding conducting interviews in China.
Interviewers may pose questions on salary level as well as other
personal questions with regards to age and marital status.
Manage Candidate Expectations
Many Chinese candidates see their peers quickly move up the corporate
ladder and expect that the same should happen to them. For example,
Chinese employees salary growth expectations rank among the highest
in the world. More than half of Chinese employees expect a salary incre-
ase of more than 30% when changing jobs. As a comparison, the ave-
rage salary increase expectation in Europe is between 1020%.
Companies which are not able to meet candidate expectations expe-
rience high employee turnover rate, so clarifying salary, benefits, and
career development during the recruitment process improves employee
retention and has a positive impact on candidate attraction.
1.3 S election
19 1
Conduct Assessment Centers
Conducting assessment centers allows company representatives to

obtain insights into various aspects of potential candidates such as beha-
vioral, motivational, technical, and aptitude attributes before making
the final selection decision.
Conduct Reference Checks
Reference checks are carried out to verify information gathered about

candidates during CV screenings and interviews. It is usually conducted
after the final assessment interview and prior to making an offer to the
candidate.
For the following reasons, reference checks are particularly impor-
tant in China:
1. It is not common that candidates possess written evidence of previ-

ous employment or letters of recommendations.
2. CV and credentials fraud is more commonly practiced to enhance
individual competitiveness in China compared with other markets.
Manipulated information might include personal data, qualification

certificates, educational background, work experience, salary, and rea-
sons for leaving previous employers. Therefore, it is highly recommen-
ded to conduct reference checks before making a formal offer.
Legal note
No statutory law exists against conducting reference checks. However,
we recommend that companies should use a third party, usually a
recruitment firm, to perform activities including cold-calling to contact
candidates, collecting background information and doing reference
checks to improve efficiency, and avoid any direct connection to the
company.
In China, the most common practice to conduct reference checks

is via the telephone. Due to the frequent job changes of professio-
nals in China, former management may no longer be with the same
company, making the process of validating reference checks more
complex.
1
20
Assessment tests in China
Category Tests available in Skills tested/trained Method Remarks Provider Source

China
Personality MBTI personality Rational functions: 2h workshop Available in traditional Chinese/ Cross Culture www.mbticomplete.com
test English Limited
thinking/feeling
Irrational functions:
sensing/intuition Only available in Hong Kong
FiT In personality Leadership competencies/ Online tool Developed in Shanghai/China HRO Consulting www.hrobjective.com
test potential
Chapter 1 Recruiting Professionals
Managerial competencies 6 specific Scales grouped in 5

2
Intercultural competencies broad dimensions
Each scale group is independently

defined for a person
Identitythe Leadership styles Online tool Directly assesses 36 personality PsyAsia www.psyasia.com
self-perception team role preference International
questionnaire
Jung/MBTI Type Traits
Learning styles Available in Chinese/English
Emotional intelligence S pecific in-house norm groups

possible
Motivation HRO MQ Intrinsic and extrinsic moti- Motivational Based on 15 motivational factors HRO Consulting www.hrobjective.com
vational factors questionnaire
In-basket exercise otivational profile can be used for

M
appraisal, feedback, employee
dialog
Assessment tests in China
Category Tests available in Skills tested/trained Method Remarks Provider Source

1.3 S election
China
Language Chinese Chinese for non-native Testing of: listening, Certificate Tests available www.hsk.org.cn
Proficiency speakers reading, writing, at locations
Global recognition
Test (HSK) and speaking worldwide
TOEFL, IELTS etc. English for non-native Testing of: listening, ifferentiation between general
D Tests available www.ets.org
speakers reading, writing, and academic level at locations
and speaking worldwide
Certificate
Global recognition
Technical Technical Quality management, Workshops Global recognition TUEV SUED grea- www.tuvps.com.cn/
skills training and management techniques, ter China home.html
Written tests Certificate
(examples) certification CCC, CQC, etc.
Practical tests Mostly in Chinese
Technical Dye penetrant Workshops Certificate SGS in China www.cn.sgs.com/

training and examination, metal home_cn_v2
Seminars
certification material testing
information security Trainings
mgmt. FAMI-QS
certification etc. Tests
S eminars/training for different

branches available
1 21
1.4 On-Boarding
1
In China the on-boarding process is a comparatively critical role in
recruitment. It serves as an important means to reduce uncertainty for
companies and candidates in the process of integrating a suitable pro-
fessional into the organization. After a suitable candidate has been iden-
tified, the following steps should be taken into account:
Send Candidates a Letter of Intent
The letter of intent or offer letter prior to signing the employment

agreement is a good means to summarize the key employment condi-
tions and to bridge the time period between identifying the right can-
didate and the eventual starting date in the position. The letter of intent
should be kept within one to two pages and contains the most critical
terms of employment. Additionally a checklist should be drafted, which
describes the next steps to be taken and materials to be provided by the
candidate. This will provide assurance to the candidate and might trig-
ger a buy-in effect, so that the candidate mentally already joins the
company before he signs the contract.
On-boarding process checklist
Letter of intent Next steps Registration materials
Formal title Health checks ID card

Main duties Signing employment contract C opies of academic
Reporting line R egistration with HR department certificates
R emuneration details including bonus on the starting date Reference letters
structure Employment handbook Labor handbook
Social welfare standard Training period Residence certificate
Length of contract and probation period H ousing fund account
Commencement date number
Passport pictures
Consider Candidates Notice Period
The common contractual notice period for candidates in China is 1

month. For more senior positions companies often customize employ-
ment contracts and add longer notice periods. In order to terminate
an employment contract, candidates need to provide a formal letter of
resignation to their supervisor or the HR department. To reduce risk
and remain in a comfortable negotiation position, a candidate typi-
cally expects a formal letter of intent from the new employer before he
resigns from his existing position.
1.4 O
n-Boarding
23 1
Manage Time and Feedback
As the competition for skilled professionals in China is fierce, the

assumption can be made that a candidate commonly has several
employment options at hand. Therefore, a rapid and transparent follow-
up with candidates is critical as it reduces the employment uncertainty
for the candidate and leaves a professional impression. In contrast to
more developed markets, a structured on-boarding process is still not
the rule in China. Therefore, a professional handling can be an impor-
tant differentiation factor and increase the chance of hiring talents.
Verbal and even written commitment is often provided by candi-
dates without them actually being committed to a position. A candi-
date who has agreed during the on-boarding interview to start in the
position might back-off at the last minute to accept an offer from ano-
ther company. Therefore, the hiring managers should take this point
into account in China and counter it by keeping positive contact with
other (less) suitable candidates as long as possible. Rejections should
be communicated clearly to avoid massive follow-up correspondence
by rejected candidates, but in a positive manner, to maintain positive
word-of-mouth.
When hiring Chinese employees, how do foreign-invested

enterprises handle their personal files (dangan)?
Employers are responsible for holding their employees dangan

(pronounced dangan), personal files maintained for each Chinese
individual.
A persons dangan will usually contain the following
information:
1. Educational background including academic performance,

normally from high school onwards.
2. Names of direct family members (parents, spouse, and
children).
3. Location of hukou (to be introduced below) and any record of
transfer.
4. Name of employer and period of employment.
5. Any periods when the individual was not employed.
6. Evidence of criminal record.
The Chinese government does not allow foreign-invested

enterprises (or smaller domestic enterprises) to hold these
dangan themselves. In practice, what this means for foreign-
invested enterprises is that they must make a payment to either
1 the government sponsored job center or some HR agent to store

the dangan on their behalf.
When a new employee is hired, the dangan should be upda-
ted. Either a representative of the company or an HR agent
should manage this process.
If the file is incomplete or if it is lost, then this may affect the
amount of state pension the individual can receive once they
retire.
25 2
Hiring Staff
Dezan Shira & Associates
Hiring staff is one of the first key decisions a company will come across.
Before a company decides to employ significant numbers in China it
should take into account all the issues introduced in this chapter. It may FOR MORE INFORMATION
be acceptable, or even sensible, to hire a few employees without inves- Establishing and Running a
ting money in developing rulebooks, policies, and complex salary struc- Business in China
This guide discusses foreign investment
tures, but as a company grows it needs to protect its interests and define
structures in terms of suitability and
employment relationships in a clear manner. feasibility by business goal, documentation,
This chapter discusses some options available to companies, intro- and procedure for setup, and need-to-know
points for analyzing and ensuring legal
duces a few concepts unique to China, explains the requirements of the
compliance. This includes pre-investment
social insurance system as they relate to employers, and covers some considerations, foreign-invested commercial
other critical points that should be addressed. enterprises, representative offices, wholly
foreign-owned enterprises, joint ventures,
mergers & acquisitions, making changes to
an investment, and legal due diligence.
2.1 Contract Types www.asiabriefing.com/store
One of the first questions a manager will wish to consider when hiring
staff is whether or not the company should offer a direct labor contract
for a particular position.
When hiring in China, there are a number of points to take into
account:
1. The nature of the job.

2. Is the position likely to be a permanent one?
3. What kind of responsibilities will the employee have within the
organization?
4. The effect on the motivation and sense of belonging of the employee.
5. Whether or not the company is able to employ people directly in
China.
The first four points will be considered by employers all over the
world. If the role is expected to be a permanent one carrying a large
degree of responsibility, then the employer will generally look to hire
the employee directly. If the role is transitory or non-core, then an
employer will often look to second an employee from an agency, or
outsource the role completely. These issues are equally relevant in
Dezan Shira & Associates(*)

26 Chapter 2 Hiring Staff
China. The key point for the company will be how to accommodate the
employment relationship within the Chinese Labor Contract Law.
In China there are four types of permissible employment rela-
2 tionships that can be entered into between a private company and an
individual:
(i) Job contract.

(ii) Part-time contract.
(iii) Fixed-term labor contract.
(iv) Open-term labor contract.
In addition to these four types of contracts, which are all entered

into directly between the employee and the employer, the following
options are also available:
(v) Dispatch of staff (secondment).

(vi) Outsourcing.
When can an employee be hired directly?
In principle, any company located anywhere in the world may

employ a Chinese person to physically work in China. However,
unless the employment contract is entered into via an inves-
ted entity on the Chinese mainland it will not be regulated by
relevant Chinese legislation.1 The company will not be able to
make mandatory benefit contributions to the employee in China
or deduct individual income tax before paying salary to the
employee.
Note that foreign companies that have established a repre-
sentative office (RO) in China do not have the ability to hire staff
directly. Instead, Chinese staff must be seconded from an agency
that will take the title of official employer. Foreign staff working
for ROs should have an employment relationship with the parent
company abroad, and any disputes should be settled under the
laws of that country.
The reason for restricting the right of an RO to employ staff
is quite simple; it is not a capitalized legal entity in China. An
employee must have the right to claim against their employer,
and an RO will not be a suitable entity to claim against. By forcing
ROs to employ staff through an agency (which is a capitalized
legal entity in China), the interests of the employee are protected.
1 Article 2 of the Labor Law of the Peoples Republic of China

implemented on January 1,1995.
2.1 Contract Types
27 2
(i) Job contract
In China it is possible to enter into an employment contract that
allows a company to hire a person to implement a specific project. Once FOR MORE INFORMATION
the project is completed, the employment relationship naturally comes Contact:
to an end. The company should pay compensation in accordance with Dezan Shira and Associates
china@dezshira.com
guidelines in the Labor Contract Law to the employee at this time.1
This type of contract is sometimes used for seasonal jobs where the www.dezshira.com
scope of work can be defined very clearly. However, in most situations
defining such a contract can be a challenge. How does one adequately
define the completion of a project? What to do if the project is not com-
pleted for some reason? How should employees be compensated in such
circumstances?
Unlike a contract with another company for provision of services to
complete a project, the job contract forms an employeremployee rela-
tionship. As such, when there is a dispute the court will tend to protect
the interests of the employee to a greater extent than those of the emplo-
yer. In addition, no probation period is allowed for such a job contract.2
These considerations, combined with the difficulty of defining an
appropriate contract scope, deter most employers from entering into
job contracts with employees.
(ii) Part-time contract

The application of this type of contract is quite restricted in China.
The main conditions are the following:
5 The employee may not work for more than 4h a day.

5 The employee may not work for more than 24h per week.
5 No probation period allowed.
5 Payment must be made to the employee at least every 15days.3
For these reasons, the part-time contract is used by employers only

in limited circumstances. Such a contract could be appropriate for an
office cleaner, or some other role where the tasks can be completed
within a relatively short period of time each day.
Please note that part-time workers should be paid at least the mini-
mum hourly wage
(iii) Fixed-term contract

The vast majority of employees hired in the private sector in China
are given fixed-term contracts. Generally the contracts are for full-time
1Article 22 of the Implementation Rules for the Labor Contract Law

implemented on September 18, 2008.
2 Article 19 of the Labor Contract Law implemented on January 1, 2008.
3Articles 68, 70, and 72 of the Labor Contract Law implemented on
January 1, 2008.
positions (although they do not have to be). The key point to consider
for employers is what length of contract to offer each staff member.
A fixed-term contract can be of any length.4 However, the length of
2 fixed-term contract offered to an employee has a major effect on the
subsequent employeremployee relationship:
5 A fixed-term contract can only be renewed once. On the occasion of

the second renewal the contract effectively becomes an open-term
contract.5
5 The length of the fixed-term contract will determine the maximum
length of the probation period that the company can offer to the
employee.6
Maximum probation periods by contract period
Contract period Maximum probation period
Less than 3months None
3months to 1year 1month
Over 1year, less than 3years 2months
3+ years (or open-term contract) 6months
In cases where a company is acquired by another investor, the new

owner is not able to insist that existing employees go through another
period of probation.35 Similarly, a new probation period cannot be
enforced if the employee is promoted or moved to another position
within the organization.
What are the benefits and risks of a probation period in an

employment contract?
During a probation period, employers can pay 80% of the full

salary as stipulated in the employment contract (no lower than
minimum wage benchmark) and more easily terminate emplo-
yees than under fixed-term contracts.
In contrast, an employee still within their probation
period can resign from the company after giving just 3days
notice. Employers may want to consider this point if they offer
employees a particularly long probation period (for instance,
6months). It is not advisable to give a large amount of respon-
sibility to an employee who is able to resign at such short notice.
4 Article 13 of Labor Contract Law implemented on January 1, 2008.

2.1 Contract Types
29 2
(iv) Open-term contract
An open-term contract is one that effectively guarantees an emplo-
yee job security until retirement age, unless some exceptional circum-
stances affect the company or the individual. It can be quite difficult to
terminate an employee who possesses an open-term contract.
When will an employer be required to offer an employee an

open-term contract?
An employee who has been working continuously for the same

employer for 10years, or who has had their fixed-term employ-
ment contract renewed twice since the Labor Contract Law came
into force in 2008 is deemed to hold an open-term contract.
An employee who has worked continuously for the same
employer for a full year but has not concluded a written labor
contract is also deemed to hold an open-term contract1. If the
company does not conclude open-term contracts to employees in
these circumstances, the company is required to pay double the
amount of the original labor remuneration to the employee on
a monthly basis commencing from the date when it fails to con-
clude the open-term contract.2

2 Article 82 of Labor Contract Law of the Peoples Republic of
China implemented on January 1, 2008.
(v) Dispatch contract (secondment)

A dispatch contract (secondment) describes the situation in which
an agency dispatches an employer to work at another organization. In
China, the market for staff dispatch services is a very large and lucra-
tive one including many organizations using the name FESCO, which
stands for Foreign Enterprise Service Company.
Representative offices must recruit their Chinese employees through
dispatch contracts, and dispatch agents can also be quite useful for other
foreign-invested entities on occasion.
While a FESCO will not take liability for financial compensationthis
will be quite clear in the initial agreementin the case of a labor dispute
(on issues such as performance, termination of the labor contract, salary
payments, social insurances payment, training, labor protection, etc.), the
FESCO can get involved in the negotiation, arbitration, and/or litigation.
Many of these companies are state-owned and some of them have a strong
legal team (especially for employment issues) and are familiar with local
arbitration and litigation process. FESCOs involvement in labor disputes
can sometimes help to achieve a resolution.
In the case of a labor

dispute, the FESCO can
get involved in the negotiation,
In addition, FESCOs can also be useful for foreign-invested entities
during the pre-incorporation period, during which preparation work
often requires the assistance of Chinese employees. A foreign-invested
2 arbitration, and/or entity cannot establish a legal contract under Chinese Labor Law with

litigation. a Chinese individual before the entity obtains its business license. Some
FESCOs (not all) will agree to hire the Chinese employee and dispatch
them to the foreign-invested entity that is still under the process of
Victor Zheng incorporation, generally on the condition of a 34month cash deposit
Business Advisory Services of all salary and social insurance payments.
Dezan Shira & Associates Labor Contract Law stipulates that workers dispatched from a
Shanghai Office FESCO should generally assume temporary, substitute, or auxiliary
china@dezshira.com positions. In the past, this directive has often been ignored and FESCOs
www.dezshira.com have been used to hire a wide variety of Chinese workers upon the
clients request. However, recently drafted legislation regarding the
obligation of employers to directly employ core staff has brought extra
risk to companies employing a large portion of their employees through
agencies, and many companies are now reconsidering their approach to
hiring in light of this new regulation.
Article 66 of the Amendment to the Labor Contract Law of the
Peoples Republic of China (Draft) is amended to read as follows: labor
dispatch shall exclusively apply to provisional, auxiliary or substitutive
positionsa provisional position offered by the employer refers to a
position that exists for no longer than 6months; an auxiliary position
offered by the employer refers to a position which is orientated to pro-
viding services to the positions of the primary business of the employer;
a substitutive position refers to a position that is held by a labor dis-
patch worker on a substitutive basis during the time when the employee
of the employer that originally holds the position is unable to hold the
position because the employee is undergoing full-time training or on
vacation.
One thing to keep in mind about FESCOs is that, according to
Labor Contract Law, they can only offer fixed-term contracts for at
least 2years. An employer may still terminate the employment relati-
onship with the Chinese employees, following the stipulations of Labor
Contract Law and the agreement signed with FESCO.
According to legislation available as of July 2012, it is unclear whe-
ther an employee that is working under an agency contract will have the
opportunity to achieve an open-term contract with the company after
expiration of two fixed-term contracts. Options beyond a fixed-term
contract include a service agreement or part-time arrangement based on
relevant Chinese laws and regulations, which can be terminated more
easily.
Furthermore, some FESCOs also carry out other services such as
executive search work (headhunting) on behalf of their clients, which
could create a conflict of interest between payroll clients (who supply
confidential personal and salary information) and headhunting clients
(for whom the knowledge of such confidential data is valuable)
2.1 Contract Types
31 2
(vi) Outsourcing
Tasks that are most commonly outsourced are those that require
specific specialist skills, a high degree of confidentiality, or those that
have a clear scope but incur major consequences when they are wron-
gly implemented. Good examples of such tasks are accounting, tax
filing, HR administration, and payroll processing work. Most small- and
medium-sized companies will choose to completely outsource some or
all of these functions, whereas some large companies will set up a sepa-
rate entity to manage such back-office tasks on behalf of all the other
entities in the region.
An outsourcing contract is fundamentally different from a second-
ment contract in several different ways:
5 Responsibility for the behavior of the employee carrying out the task
is maintained by the company contracted for the outsourcing.
5 The role is often not a full-time one, and most of the work does not
have to be completed on-site (working off-site improves the level of
confidentiality). As the company does not need to hire a full-time
internal resource for the role, outsourcing can often be a money-
saving solution.
5 The outsourcing company retains the right to use whichever resour-
ces it feels are best for each project. This ensures continuity in ser-
vice provision.
5 Often such tasks will use some special software which is licensed by
the company contracted for the outsourcing. The company reques-
ting the services does not need to pay for software licenses or deve-
lopment work.
The outsourcing solution works well for back-office tasks that are
not industry specific. As outsourcers become more efficient, there is a
growing trend for companies to use such services instead of relying on
internal staff for functions unrelated to their fundamental business.
Beyond a labor contract, what additional agreements may be

necessary?
Additional agreements, such as a confidentiality agreement or

non-competition agreement, may be signed at the same time as
the labor contract. Confidentiality agreements, which normally
cover corporate secrets, may include terms relating to owner-
ship of patents for inventions created by employees. A non-com-
petition agreement, which aims to prevent an employee from
working for a competitor after terminating the labor contract
is usually used only for senior positions and can be signed for a
maximum period of 2years. Companies are obligated to continue

paying a proportion of the employees salary after his/her depar-
2 ture from the company in order to maintain the effectiveness of
the non-competition agreement.
Will the Real FESCO Please Stand Up?
Many foreign-invested companies and representative offices in

China have a contract in place with a FESCO (Foreign Enterprise
Service Company) for labor dispatch, payroll, and/or additional
services for Chinese employees.
A large proportion of managers at such companies assume
that FESCO is a single organization, but in fact it is a generic
term used by dozens of local HR companies around the country.
There are often multiple competing FESCO organizations in
each city; some subsidiaries or affiliates of companies in another
part of the country, some partially state-owned and some 100%
privately owned.
The English term FESCO is a generic one, indicating
nothing more than the type of service provided by the company.
Because of the widely held misconception that FESCO is one
company, the brand is a powerful marketing tool, and the term
is often casually used to refer to companies providing similar
services.
There are a couple of other large players in this market provi-
ding similar services to FESCO, but using a different brand. One
is called CIIC (China International Intellectech Corporation
Chinese name ). CIIC is a state-
owned organization based in Beijing and has subsidiaries,
affiliates, or branches around the country. In this sense it has a
larger network than any of the various FESCOs.
The other large player is known in English as China Star
(Chinese name ). Headquartered
in Beijing, it also has branches in Shanghai, Shenzhen, and
Guangzhou.
It is important that foreign investors realize that FESCO is
not a single organization and that organizations by other names
can offer the same services. Many general managers operate
under the misconception that their organization (especially if it
is a representative office) has no negotiating power with FESCOs,
and simply accept the quoted price they provide without
question.
2.2 Designing a Labor Contract
33 2
Once a conclusion has been reached concerning the issue of what kind
of contract the company wishes to enter into for a particular role (direct
FOR MORE INFORMATION
employment, secondment or outsourcing), the next step will be the
drafting of the contract. Normally, employment agencies and outsour- International Related Party
cing companies will have their own template for the services they pro- Transactions
vide, but the company will need to design a labor contract template for In this issue of China Briefing, we turn
once again to the issue of international
its directly hired staff. As the majority of employees are employed on transactions, specifically those between
fixed-term labor contracts we will concentrate on this type of contract related parties.
in our explanation below. Including:
The first condition that should be met when employing Chinese
5 Service Agreements for HQ and
employees is for a written labor contract to be completed within Subsidiaries.
onemonth of the commencement of the employment relationship. If
5 A Briefing Overview of Chinas Transfer
this condition is not observed, under the terms of the Labor Pricing Obligations.
Contract Law an employee may claim double salary for each of the
5 Cross-border RMB Pilot Settlement
months worked without a written labor contract after the first Project.
month.7 If the situation persists for a period of more than one year,
5 Q&A: How do royalty remittances work?
the company is deemed to have provided the employee with an
www.asiabriefing.com/store
open-term contract.8
Secondly, when employing Chinese employees the contract should
be drafted in the Chinese language. It is acceptable to include an English
translation along with the Chinese text, but note that the Chinese ver-
sion will take priority in case of any dispute. Therefore, it is advisable
that contracts are either drafted in Chinese using a legally trained pro-
fessional before translating into English, or drafted in English and then
translated into Chinese by a legally trained professional.
Every local Labor Bureau has a template for a standard labor con-
tract, but it is in Chinese only. It is possible to use this template for all
the contracts you enter into, however, we would not recommend this
in every circumstance. A template designed with specific corporate
requirements will offer more protection. We would suggest combining
a standard template with a labor contract used in other countries where
your company has large operations.
This document should be shown to a professional trained in Chinese
Labor Law to add, remove, or amend clauses as necessary. Certain
clauses inserted into a draft labor contract may be inadmissible under
Chinese law. Including such clauses in the final version of a labor con-
tract will only provide a false sense of security to the employer; in the
event of a dispute, any such clauses will be deemed illegal by the court.

What information should be included in any labor contract? The fol-

lowing is mandatory9:
2 1. Name of the company, address, name of the legal representative or a

senior manager.
2. The name of the employee together with a valid address and identifi-
cation number.
3. Commencement date and duration of the contract.
4. A description of the job and the location where it is to be
implemented.
5. Working hours, vacation provided, and length and frequency of
break times.
6. Salary details.
7. Indication that the employer will contribute social insurance for the
employee.
8. Labor protection, labor conditions, and protection from occupatio-
nal hazards.
How much annual leave must be given?
The required minimum amount of annual leave in China (in

addition to at least one rest day per week and the public holidays)
is 5days. This requirement only commences once the employee
has worked for one continuous year.1 Therefore, it is not manda-
tory for the company to provide any annual leave to the emplo-
yee in the first year of their employment if the employee has
not worked in any other company for more than a year prior to
joining.
In practice, the vast majority of foreign invested companies
realize that their employees are more productive when allowed
periodic breaks. Although annual leave periods are generally
shorter than in the west, most employees working at foreign
invested companies receive 1525days of annual leave per year.
1 Article 3, Rules on Employees Paid Time Off, State Council,

implemented on January 1, 2008.
There may be some other mandatory requirements depending

on the location of the company entering into the labor contract. If
important mandatory items are not adequately addressed in the labor
contract, there is a possibility that the contract may be deemed by the
authorities to represent an open-term contract.

35 2
There are a number of other clauses that may be beneficial to insert
into certain contract templates. Examples are:
5 Non-competition clauses.
5 Confidentiality clauses.
5 Allowances and benefits (particularly for foreign employees).
5 Length of probationary period.
5 Stock options.
We also recommend that some reference be made to the company

rulebook in the employment contract. This makes a clear association
between the signing of the employment contract by the employee and
their observation of the company rules.
In certain cities, once the template has been drafted it should be
taken to the local Labor Bureau for verification. If you fail to do this,
the validity of some of the clauses may be challenged by your emplo-
yees in the event of a dispute arising from the implementation of such a
contract. Note that the approval should be renewed by the Labor Bureau
every time an amendment is made to the template.
Finally, the contract should be chopped clearly using the Chinese entitys
company chop (and of course signed by the employee) before it is consi-
dered to be valid. Similar attention should be paid to safeguarding of labor
contracts. Not only do such contracts contain confidential information, it
could also be costly for the company if the contracts were lost or stolen.
When does a written labor contract need to be completed by?
According to the Labor Contract Law, an employer must ensure

that it has completed a written labor contract with every staff
member within 1month of the employee commencing work.1
This is important because if such a contract is not in place by
the end of the first month the employee shall have the right to
claim double salary for the period in which the company remains
out of compliance with this regulation. Therefore, if the company
does not fulfill this obligation with an employee until the end
of the third month of their employment it shall be liable to pay
2months of additional salary to that employee.
If the company neglects to complete such a contract after
the employee has worked for one whole year, not only can the
employee claim double salary for the previous 11months, they
can also claim an open-term contract from the employer.2 This
will mean that the employer loses the ability to terminate the
contract of the employee at the end of the fixed-term contract.
Note here that the employment relationship is deemed to
have started from the first day the employee works at the com-
pany, not from the date of signature of the contract. So as long as
the employee can prove that they have physically been working
for the company for over a month prior to signing an employ-
2 ment contract this will be sufficient to make a successful claim
against the company. Of course, the simplest piece of evidence
proving this will be the receipt of salary.
Therefore employers should not expect their employees to
chase them for signing written labor contracts or open-term
contractsit could potentially be in their interests not to sign,
especially in the event of a future dispute with the company. The
company must take the initiative to ensure such contracts are sig-
ned promptly. A system should be put in place so that there is
no possibility for any employee to be overlooked. One effective
safety mechanism would be to only release salary to employees
once written labor contracts are put in place. As salary is gene-
rally paid once per month, this would incentivize the employee to
sign while ensuring the employer remains in compliance.
1 Article 10 of the Labor Contract Law implemented on January

1, 2008.
2 Article 14 and Article 82 of the Labor Contract Law implemen-
ted on January 1, 2008.
What should be done at labor contract renewal, promotion or

transfer?
Upon renewal of a labor contract, a labor contract renewal form

should be filled out. It could include the following details:
5 Name of employee, position, commencement, and expiry date

of labor contract.
5 A self-evaluation by the employee of their performance.
5 An evaluation by the supervisor of the employees
performance.
5 The period covered by the renewal.
5 The document should be signed and stamped by employee,
supervisor, and HR department.
When the employee receives a promotion or a transfer, it is nor-

mally not necessary to rewrite the employment contract. More
commonly, the change is registered using a promotion or internal
transfer form. This form will usually show the date, previous title,
and new title. Normally, it will not include any information about
new salary details, and the company will reserve the right to place
the employee back in the original position if they do not prove
37 2
suitable during the evaluation period. This way, the company does
not incur any immediate liability to guarantee a promoted employee
a higher wage if it is discovered they are not suited to the position.
2.3 Structuring a Salary Package
Structure of the salary package payable for each position in a com-

pany should be given careful consideration. Certain employees need to
be incentivized, while other roles require a more fixed form of salary.
Furthermore, the employer should consider the amount of IIT that will
be payable by the employee. This is particularly important if the com-
pany offers a net salary package to its employees.
Base Salary and Bonus
The first component is base salarya fixed amount that is guaranteed to

be paid to the employee by the company. The initial base salary should
be clearly stated in the labor contract.
It is also possible to include some one-off paymentsmany com-
panies make a 13th month salary payment around Chinese New Year
time. Please note that if this information is included in the labor con-
tract the company is legally obligated to pay it.
An alternative option would be to pay this amount in the form of
an annual bonus. It could be explained to staff that although the com-
pany will generally pay this amount under normal business circumstan-
ces; there is no obligation for the company to pay the bonus if corporate
performance is below expectations. Under such conditions there is no
need to include it in the labor contract.
Other bonuses can also be paid to staff at various points during the
year. From a taxation perspective it is more efficient to combine bonus
payments so that they are paid during the same month because in China
employees are allowed to use a special tax treatment once a year to
reduce their IIT burden.
Payment of annual bonus versus quarterly bonus
An employee was transferred from the U.S. HQ to a China subsidiary. In 2011, he stayed in China for 365days and was paid a
monthly salary of RMB110,000
Quarterly Bonus Payment Annual Bonus Payment
IIT Quarterly bonus=RMB50,000 per quarter Annual bonus=RMB200,000
IIT=RMB50,00045%3months+(RMB50,000 IIT=(RMB200,00025%
10% RMB105)=RMB72,395 RMB1005)=RMB48,995
This is because for three of the four quarters the bonus
must be treated as additional salary
IIT savings RMB72,395-RMB48,995=RMB23,400

Allowances
The Chinese Tax Bureau allows foreign staff (including those from
2 Hong Kong, Macau, and Taiwan) to deduct certain allowances before
calculating the tax burden on their monthly salary.10 There are two pre-
requisites to this:
1. In the employment contract (and sometimes also in a board resolu-

tion depending on the location of the company) there should be a
clear reference to the amount being paid to the employee under the
title of each specific allowance.
2. Each month the employee should produce evidence to show the com-
pany that this money was indeed spent on the services described in the
contract; this is done using the ubiquitous fapiao, or official invoice,
that should be received whenever an official monetary transaction is
completed in China (in some cities, the name of the company must be
clearly written on the fapiao for it to be permitted as a deduction).
Let us look at the deductions that are allowable one-by-one:
(a) Meal allowance

Foreign employees are allowed to deduct a certain amount that
they spend on meals each month from their taxable income. Most of
the fapiaos submitted should be issued by restaurants; although for
some portion of the allowance fapiaos issued by supermarkets may also
be accepted. Please note that the fapiao should state that the product
purchased was meals or food.
(b) Housing allowance

The amount spent on rental of an apartment may also be deducted.
However, please be aware that in China a private landlord will often
be reluctant to issue an official fapiao because in order to obtain one,
he/she must pay approximately 17% of the rental amount received to
the Tax Bureau. If a fapiao is requested the landlord will likely charge
a large premium on top of the originally negotiated rental amount.
Foreign employees that require a fapiao should negotiate this with the
landlord before signing the rental contract. Fapiao issuance should be
clearly mentioned in the agreement. Foreign employees living in a ser-
viced residence will not have this problemthe residence will be mana-
ged by a company that can issue a fapiao.
(c) Laundry allowance

This is fairly self-explanatoryan allowance for the dry cleaning of
clothes, etc.
10 Clarifications of the State Tax Bureau on Several Issues on Foreign

Individual Income Tax, implemented on April 9, 1997.
2.3 Structuring a Salary Package
39 2
(d) Childrens education allowance
Some of the cost of a foreign employees education expense for the
studying of Chinese language or relating to the education of their child-
ren can be deducted. Note that the education must be received here in
China, and as with the other allowances above, a fapiao must be received.
(e) Home visit allowance

Each year a foreign employee is allowed to deduct the cost of one
or two return flights back to their home country (usually the cost of
a ticket up to business class may be permitted). Note that flights to
other destinations are normally not accepted. Cost of hotels and other
expenses are also not accepted as this is considered a home visit allo-
wance, not a vacation allowance.
One key point is how much of a foreign employees salary can be
allocated to allowances. This is something that is not clearly defined by
the law, which stipulates that the allowances should be reasonable.11
In practice, many companies adopt a proportion of 30% of the total
salary of the foreign employee and classify this portion as allowances.
There is always the possibility that the tax office will challenge the com-
pany on this issue, so we recommend that the proportion of allowance
should be set at or below this level.
Mandatory Benefits (Social Insurance)
The next portion of the salary package is social insurance, often referred
to in China as mandatory benefit. Contributions are made by both the
employee and employer. The employees portion is deducted from their
gross salary. The proportions and maximum contributions made by
employer and employee vary depending on where the business is located.
Some employers choose to enroll their employees in additional pen-
sion plans or other types of wealth accumulation plans. This is legal, but
please note that only the mandatory benefits specified in the IIT laws
can be deducted before calculation of IIT.12
Defining Net Salary
Normally net is defined as the amount employees receive into their

pocket each month after payment of IIT and the employees portion of
social insurance. It is more commonly offered to blue-collar workers
who may not understand the details of the Chinese social insurance or
IIT systems.
11 Article 1 of the Clarifications of the State Tax Bureau on Several Issues

on Foreign Individual Income Tax, implemented on April 9, 1997.
12 Article 25 of the Implementation Rules for the Individual Income Tax
Law implemented on March 1, 2008.

Misunderstandings between managers and employees over the defi-

nition of net salary are commonplace. If your company intends to
offer such packages to employees we suggest the HR Department draws
2 up a clear example to explain to each employee how their salary package
will be structured, and to show them how much money they will be able
to take home every month.
The total of the base salary, allowances, bonuses, non-mandatory
pension plans, and the employers portion of social insurance contri-
bution are added together to form the total compensation and benefits
(C&B) amount.
Example: Total expenses, Net salary, and IIT by Social Insurance Contribution Payment Party
A company pays an employee a monthly salary of RMB10,000 per month. The companys social insurance contribution is 39%
of the employees monthly salary, which the employees contribution is 21%
Company pays only social insurance Company pays social insurance

contributions required of the company contributions required by both
company and employee
Gross salary for the employee RMB10,000(121%)=RMB7,900 RMB10,000
IIT for the employee (RMB7,900RMB3,500) (RMB10,000RMB3,500)

10%RMB105=RMB335 20%RMB555=RMB745
Net salary for the employee RMB10,000RMB100RMB335= RMB10,000RMB745=RMB9,255

RMB7,565
Total expenses for the employer RMB10,000+(RMB10,00039%) RMB10,000+(RMB10,000

=RMB3,900 (39% +21%))=RMB16,000
2.4 Mandatory Benefits (Social Insurance)
Social security in China is a complex topic because it is organized on a

regional level. The formal social security system only covers urban wor-
kers, and partially covers rural workers who have come to the cities to
work (the so-called floating population).
In this section we will introduce the various components of the
Chinese social security system, some examples of contributions that
need to be made by employees and employers in various cities, and the
conditions under which employees can make claims.
Chinas Social Security System is made up of five different kinds of insu-
Chinas Social Insurance System rance, plus one mandatory housing fund. The insurances are as follows:
presented by Adam Livermore
Through an introduction to the five
different types of Social Security in China,
Adam Livermore illuminates the current
Pension
regulations, benefits, and consequences of
Chinas Social Security System. The five types Pensions for workers in China are financed by contributions from both
of Social Security include: pension, medical
insurance, unemployment insurance, work-
the employee and the employer. The portion contributed by the emplo-
related injury insurance, and maternity yer is normally higher than the portion contributed by the employee. As
insurance. a general rule the employers contribution is usually between 1022% of
www.dezshira.com/multimedia monthly salary. The employee will usually contribute around 8%.
41 2
Mandatory Benefit Types
Medical
In the event of illness/injury, an
employee can have part of the treatment
cost covered by medical insurance.
Contributions accrue to a card that can
be used for pharmacy or out-patient
Maternity costs in government-approved hospitals
Unemployment
Maternity leave is usually three months and clinics (excludes international
In the event of redundancy (not in the
and paternity leave is generally less than clinics).
event an employee chooses to resign),
15 days. In the cities in which maternity
on the precondition that an employee
insurance is applicable, during a period
has contributed to unemployment for at
of maternity or paternity leave, salary
least one continuous year, the employee
is not required to be paid, rather the
may claim unemployment benefits for a
employee receives a fixed sum from this
maximum of 24 months.
insurance fund.
Pension Housing Fund

On the precondition that contributions Designed to ensure that workers save to
have been made for at least 15 years, purchase housing, money from this fund
upon reaching retirement, an individual can be used to pay the initial down-
can receive a pension based on the Work-related Injury payment on a house. In most cases, a
amount accumulated in his/her The work-related injury fund covers company determines the contribution
individual fund. the cost of treatment should an rate (within the legal range) when
occupational injury occur. The employer opening its social insurance account.
must pay some salary during the period
of rehabilitation and, if the employee
cannot return to work, compensation
must be paid.
= Five Social Insurances
Pension contributions made by the employees go directly into their

personal pension accounts. The contributions made by the company
go into a social account.13 The overall amount of pension that an indi-
vidual can draw is based on the overall level of contributions over their
working career. Once the personal account is empty, the individuals
pension will be 100% funded from the social account. In the event that
the individual dies before the amount in the personal account is used
up, the balance remaining in this account may be inherited by
relatives.14
It is not possible for individuals in China to draw a pension unless they
have made contributions for a minimum of 15 consecutive years.15 Even if
an individual loses their job it will still be necessary for them to maintain
social security contributions, at least at the minimum level stipulated by
13 Article 4 of the Decisions of State Council on Establishing a Unified

Basic Pension System for Employees Working in Enterprises implemented
on July 16, 1997.
14Ibid.
15 Article 5 of the Decisions of State Council on Establishing a Unified
Basic Pension System for Employees working in Enterprises implemented
on July 16, 1997.
the authorities. In China the statutory retirement age for men is 60; for
white-collar female workers 55; and for blue-collar female workers 50.16
2 Unemployment Insurance
In most large cities contributions are made by both the employee and the
employer to this fund. The employer contribution can be as high as 2% of
the individuals monthly salary. If an individual becomes unemployed this
insurance will pay a fixed amount every month on the condition that con-
tributions have been made on behalf of the employee for a continuous one-
year period prior to the application. It will not be related to the amount of
money paid by the individual or the company into the fund.17 Individuals
may claim unemployment benefits for a maximum period of 24months.18
Medical Insurance
Both employer and employee contribute to this fund. Proportions vary

considerably between cities, but generally the company will be expected
to contribute between 512% of the employees monthly salary, while
the employee will contribute around 2%.
In the event an individual falls ill, they will go to the hospital and
receive treatment. Usually, just a base charge will have to be paid to the
hospital up front by the individual, and the rest of the treatment expense
should be received by the hospital from the insurance scheme. The precise
portion covered by insurance can depend on the type of sickness or injury.
Each individual covered by medical insurance is issued with a
medical treatment card and every month a small amount of money
is added to the balance in this card. Carriers of this card can make
purchases from pharmacies or pay for treatment at hospitals if the
balance on the card is sufficient.
Occupational injury Insurance
Contributions to this fund are made by the employer. Usually, the pre-
mium is between 0.53% of the monthly salary of the employee, depen-
ding on what kind of work is being carried out by the employee.
In the event a worker experiences an injury at work, the employer will
collect evidence of the incident and send it to the insurance company.
Assuming everything is in order, the insurance company will reimburse
16 Reply of Ministry of Labor on the Definition of Statutory Retirement

Age for Employees working in Enterprises implemented on May 11, 2001.
17Article 19 of Beijing Unemployment Insurance Regulations (No.
38 Order issued by Beijing Municipal Government implemented on

November 1, 1999.
18Article 17 of Beijing Unemployment Insurance Regulations (No.
38 Order issued by Beijing Municipal Government implemented on

November 1, 1999.
43 2
the employer for the cost of the treatment. The company will remain lia-
ble for paying salary to the employee during the period of rehabilitation.19
Please note that if you have an employee who has a serious injury at
work, the company can be liable for all the costs of treatment if the insu-
rance premium has not been paid up-to-date. For this reason it is best
to ensure that your new hires are registered with the Social Insurance
Bureau and contributions are made promptly.
Maternity Insurance
Usually, only the employer makes a contribution of 0.51%. Under this

system a female employee generally takes around 4months of maternity
leave during the period prior to and after the birth of her first child, depen-
ding on the location of the employee, age and other factors.20 During this
period the insurance will cover the cost of her salary. The calculation of
her salary will be based on the contributions made by the individual and
the company over the past year, although recent legislation in certain cities
has linked the amount of the payout to the average salary paid to emplo-
yees in the company (rather than the earnings of the individual employee).
A fixed amount toward the cost of the childbirth will also be paid out.21
As an associated point, the company may not terminate the contract
of the employee from point of pregnancy until the baby reaches one
year of age.22 If another employee has been hired for the position in the
interim period then this person must also be retained at least until the
end of the period of that employees fixed-term contract. If this is not
possible then compensation should be paid to the employee in line with
the Labor Contract Law.
Housing Fund
Housing fund, although in the strictest sense not a kind of social wel-
fare, is generally included within the scope of social security, because
the contributions are mandatory and come from both the employer and
the employee (apart from in some special areas like Shenzhen, where the
employee does not need to make a contribution).
As its name suggests, the housing fund is designed to ensure that
workers save some money in order to purchase a house or an apart-
ment. The employer will usually have to contribute between 7and 20%
of the employees salary. In many cities, the employee matches this
contribution with an equal contribution of their own, although certain
cities have different policies.
19Article 31 of Beijing Occupational Injury Insurance Clauses imple-

mented on January 1, 2004.
20Article 14 of Beijing Enterprise Employee Maternity Insurance
Regulations implemented on July 1, 2005.

21Ibid.
In Shanghai, social
insurance inspections are
random. The bureau will call
It is possible in many cities to make housing fund contributions in
excess of 300% of the local social average salary to employees. The limit is
generally 500%, although some cities do not set a limit at all. The portion
2 a company a few days prior over 300% will be deemed to be taxable income of the employee. The key
to the inspection so that all point for employers to note is that if you hire employees earning a salary of
paperwork can be put in order. higher than 300% of the local social average salary you should make sure
to clarify in the offer letter that both employee and employer contributions
A company might undergo
will be limited by this cap. This can avoid potential problems in the future
such an inspection once a year
if the employee claims that higher contributions should be made.
or once every 23years, its

When the employee wishes to purchase a house, the money in the
hard to know. housing fund can be used to pay the initial down-payment on the house,
and it can also be used to subsequently pay back the loan to the bank.
Tina Wang Furthermore, by producing evidence that funds have been accumulated in
an individuals housing fund the bank may provide a lower rate of interest
Group HR Manager
on the loan. Upon retirement any remaining balance in the housing fund
account can be withdrawn and used for any purpose by the individual.23
Shanghai Office
china@dezshira.com Contribution Calculations
www.dezshira.com
Monthly contributions to the social security system are determined
from a base figure. In most cities it is calculated as follows24:
Social security base=Previous years total income/12.
For new hires, the starting salary may be used as the social security
base during the first year. Note that the base figure for social security
contributions is capped at 300% of the social average salary for the loca-
tion in which the employee pays social security.25 Therefore, any emplo-
yees earning more than this amount will actually pay a smaller
percentage of their salary in social security contributions (employers
will also have a smaller percentage burden).
The maximum base figures will generally be updated once per year
for all employees. This usually happens in May. Sometimes the govern-
ment will also adjust the percentages to be contributed by employee and
company at this time. Note that although the maximum base figures will
usually be updated during the middle of the year, the calculation of each
individual employees base will be made based on their average salary
during the period from January to December of the previous year.26
Participation by Foreign Employees
The inclusion of foreigners into Chinas social insurance system was

formally indicated when the new Social Insurance Law was promul-
gated in October 2010. However, it was not until September 2011 that
23 Article 24 of the Regulation on the Administration of Housing Funds

implemented on April 3, 1994 (and revised on March 24, 2002).
24 Article 12 of the Beijing Social Pension Regulations implemented on
January 1, 2007.
25Ibid.
26Ibid.
45 2
Chinas Ministry of Human Resources and Social Security (MOHRSS)
announced in the Interim Measures for Participation in the Social
Insurance System by Foreigners Working within the Territory of China
that foreigners should be included in the Chinese social insurance sys-
tem starting from October 15, 2011. The Interim Measures require
employers to undertake social insurance registration for foreign emplo-
yees within 30days of applying for work permits.
In December 2011, MOHRSS issued a Notice on Guiding Measures
for Foreigners Working in China to Participate in the Social Insurance
specifically providing guidance on the issue of foreigners participation in
Chinas social insurance. The Notice requires foreigners who have been
working in China prior to October 15 and who meet the participation
requirements to register with the MOHRSS authorities by December 31,
2011, or late payment surcharges will be applied. It also provides that for-
eign employees who are nationals of countries that have concluded social
insurance agreements with China can be exempted from certain Chinese
social security contributions in accordance with these agreements as
long as they produce proof that they participate in the relevant countrys
social insurance within 3months of receiving their work permits.
Subsequent to the promulgation of the above national regulations,
various cities such as Beijing and Suzhou have issued local implemen-
ting rules requiring foreign employees to enroll in the social insurance
scheme. However, the implementation of the scheme for foreigners
remains uneven and uncertain across China.
Summary
Contributions from the employee and employer can vary considerably

depending on the city in which the amounts of contribution are being
made. For a company that has employees based in a number of cities
around the country this means that the overall cost to the company
for an employee earning RMB10,000 in one city may be quite different
from someone on the same salary based in another city, although the
cost in first-tier cities such as Beijing and Shanghai tend to be similar.
Companies based in large cities may find that if they employ an indi-
vidual from a regional city in their head office, the employee will request
to have social security paid in the city where the company is based
rather than in their hometown. The reason is simplethe employee will
be able to earn more money via the pension and housing fund.
The opposite situation occurs as well. For example, if an employee is
relocated from Shanghai to Shenyang the employee will likely request that
social security continues to be paid in Shanghai. This is partly because the
amount of pension and housing fund receivable in Shanghai will be hig-
her. Additionally, the employee will probably consider the fact that it is
unlikely the company will employ them permanently in Shenyang; there
is a strong likelihood of a return to Shanghai at some point.
The social security contribution can affect the total compensation
and benefits (C&B) cost quite considerably. Companies should take
this variance into consideration when deciding where to locate their
operations. You will find that even within some cities there are different
percentages and bases for contribution of social welfare.
Employee Mandatory Benefit Minimum Contribution Ranges
2 Social Insurances
Unemployment 0 - 1%
Work-related Injury 0%
Maternity 0%
Medical 0.5 - 2%
Pension 8%
Housing Fund 5 - 20%
0% 5% 10% 15% 20% 25%
Employer Mandatory Benefit Minimum Contribution Ranges

Social Insurances
Unemployment 0.2 - 2%
Work-related Injury 0.5 - 2%
Maternity 0.5 - 1%
Medical 5 - 12%
Pension 12 - 22%
Housing Fund 5 - 20%
0% 5% 10% 15% 20% 25%
Example: Different salary, same social insurance contributions
Two employees working in Beijing make different salaries, but because of the social insurance payment base (RMB14,016), their social
insurance contributions are the same total amount
Employee 1 Employee 2
Monthly salary RMB14,016 RMB20,000
Employer social insurance contribution (44.3%) RMB14,01644.3%=RMB6,209 RMB14,01644.3%=RMB6,209
Employee social insurance contribution RMB14,01622.2%+3=RMB RMB14,01622.2%+3=RMB3,115

(22.2%+RMB3) 3,115
Example: Different cities, similar employer burden
The employer burden for an employee with a monthly salary of RMB10,000 would be similar in Beijing and Shanghai despite diffe-
rences in social insurance contribution rates. In Beijing, the employers social insurance contribution is 44.3%, while the employees
contribution is 22.2%+RMB3. In Shanghai, the employer contribution is 44% and the employee contribution is 18%. The employees
monthly salary is below the social insurance base in both cities
Beijing Shanghai
Social insurance base RMB14,016 RMB12,993
Employer social insurance contribution RMB10,00044.3%=RMB4,430 RMB10,00044%=RMB4,400
Employee social insurance contribution RMB10,00022.2%+RMB3=RMB2,226 RMB10,000 x 18%=RMB1,800
Net salary paid = 10,0002,226322.4 (IIT)=RMB7,451.6 = 10,0001,800385 (IIT)=RMB7,815
Total employers burden = 10,000+4,430=RMB14,430 = 10,000+4,400=RMB14,400

47 2
Mandatory Welfare Payments in Selected Cities (October 2012)
C = Company I = Individual
Beijing Shanghai Guangzhou

C I C I C I
Pension 20% 8% 22% 8% 20% 8%
Injury 0.5% 0% 0.5% 0% 0.25 - 0.75% 0%
Maternity 0.8% 0% 0.8% 0% 0.85% 0%
Unemployment 1% 0.2% 1.7% 1% 2% 1%
Medical 10% 2% + RMB3 12% 2% 8% + RMB12.45 2%
Housing fund 12% 12% 7% 7% 5% - 20% 5% - 20%
1
5
3
4
Shenzhen Dalian Hangzhou

C I C I C I
Pension 11%1 8% 20% 8% 14% 8%
Injury 0.4% 0% 0.6 - 2% 0% 0.4 - 1.6% 0%
Maternity 0.5% 0% 0.8% 0% 0.8% 0%
Unemployment 0.4% 0% 2% 1% 2% 1%
Medical 6.5% 2% 8% 2% 11.5% 2% + RMB4
Housing fund 5 - 20% 5 - 20% 10, 12 or 25% 10, 12 or 15% 12% 12%
1
Shenzhen pension contribution by company to non-Shenzhen hukou holders is 10%, not 11%
How do hukou influence social insurance participation

today?
2
A hukou (pronounced hoo-kou) is a kind of domestic passport for
all Chinese citizens. A hukou stipulates an employees home city/
country and is either a rural hukou or an urban hukou, with the
social insurance system applying only to the latter.
Previously, an employee working outside of his/her hukou
area would generally not be able to participate in the mandatory
fund benefits of the region of employment. If an employer wis-
hed to hire someone from outside the region of employment, the
employer could pay mandatory benefit contributions through
a branch office or through an employment agency (such as
FESCO) in the employees hukou area.
Since last year when the social insurance system was expan-
ded to include even foreign employees, hukou became mostly
irrelevant when determining which local Social Insurance Bureau
should receive payments made on behalf of an employee. The
company should pay mandatory benefits in the city in which it
is based. This way, should an employee want to access medical
insurance funds at a local government-approved facility, they can
do so conveniently. In addition, the company is familiar with the
local government bureaus and can more easily assist the emplo-
yee in resolving any difficulties in accessing benefits.
Hukou still has a small influence on mandatory benefit con-
tribution rates, as employees are divided into the categories of
permanent local residents and other residents (which includes
Chinese with hukou from other cities and foreigners) and rates
differ for certain insurances contribution.
Certain hukou locations are viewed as being the most highly
desirable (particularly Beijing and Shanghai) for reasons related
to childrens education, property purchases, international tra-
vel, etc. For key staff that a company wants to retain for the long
term, a company can endorse an employees application for a
hukou change.
The full hukou transfer process takes about 6months and
involves several bureaus other than the Social Insurance Bureau.
These bureaus include the Public Security Bureau, which must
issue a new id card (shenfenzheng) for the employee before the
Social Insurance Bureau will accept that employees application to
make social insurance contributions as a local permanent resident.
The transfer of previously contributed social insurance funds
between cities can vary in difficulty, depending on city tiers.
Transferring funds between two first-tier cities is of course the
easiest, while a transfer to/from a third tier city can be more
challenging.
49 2
No one can be sure what Chinas hukou policy will be like

in 20years, but the law says that an individual can apply for a
refund or transfer of the individual portion of their social insu-
rance contributions back to their hometown. Note that only the
funds contributed by the individual can be transferred, company
contributions must stay in the city in which they were made.
2.5 Creating a Company Rulebook
A company rulebook clarifies an employers expectations and if neces-

sary, makes it easier to demonstrate that an employee has broken a
company rule and can be legally dismissed. As a guideline, we would
normally suggest that any company with more than ten employees con-
sider creating a company rulebook.
Contents of the company rulebook vary based on the industry
in which the company is involved. Companies in the manufactu-
ring industry will generally be more concerned about issues relating
to promptness, length of breaks, safety of employees, etc. Those in the
business process outsourcing (BPO) market will be particularly concer-
ned about the confidentiality of their clients information. Those in the
food industry will pay most attention to hygiene.
The rulebook should be bilingual, with the Chinese version consi-
dered valid. If a company has a trade union, the terms included in the
rulebook shall be agreed with the union itself. Finally, the labor con-
tract template should include a clear reference to the rulebook. This
strengthens the companys case if it needs to dismiss an employee based
on rulebook infractions in the future.
1. Is the rulebook reasonable?

A company may devise hundreds of rules in their rulebook, making
it extremely hard for the employees to keep in compliance, and also
increasing the workload of the HR division to supervise the rules. Bear
in mind that if a dispute with an employee or ex-employee reaches the
court, the judge may consider the size and complexity of the rulebook
when deciding how much responsibility the employee should take for
a particular infraction. If the judge considers that the company has set
arbitrary rules in order to find reasons to dismiss employees then the
employee is more likely to receive a sympathetic judgment. The emplo-
yer should be prepared to explain exactly why each of the regulations
should be included in the rulebook.
2. Is the severity of each infraction described in the rulebook?

A rulebook should differentiate between a serious breach and a
minor breach when determining how many warnings a company must
give an employee before dismissing that person. Serious breaches can

constitute immediate dismissal. Minor breaches are generally dealt with
by issuing an official warning letter to the employee. The rulebook may
2 stipulate that after a specified number of official warnings the employee
is deemed to have committed a serious breach of the rulebook. In this
way the company may gain the right to dismiss the employee without
compensation, although we would like to stress that ultimately the deci-
sion on whether or not the infringements warrant dismissal could be
challenged by the employee in a court.
3. Do you have evidence that your staff have read and agreed with the
terms?
Each employee should sign a document confirming that they have
received a copy of, read, and understood the rulebook. If you amend
the rulebook in the future, have the employees confirm once more.
Provide a draft of the amended rulebook to employees, giving them a
chance to provide comments and feedback for the companys conside-
ration (although there is no obligation to adopt any suggested adjust-
ments). This not only improves the position of the company legally in
the event of a dispute, but will ensure that employees read the rulebook
more carefully.
51 3
Handling Payroll
This chapter deals with the logistical process of managing the monthly
payroll. Paying employees the correct amount of money by the requi-
red date may seem like a simple exercise; however, as payroll structu-
res become more complex processing, more time consuming, and more
errors are made. Fundamental mistakes like continuing to pay salary or
mandatory benefit to workers that have already left the company are FOR MORE INFORMATION
surprisingly common. Such mistakes are financially damaging, but the
Contact:
consequences to the company can be even worse when it fails to pay the
full amount owed to a valued staff member. Dezan Shira and Associates
In the first sections of this chapter, we take a look at each of the vari- china@dezshira.com
ous aspects of the monthly payroll. At the end of the chapter, we focus www.dezshira.com
on a growing trend all over the world and particularly among foreign-
invested enterprises in Chinaoutsourcing of payroll to improve the
efficiency, accuracy, confidentiality, and transparency of the process.
3.1 Calculating Overtime Payments
Overtime can be expensive for employers. In China, employees are

grouped into three categories working under different systemsthe
standard work hour system, the comprehensive work hour system, and
the nonfixed work hour system.
The standard work hour system requires that an employees normal
working day should not exceed 8h, and that the normal working week
not exceed 40h. Each employee should be guaranteed at least one rest
day.1 Most white-collar workers in China now operate under a 5-day
working week, although some domestic companies still utilize a 6-day
working week model.
The comprehensive work hour system does not refer to 1 week as the
key factor in regulating working hours. Instead, it takes a set period
(usually a month, but not necessarily) as the base to calculate the num-
ber of working hours. Although the distribution of hours worked
during this period may be quite irregular, the average number of wor-
king hours per day and per week should roughly correspond to the
1 Article
38 of the Labor Law of the Peoples Republic of China imple-

52 Chapter 3 Handling Payroll
levels set out in the standard work hour system.2 Please note that before
a company can implement this system it must submit its plan to the
local Labor Bureau and receive approval.3 This system is normally used
for blue-collar workers or other workers that require irregular shifts.
Under the nonfixed work hour system employees do not generally
3 receive overtime payments, because measurement of the time spent

working is considered to be impractical. A company implementing this
system for some of their employees should receive prior approval from
the local Labor Bureau.4
Standard work hour system overtime
Time of work Basic hourly salary (%)
Extra hours worked on weekdays 150
Hours worked on weekends 200
Hours worked on public holidays 300
Basic hourly salary is calculated by taking the basic monthly pay of

the employee and dividing it by 174 (average number of working hours
in the month).5
These are the mandatory minimum percentages paid to emplo-
yees for the overtime they work, although some companies offer their
employees higher rates than the statutory minimums.
Comprehensive work hour system overtime
Time of work Basic hourly salary (%)
Extra hours worked outside of normal shift 150
Extra hours worked on public holidays 300a

aThishigher rate applies even if the standard shift for the worker is
scheduled on a public holiday.6
2 Article 5 of Approval Measures for Adopting Non-fixed Working Hours

System and Comprehensive Working Hours implemented on January 1,
1995.
3 Article 7 of Approval Measures for Adopting Non-fixed Working Hours
System and Comprehensive Working Hours implemented on January 1,

1995.
4Ibid.
5 Article 2 of the Notice on the Monthly Working Hours and Salaries of
an Employee promulgated by the Labor. Ministry and implemented on

January 3, 2008.
6 Article 13 of Preliminary Regulations on Salary Payment implemented
on January 1, 1995 and Article 62 of the Opinions of Ministry of Labor

on Several Issues on Implementing the Labor Law of Peoples Republic of
China implemented on August 4, 1995.
3.1 C
alculating Overtime Payments
53 3
An employee may work a maximum of 3h of overtime in any one
weekday and a maximum of 36h of overtime in any 1 month.7 Assuming
a company stipulates an 8h work day, then on average in a month a wor-
ker shall work 174h. Adding this maximum 36h period of overtime
means that (for an average-length month) an employer cannot legally
require an employee to work for more than 210h during that month.
3.2 Paying Mandatory Contributions (Social

Insurance)
Although both employee and employer make contributions toward the

social insurance funds in China, it is generally the case that the emplo-
yer is responsible each month for withholding the contribution of the After corporate account
employee from gross salary, and making their contribution together registration is complete, in
with that of the employer.8 Shenzhen, registration for
While the mandatory contributions into the state-sponsored pension
local employees can be done
plan and other social insurances are clearly specified by law, certain
online, while registration for
companies choose to base their housing fund payment to their emplo-
the supporting documents for
yees on an amount exceeding 300 %of the social average salary base for
their city. This is acceptable in many areas of China; however, the por- expatriate employees must
be physically submitted at the

tion that is above the mandatory amount is taxable for individual
income tax purposes, and this amount of tax should be deducted by the Social Insurance Bureau.
employer before payment of net salary to the employee.9
Below we will explain how to register at the Social Insurance Bureau Sisi Xu
and the Housing Fund Bureau and pay mandatory contributions on Sr Manager
behalf of employees. As the process is slightly different across different Corporate Accounting Services
cities in China, we use the situation in Beijing as an example. Dezan Shira & Associates
Shenzhen Office
china@dezshira.com
Social Insurance Registration and Payment
www.dezshira.com
1. The company should first obtain a social insurance number. The

following documentation must be presented at the Social Insurance
Bureau between the 1st and the 20th of the month (no social insu-
rance numbers will be issued after the 20th):
5 Company business license.

5 Enterprise code certificate.
7 Article 41 of the Labor Law of the Peoples Republic of China imple-

8 Article 12 of the Social Insurance Levy Temporary Clause implemented
on January 22, 1999.

9 Article 1 of Circular Caishui [2006] No.10 implemented on June 27,
2006.
5 Certificate of approval.
5 ID of the legal representative or person in charge of the company.
5 Social insurance information collection form.
5 RMB Basic Account Opening Permit.
3 If the employee is paid through a branch of the company, the fol-

lowing documentation is also required:
5 Parent companys business license and enterprise code certificate.

5 Power of attorney affixed with company chops.
2. After receiving a company social insurance number, details rela-

ting to the employees should be input into software provided by the
Social Insurance Bureau. These details include salaries, as these will
determine the base on which monthly contributions are made.
3. Information input into the software should be saved onto a USB
flash drive and physically taken to the Social Insurance Bureau.
4. A contract should be completed with an eligible bank to ensure that
the monthly social insurance contributions can be directly remitted
to the Social Insurance Bureau each month. In most cases, the first
payment of social insurance contribution must be made via a cheque
issued from the company, the funds cannot be automatically debited
until the second month.
5. A monthly visit to the Social Insurance Bureau to register new
employees and deregister employees who have left the company is
often necessary, as these processes cannot be handled online in many
cities at time of writing.
Fines can be imposed by the Social Insurance Bureau for late pay-
ment of contributions by an employer.
Housing Fund Registration and Payment
The nature of the housing fund is fundamentally different from the

social insurances described above. All of the contributions made to this
fund accrue to the individual, with none of the funds going to a social
pool. For this reason, the housing fund is treated separately and gover-
ned by a different bureau.
The steps to complete the Housing Fund Bureau registration are:
1. A company account must be opened with the Housing Fund Bureau.

To do this, the company should present the following information:
5 Company business license (original and copy).

5 Enterprise code certificate (original and copy).
5 Certificate of approval (original and copy).
5 ID of the legal representative of the company (copy).
3.2 P
aying Mandatory Contributions (Social Insurance)
55 3
5 Power of attorney affixed with company chops (original).
5 Housing fund information collection form with company chop.
2. Approval can generally be received immediately, and the company

receives a special account number for payment of housing fund.
3. A contract must be signed between the Housing Fund Bureau, the
company, and an eligible bank to allow automatic contribution of
housing fund each month. The first payment of housing fund contri-
bution usually must be made via a check issued from the company
it cannot be automatically debited until the second month.
4. A monthly visit to the Housing Fund Bureau to register new emplo-
yees and deregister employees who have left the company is often
necessary, as these processes cannot be handled online in many cities
at time of writing.
Online systems for registration of employees with the Social

Insurance Bureaus and Housing Fund Bureaus are still not available in
many parts of China. Either someone in the companys HR department
needs to make frequent trips to both the Social Insurance Bureau and
the Housing Fund Bureau, or the role could be outsourced. As a gene-
ral rule, a company with less than 1,000 employees will normally find it
worthwhile to outsource this function.
3.3 Additional Payroll Costs
Regional Allowances
Regional allowances are localized mandatory payments that employers

based in certain regions must pay to their employees as part of monthly
payroll. We will just provide two examples of supplemental payments that FOR MORE INFORMATION
companies based in certain locations need to make to their employees. Contact:
Dezan Shira and Associates
1. Allowances for winter heating feeNortheast China.
china@dezshira.com
Northeast China is a cold place in the winter, with temperatures
www.dezshira.com
falling to below 30 C in some areas. Heating is supplied to all
apartments during the winter, however, there is a cost associated
with this. The cost differs per city, but each household can expect to
have to pay a fixed fee of around RMB2,000 to RMB4,000 for cons-
tant heating through the winter months. This fee can represent a few
months of salary for some workersnot an inconsequential amount.
In an attempt to ensure that all households will have enough
money to pay for their heating bill, the various local governments in
the region require companies to provide a certain amount of money
each month to each employee as a heating allowance.
An additional requirement in Dalian is that companies must also
contribute another 2 % of the average social salary of all employees
with a Dalian hukou to a fund, which will be used to help retired
people pay their annual heating fee.10 This amount is paid together
with the monthly social insurance contribution to the Social
Insurance Bureau.
2. Summer heat allowance feeGuangdong Province.
3 In contrast, the south of China is too hot in the summer. The

Guangdong government has instituted a policy that requires compa-
nies to compensate their employees for working during the hot
months. During the period of JuneOctober, companies should pay
an additional RMB150 per month to their employees, regardless of
whether they work indoors or outdoors.11
Although these additional fees do not appear to be high, espe-
cially by western standards, we include them in this chapter to high-
light the fact that there are regional policies which affect the amount
of compensation payable to employees.
Disabled Workers Employment Assistance Fund
In certain cities, employers are required to either employ a proportion

of disabled workers or pay a certain amount into a fund to assist disa-
bled people in finding work. Beijing and Shanghai both have policies in
place governing payment into these funds, however, the burden for the
employer is quite different.
3.4 Distributing Salaries
The vast majority of companies in China handle salary distribution via

electronic funds transfer (EFT). EFT files can be uploaded through bank
websites by the HR manager and approved online payment to emplo-
yees by the finance manager. If the employees have bank accounts with
the same bank as the company then the transactions should be pro-
cessed immediately, otherwise there can be a short delay; normally of
not more than 1 day.
Uploading one EFT file which includes details of each employees
net take home pay saves time, and also has the advantage that indivi-
dual salary details will not appear on the bank statement at the end of
10Dalian City Employee Heating Allowance Regulations implemented

on September 30, 2005; Dalian City Council Code No.80 implemented on
September 15, 2006.
11Guangdong Province Administrative Measures on Paying High
Temperature Allowance implemented on June 1, 2012.

3.4 D
istributing Salaries
57 3
Disabled workers employment assistance fund contributions
Beijing Shanghai
Fee exemption: minimum % of 1.6% 1.7%

workforce as disabled workers
Fee contribution amount Beijing social average Actual average annual salary for the company in
calculation annual salary for previous previous yearno. of workers employed1.6%
year60%no. of workers
employed1.7%
Comments Companies that do employ The regulation mentions a ceiling for the actual
some disabled workers but average annual salary for the company, however the
do not meet the exemption amount of this ceiling is not specified anywhere
requirement will pay a reduced
In practice, the collection of this fund is being
amount into this fund based
implemented using a rather different calculation
on the difference between the
to the legal basis. The social insurance bases of the
percentage of disabled emplo-
companys employees are being used as the refe-
yees actually employed and the
rence point for calculation of the fund contribution.
exemption threshold
The maximum social insurance base in Shanghai in
2012 is RMB12,993. Therefore, the contributions the
company makes for employees earning more than
the maximum social insurance base this amount is
limited and the total cost to the employer is lower
than the amount calculated in accordance with the
relevant regulations
Sources
Notification of Implementation Measures Concerning the Management of Payment of Contributions to the Beijing City Disabled
Workers Employment Assistance Fund implemented on July 17, 2006
Implementation Measures for Methods of Organizing Employment for Disabled Workers in Shanghai City implemented on June
22, 2000
the month. Before the batch is processed, the bank will require approval
from the finance manager at the company for the total amount of salary
to be released. This is the figure that will appear on the companys next
bank statement. Only the person that uploaded the EFT file will know
the contents of that file; usually the HR manager at the company.
Salary payments in China should be handled through the companys
main operating bank account if possible, so that payments can easily be
classified as salary payments.
For companies that use an international bank for their main bank
account, it is not always possible to process a batch EFT file. Therefore,
all the salary details for each individual will appear on the statement. To
avoid this situation, some companies set up a domestic bank account,
first transferring the funds into this new account (specified as a pay-
roll account) before remitting to their employees accounts. Another
alternative is to pay a lump sum to a payroll agent, which will then pay
salary, mandatory benefit, and possibly IIT on behalf of the company.
This method is not recommended as it causes an unnecessary delay in
the monthly payroll process while the agent verifies that the funds have
been received. There is also the risk that the agent fails to make the
required payments.
3.5 Calculating and Filing Individual

FOR MORE INFORMATION IncomeTax
Tax, Accounting, and Audit
Payment of individual income tax in China is based on not just salary
inChina
A strong understanding of tax liabilities enables income but a range of other income that an individual may receive. The
3 foreign investors to maximize the tax efficiency

of their foreign investment while ensuring full
responsibility of the employer is limited to deducting the IIT payable on
salary income before paying a net amount to the employee. Any pay-
compliance with all tax laws and regulations.
This guide overviews taxes for businesses and ments of IIT based on other sources of income are the responsibility of
individuals, and discusses accounting and the individual.
audit in the China business context, including
As in most countries, IIT is a progressive taxa higher proportion
tax planning, corporate taxes, individual
income taxes, international transactions, audit of tax is payable on earnings above a certain level, and it is payable
and compliance, and financial due diligence. monthly. The lowest level of IIT is 3 %, levied on the portion of taxable
www.asiabriefing.com/store monthly income between RMB1 and RMB1,500. The highest rate is
45 %, payable on the portion of taxable monthly income above
RMB80,000.12
IIT Rate by Monthly Taxable Income
Individual income tax rates and deductions
Monthly taxable income (RMB) Tax rate (%) Deduction (RMB)
1,500 or less 3 0
1,500<TI4,500 10 105
4,500<TI9,000 20 555
9,000<TI35,000 25 1,005
35,000<TI55,000 30 2,755
55,000<TI80,000 35 5,505
> 80,000 45 13,505
12
Tax Rate Table Supplement to the Individual Income Tax Law imple-
mented on June 30, 2011.
3.5 C
alculating and Filing Individual Income Tax
59 3
The actual IIT calculation for monthly salary income is fairly
straightforwardthe key point to address is what exactly constitutes
taxable income?
Taxable income calculation for Chinese nationals:
Gross salary+other fringe benefitsemployee social insurance con-
tributionemployee mandatory housing fund contributionRMB3,500.
Included in fringe benefits are:
5 Nonmandatory insurance policies.

5 Various fixed allowances such as housing allowances.
5 Contributions to corporate retirement funds or wealth accumulation
funds.
These fringe benefits should be distinguished from reimbursements,

which are not part of gross income. Employees should provide official
invoices to the company for reimbursement each month based on the
actual amount of their expenses.
Taxable income calculation for nonChinese nationals:
Gross salary+other fringe benefitsmandatory social welfare con-
tributions in their home countrydeductible allowancesRMB4,800.
Individual Income Tax Bonus Treatment
All employees, no matter whether Chinese or foreigners, may take

advantage of special tax bonus treatment during 1 month in every
year. The tax treatment works as follows:
1. Divide total amount of bonus by 12.

2. Cross-reference taxable rate and quick deduction amount.
3. Apply percentage to total bonus amount and deduct the quick
deduction amount.
Let us take a look at one example:

If a staff member receives RMB50,000 as an annual bonus, the tax
treatment works as follows (please note that the calculations below
assume that the employee will receive their current months salary
and that this is over RMB3,500 for Chinese staff or RMB4,800 for for-
eign staff. If the current monthly salary is less than the tax deductible
amount, then the annual bonus shall firstly offset the tax deductible
amount and then follow the below calculation method):
1. First, divide the annual bonus by 12: RMB50,000/12= RMB4,166.67.

So the tax rate for the annual bonus is 10 % with a quick deduction
amount of RMB105.
2. Calculate the total IIT for the annual bonus: RMB50,00010%10
5=RMB4,895.
3. For the annual bonus calculation there is no fixed tax deductible

amount for either Chinese or foreigners (unlike for monthly salary,
where RMB3,500, or RMB4,800 may be deducted).
One key point is that the annual bonus declaration can only be made
3 on one of the 12 monthly IIT declaration forms during any calendar

year. This does not mean that the entire bonus must be received in one
payment, or for one specific purpose.
It is possible to combine the payment of several bonuses or allowan-
ces into the filing for 1 month. Although the employee can treat bonu-
ses and allowances in this way during 1 month of the year, the standard
salary payment for the month will still follow the normal IIT rules exp-
lained previously.
Foreign Employees Working for Overseas

Entities
Note that the calculations introduced above for foreign employees

assume that they are contracted to and working for the Chinese entity. If
they happen to be contracted to an affiliate-based abroad, then their tax
treatment is different depending upon a number of factors including the
number of days they have been based in China during the fiscal year. This
treatment is quite complex and we will not explain it here in this guide.
In most large Chinese cities, individual income tax can be filed online
by the company each month. Physical filings are still generally required
(with the exception of Beijing, Shanghai, and a few other cities).
China Residence and IIT Income Source Applicability Timeline

90 (183)
Less than 90 days to One year to
(183) days one year yes
Tax on global
income from
hereafter
In the 6th
In China year, does
Income paid 5 years residing for
by employer Income paid continuously one year Five year
apply? period is
in China by overseas Income paid reset and
(China- employer by employer 90 (183) day
sourced) (China- no rule applies
in China again
sourced) (non-China
sourced)
IIT Online Filing
To make online filings of IIT the company will generally require:
1. A special USB Key issued by the local Tax Bureau.

2. A piece of software installed on a computer to facilitate the online
filing.
3.5 C
61 3
3. The details of the IIT amounts for each individual, organized into a
format that can be uploaded into the above-mentioned software. FOR MORE INFORMATION
Double Taxation Avoidance
At the beginning of the month, following the payment of salaries to
Agreements
employees there is a period of around 2 weeks during which the online The technical language surrounding double
IIT filing should be made. The precise deadline can be different depen- taxation, including the substance over form
principle, beneficial owner status, and the
ding on the city in which the company is located, although according to
concepts of permanent establishment and
the national law filings should be completed within the first 15 working tax residency, make the area a challenge
days of the month.13 The USB key needs to be inserted into the compu- for nonspecialists to navigate. Yet, an
understanding of these terms and the
ter on which the Tax Bureau software is installed. The pregenerated IIT
circulars behind them is key to ensuring that
file with the details of all the payments to be made by each employee can a business can benefit under double taxation
then be uploaded into this piece of software. agreements.
Including:
The final step is to authorize the software to send the total amount of
5 Double Taxation Agreements for China
IIT to be paid by the company to the Tax Bureau. Note that the details Investment
of each individuals payment are not sent to the Tax Bureau, but remain 5 DTA Interpretation: Circular 75 and
ChinaSingapore DTA
saved within the computer. This software should not be deleted from the
5 Q&A: What is the situation in China for
computer, because physical tax filings that periodically must be made at foreign companies wishing to obtain
the Tax Bureau are also generated using this software. Physical filings will DTA relief?
include details of all the individual contributions made by each employee. www.asiabriefing.com/store
Upon submission of IIT, the Tax Bureau will directly deduct the
amount of IIT filed from the bank account of the company. The com-
pany must have signed an agreement with the Tax Bureau and their
bank to allow the amount filed to automatically be debited. Most large
domestic banks are able to facilitate these transactions, although at the
time of writing of this guide foreign banks are still unable to do so.
Online filings can only be made during the window after the end of
the month in which the salary was paid. If the company fails to meet the
deadline for some reason it must make a physical filing. A fine will likely
be imposed for any late filings.
Physical Filings
Depending on the city, physical filings of IIT are necessary. Assuming

online filings have already been made by the company, all that is requi-
red for the physical filing is:
1. Print out the details of the IIT payments from the Tax Bureau soft-
ware for each individual for each of the months required.
2. Stamp each document with the company chop.
3. Take to the local Tax Bureau for submission.
It is also possible for companies to make physical filings every

month instead of online filings. Although this is obviously more time
13Article 9 of the Individual Income Tax Law implemented on March 1,

2008.
consuming, as the physical filing includes all the details of each indivi-
dual employees tax payments. The person making the filing will be able
FOR MORE INFORMATION to calculate the salaries on which they are based. Therefore, if physical
Annual Compliance and Audit for Expatriates
and Foreign Investors in China filings are necessary they should be made either by the companys HR
In China, January and February brings New manager or someone from outside your organization for reasons of
Year banquets, transportation chaosand
3 annual compliance procedures.
confidentiality.
If physical filings are made, then the tax payment generally cannot
Including:
5 Annual Compliance Procedures. be deducted directly from the companys bank account, and a visit to
5 Tax Deductible and Non-Deductible the bank with a form issued and stamped by the Tax Bureau will be
Expenses.
5 Individual Income Tax Filings and necessary. The bank should receive this form and the payment. The
Declarations for 2011 Earnings. form will not include the details of each individuals tax burden, so no
www.asiabriefing.com/store particular confidentiality risk exists for the company at this stage.
At the time of writing this guide there are still some cities in which
the only option for companies is to make a physical filing every month.
It will likely take several more years before all of the urban areas in
China are geared up to allow online filings.
Who needs to make an annual declaration of

their income?
The annual income declaration should be made not later than

March by anyone who has income from specified sources in
China in excess of RMB120,000 during the financial year
(January 1 to December 31).14 This requirement has been intro-
duced by the government to ensure that individuals earning sig-
nificant income from China take personal responsibility for the
amount of tax they pay.
This income does not all have to be derived from salary, it can
also come from other sources such as commission, service fee, or
interests. Foreigners that have stayed in China for less than
275days during the calendar year are not required to make this
declaration, even if the amount of personal income they have recei-
ved from China in one form or another exceeds this amount.15
The most important information on the form is as follows:
5 Name of individual and employer.

5 Income from wages, taxable income, tax paid, and tax still
owed.
14 Article 6 of the Individual Income Tax Self Declaration Methodology

(Trial) implemented on January 1, 2007.
15 Article 4 of the Individual Income Tax Self Declaration Methodology
(Trial) implemented on January 1, 2007 and Article 3 of the

Implementation Rules for the Individual Income Tax Law implemented
on January 28, 1994 and Revised on February 18, 2008.
3.5 C
63 3
5 List of other nonsalary income.

5 Signature of employee submitting information under the
section clearly stating that the information is complete and
accurate.
Since the details on this form are not limited to salary income
but also include other forms of income the responsibility for sub-
mission of this form does not lie with the employer, but instead
with the individual. At the end of the year, the employer should
inform the employee of the total amount of gross income paid by
the company and the total amount of tax paid on behalf of the
individual over the course of the year. If gross income added to
any other income earned from other sources during the year,
exceeds RMB120,000 the individual should fill out and submit a
declaration.
As mentioned above, the obligation to submit such a form
extends to foreigners working in China. In situations where the
salary details of the foreign employee cannot be disclosed to any
local staff members, companies will often appoint a third-party
agent to assist the foreign employee to make the declaration.
Example: Net salary with and without annual bonus
An employee was transferred from a U.S. HQ to a China subsidiary. In 2012, he stays in China for 365days and his annual
salary (after nontaxable deductions) is RMB1,320,000
Monthly salary RMB110,000 RMB80,000
Annual bonus 0 RMB360,000
IIT payable on salary =[(110,0004800)45%13,505]12 =[(80,0004,800)35%5,505]12
IIT payable on bonus 0 =360,000/12=30,000
Applicable tax rate: 25%
Total IIT =406,020 = 360,00025%1,005
= 249,780+88,995
=338,775
3
3.6 O
utsourcing Payroll
65 3
3.6 Outsourcing Payroll
More and more companies are turning to third parties to handle their
payroll in China. Common reasons for doing this include:
Outsourcing payroll
processing allows for greater
transparency, efficiency,
accuracy, confidentiality,
5 Increased efficiency
Providers should have their own software that can generate all and continuity, as well as
the necessary reports required by the client, the bank, and the Tax cost savings and ensured
compliance with all laws and

Bureau. This is more efficient and reliable than generating reports
internally using relatively manual processes on software like Excel. regulations.
5 Increased accuracy
Running payroll through a manual system can often lead to mis-
takes. This presents a poor image of the company to its employees.
It can also cost the company money if employees have been overpaid
Helen Kong
or are left on the payroll after they have left the company. Both of
Corporate Accounting Services
these phenomena are remarkably common.
5 Increased transparency Dezan Shira & Associates Dalian
When there is a problem it is necessary to have a clear procedure in Office
place to ensure that the source of the problem can be located and is china@dezshira.com
reported to management. When companies handle payroll internally www.dezshira.com
it will often be the case that such problems are rectified without any
reporting to management. By outsourcing the payroll process, this
possibility can be eliminated.
Problems with payroll come from one of two areasincorrect
input information or incorrect processing. In the first instance, the
problem lies within the companys inter-departmental reporting
structures. As long as the problem is reported to management it can
be investigated and dealt with. In the second instance, the problem
lies with the setup of the payroll calculation software itself. If the
company is outsourcing payroll management the provider should
take responsibility for the error and the client should consider swit-
ching providers in the future.
5 Increased confidentiality
Obviously, the more employees are aware of salary information
the higher the risk that salary details will become public knowledge
within the company. This is a particular risk in China, where the
concept of confidentiality of salary information is not universally
understood.
By outsourcing payroll there should only be a small core of senior
people in the organization that are aware of the payroll details. The
finance team will only need to know the total amount for the payroll
every month, not the individual breakdown.
5 Decreased liability
Outsourcing payroll management reduces the risk that the company
will make incorrect filings to the Tax Bureau. Assuming the cor-
rect information has been provided to the third-party outsource by
the agreed deadline, any responsibility for underreporting of tax or
penalty for late filing should be the duty of the outsourcing company.
5 Decreased cost
FOR MORE INFORMATION While the costs of outsourcing are quite obvious, they should be
Contact: carefully compared with the costs of running payroll internally.
Dezan Shira and Associates These can include staffing costs (HR/IT/managerial resources), soft-
china@dezshira.com ware development costs, and other miscellaneous costs. Mistakes
3 www.dezshira.com made when processing payroll can cause discontent among a

companys staff and this can lead to an increase in staff turnover.
This is a very significant cost for a company to burden.
Please bear in mind that outsourcing your payroll will not mean you
can entirely disregard your internal HR costs. You will still need somebody
internally to supply the input information to the provider and approve
the payroll each month, as well as other HR tasks, such as organizing the
hiring of employees and ensuring observation of internal regulations.
The strategy behind outsourcing for many companies is similar and
quite simpleremoving most of the processing work. Internal HR teams
should be as small as possible for confidentiality reasons and they should
focus on strategic issues (defining skill sets for various positions, structu-
ring salary packages) and communicative issues (identifying and solving
problems that arise between senior management and employees).
Payroll Processing Procedure
There are several distinct steps during a payroll processing operation:
Step 1: Submission of payroll input information by company

This should include all the information about people who have joi-
ned or left during the month, details of salary increases, bonuses, and
other allowances. Depending on the scope of the outsourcing work, the
company may also need to provide time management sheets, mandatory
benefit contributions, and details of annual leave taken for each employee.
Step 2: Initial processing of master report

At this stage the payroll processor checks all the information sent by
the company before uploading it into the payroll processing software.
After uploading is complete, the software can generate the master
report. This file details all the components of salary for each indivi-
dual, as well as figures for net salaries, IIT payments, social insurance
contributions (for employee and employer), and total compensation
and benefit costs for the employer. It also shows the total amount of
money the company must prepare for payment of salary, IIT, and social
insurance payments. The payroll processor will send this file back to the
internal HR manager at the company for approval.
Step 3: Approval of payroll data

The internal HR manager will check the information on the mas-
ter report, paying particular attention to the completeness of the input
3.6 O
utsourcing Payroll
67 3
information sent to the payroll processor. Once everything is in order,
the HR director will approve the payroll.
Step 4: Generation of all other payroll-related reports

The payroll calculations are now approved and the payroll processor
can run the other reports. These can include, but are not limited to, the
following:
(a) Electronic funds transfer (EFT) file.

(b) Payslips (printed on special security paper).
(c) General ledger file for uploading into the financial system.
(d) Cost center report.
(e) IIT online filing document.
Step 5: Processing of reports
This will depend on the scope of the outsourcing work requested by

the company. Usually the outsourcer will implement the following:
(a) The EFT file will be sent to the bank via the secure online portal
and using a password provided by the bank.
(b) The payslips are couriered to the offices, or in some instances to
the home addresses of employees.
(c) The ledger file is sent back to the companys HR department, and
then forwarded to the finance team for consolidation into the
general ledger.
(d) The cost center report is also sent back to the HR department for
reporting to management.
(e) The IIT online filing document is uploaded into the Tax Bureau
software at the beginning of the following month and subsequently
filed.
Step 6: Transfer of funds
The final step is approval of the payment of salary via online banking
(finance team only needs to see the total amount, not the individual
payments) and ensure that there are enough funds in the account to
cover the payment of salary, mandatory benefit and individual income
tax. As a general rule, the processing takes between 6 and 10 working
days each month, with the IIT online filing happening at the beginning
of the following month.
Below we include some tips on how to identify a reliable payroll pro-

cessing agent:
1. Agents should handle all interactions with your local HR team

through e-mail and in English, allowing management to monitor
3 what is happening.
2. Agents should have a reliable software system that can meet the
requirements of you organization.
3. Agents should not have direct contact with anyone but the members
of the HR team at the company and their supervisors.
4. Agents should process the payroll from a remote location, preferably
not the same city as the client. Only one or two people should be
involved in the processing work.
5. Agents should not do any executive search operations as a side
business; no company would want to entrust its employees salary
records to a company that may misuse them for other purposes.
Payroll Process Flow Chart
Collect payroll-related information

from internal HR and other service
provider (if applicable)
Bank pays to
Cross check and verify information, HR submit to the bank for
Bank transfer file employees on
upload into payroll system processing payments
pay date
Sent to employees on or after

Run master report first draft Pay slips
credit date
Individual Income Submit file via internet and/or

Send master report to HR manager
Tax file physically visit Tax Bureau
Yes To be uploaded into internal

Approved by HR manager? General ledger file
accounting system
No To be used by internal accounting

Cost center report
team
Amend master report according to
clients requests
Other user- To be designed according to
defined reports users requests
Confirmation
Send final version master report to
obtained from HR
client
manager
69 4
Managing the Employment

Relationship
The management of employees is not just about processing documents.

Certain situations arise that require special consideration. Good com-
munication and a clear understanding of the responsibilities of the
employer are necessary to maintain a good relationship. Here, we exp-
lain the role of periodic appraisals and also describe in more detail two
situations commonly encountered by employerssick employees and
pregnant employees. Finally, we take a look at the role trade unions play
in labor relationships in China.

4.1 Performing Periodic Appraisals Contact:
Once a company hires an employee it is important to regularly assess
china@dezshira.com
the performance of that individual. Of course, one of the main reasons
www.dezshira.com
for doing this is to provide feedback to the employee about their perfor-
mance. This is not an issue specific to China, and is carried out by HR
departments all over the world. The point we would like to address in
this section is the relevance of the periodic appraisal to the continued
employment of the individual concerned.
It is not easy to terminate the employment of an employee during the
period of a fixed-term contract or an open-term contract without good
cause. It may be necessary for the employer to prove that the employee
is not suitable for the position, even after further training and support.
Alternatively, the employer may need to prove that the employee has
broken the rules of the company. For certain rules that are not conside-
red to be serious infractions, it may be necessary for the company to pro-
vide several written warnings before officially dismissing an employee.
Regular appraisals can help to guide your employees away from beha-
vior that is likely to cause friction with the company and toward a more
productive relationship for both parties. Many companies perform such
appraisals at the end of the probation period and then at 6-month intervals.
Here are some points to bear in mind:
1. Make a standard template for the appraisal. Once the document is

completed it should be signed by the employee, the direct manager,
and HR and be kept in the employees file.

70 Chapter 4 Managing the Employment Relationship
If there are any particular rules that the employee is regularly or

periodically breaking, ensure that the manager mentions them explicitly
somewhere on the appraisal form. Common problems include a ten-
dency to arrive late for work, too much time spent surfing the Internet
at work etc. These should be clearly mentioned to the employee during
the appraisal meeting. By pointing out rule infractions on the appraisal
form, it will come as less of a shock to an employee if the company has
to issue an official warning for the same reason later on in the year.
4
2. Make sure that managers are keeping their appraisals realistic and
avoiding the temptation to give over-flattering appraisals to emplo-
yees. Such unrealistic appraisals defeat the original objective of the
system and can cause problems in the future as the employee may
start to have an over-inflated sense of their importance to the com-
pany. It can make any procedures to terminate an employee in the
future more difficult. Employees may cite such appraisals as evidence
that they have been performing well.
3. When one party involved in the appraisal is a nonnative Chinese
speaker, the form should be filled out in both Chinese and in English
to avoid misunderstandings. Furthermore, the employee should also
fill out and submit a self-evaluation form, also signed by employee,
direct manager, and HR.
Naturally, there is a cost associated with drafting and maintai-

ning all this information, but the costs associated with not prepa-
ring well can be much higher.
Probation evaluation form (to be filled out by direct manager)
Employee Name Department Position Probation

No. startend date
Evaluation by superior Categories Points Comments
1. Professional knowledge and skill level 7531
2. Planning and implementation ability 7531
3. Attitude to work 7531
4. Sense of responsibility 7531
5. Ability to work in a team 7531
6. Flexibility 7531
7. Ability to react to changing circumstances 7531
8. Communication skills 7531
9. Level of maturity displayed at work 7531
10. Suitability of cultural values compared with 7531

those of the company
Overall evaluation
4.2 Long-Term Sick or Injured Employees
71 4
Probation evaluation form (to be filled out by direct manager)
Employee Name Department Position Probation

No. startend date
Recommendation by Convert to standard employee status
Transfer to alternative position

superior
Dismiss
Signature of superior: Date:
Remarks Each category is evaluated using a points system as follows:
7=Excellent 5=Good 3=Average 1=Poor
Approval/comments by Signature of Employee: Date:

employee
Approval sectionDirect Manager should not fill in
Approved by Direct Managers Supervisor Approved by HR Director Approved by General Manager
Signature Date Signature Date Signature Date
It is inevitable that as your company grows in China, a small portion of

your workforce will fall ill or suffer some injury at some point. Assuming
the employer and employee have been making their contributions under
the social insurance system, at least some proportion of the hospital costs
for any illness or injury will be covered by medical insurance, while the
rest of the burden will fall on the individual. The responsibility for pay-
ment of the employees salary still remains with the employer. Some of
the regulations stipulating this responsibility are made at a local level, so
here we compare Shanghai and Beijing. Please note that these regulati-
ons apply to illnesses and injuries that were not received during the pro-
cess of performing work on behalf of the employer.
Shanghai
Recuperation period (during which the employer is responsible for pay-

ing salary to the employee) is a minimum period of 3months plus
1month for every year of service to the company from the second year
onward, with a maximum of 24months.1
The amount paid is a proportion of the employees base salary. The
proportion is higher during the first 6months of the sickness or injury
leave and lower for subsequent months. The base salary is as stipulated
1Article2 of the Standards for Recuperation Period in Shanghai for

Employees Sustaining an Illness or Non-Work Related Injury during the
Labor Contract Period implemented on May 1, 2002.
in the employment contract, and does not have to include income clas-
sified as allowances, bonuses, or overtime.2
The following points should also be taken into account:
5 If the amount payable to the employee each month during illness or

injury period is greater than the average social salary in Shanghai for
that year (RMB4,331 in 2012) then the company may pay an amount
equal to the average social salary amount3
4 5 The minimum payment that should be made to an employee each
month during the period of illness or injury should be not lower
than 80% of the minimum wage (RMB1,450 in 2012)4
5 The minimum payment that should be made to the employee should
not be lower than 40% of the average salary paid to all employees in
the company, unless this amount is higher than the social average
salary for Shanghai5
5 While the employer is in general entitled to terminate a labor con-
tract after the completion of the illness/injury leave period (assu-
ming the employee is still not capable to fulfill the responsibilities of
the position), the employer should make a one-off payment equal to
at least 6months of salary to the employee as compensation for
future medical expenses (note that this calculation of salary does not
refer to base salary, but instead the average of the total monthly
salary received over the previous 12months, including allowances,
overtime and bonuses; the regulation does not mention whether or
not this shall be limited by 300% of the average social salary for
Shanghai)6
Percentage of salary payable for consecutive leave
Within a 6month period
Continuous working period<2years 60% of employees salary
2years<continuous working period<4years 70% of employees salary
8years<continuous working period 100% of employees salary
2Article 1 of the Shanghai Labor Bureaus Bulletin in Relation to

Calculation of the Salary During the Sick Leave Period implemented on
November 1, 2004.
3Ibid.
4Ibid.
5Ibid.
6Article 44 and Article 45 of Shanghai City Labor Contract
Implementing Rules, implemented on May 1, 2002.

73 4
Percentage of salary payable for consecutive leave
In excess of a 6Month period
Continuous working period<1year 40% of employees salary
1year<continuous working period<3years 50% of employees salary

Please note that the above employees salary is define as normal salary70%
5 The employer shall also pay 1month of salary for every year worked as
compensation to the employee when implementing such a termina-
tion; (as above, this is also calculated based on the average total
monthly salary received over the previous 12months; if monthly salary
exceeded 300% of the average social salary for Shanghai then the cal-
culation should be based on 300% of the average social salary figure)7
5 If company rules stipulate that sick or injured employees should
receive higher compensation than regulations indicate, these com-
pany rules must be followed.
The total amount payable for such an employee could be roughly

18months of the employees salary, although possibly lower if the
employee is a particularly high earner.
Example: Employer Payments in Shanghai
An employee serving for a full 6years would be eligible to receive

salary for 8months after the commencement of an illness/
injury (3months plus 1month for every year after completion
of the first full year). The employee would receive 56% (80%
of 70% of their total salary) of their normal base salary for the
first 6months of their illness or injury. In the seventh and eighth
months they would receive 42% (60% of 70% of their total
salary). After this period, the employer would in most cases be
able to terminate the labor contract with the individual.
If, at the end of the 8months sick/injury leave period the
employee was unable to make a recovery, the company should
burden the following:
5 Payment of 64% of base salary for first 6months of illness or

injury, limited by the average social salary in Shanghai for that
year.
5 Payment of 42% of base salary for the final 2months of illness or
injury, limited by average social salary in Shanghai for that year.
7 Article40 and Article 46 of the Employment Contract Law implemen-

ted on January 1, 2008.
5 Payment of 6months of full salary upon termination (medical

expense compensation).
5 Payment of 6months of full salary upon termination (payable
to all employees who are released by the company1month
for every year served). The monthly payment is limited by three
times the monthly average social salary in Shanghai for that year.
4
Beijing
In Beijing, recuperation period (during which the employer is respon-

sible for paying salary to the employee) depends on both the employees
cumulative working time at the current company and the employees
cumulative number of working years.
Recuperation period by cumulative number of working years
Cumulative working Recuperation period Recuperation period

time at current for cumulative No. of for cumulative No. of
company (years) working years working years above
below 10 (months) 10 (months)
<5 3 6
<10 6 9
<15 12
<20 18
>20 24
The recuperation period does not have to be taken all in one period.
For example, the shortest recuperation period3monthsis calculated
from the cumulative amount of sick leave taken during a 6-month period.
An employee who comes back to work for a short time before taking ano-
ther period of sick leave will still be deemed to have exhausted his recupe-
ration period if 3months of sick leave is used in any 6-month period.
In Beijing, the employer is only required to pay at least 80% of the
minimum salary for the city of Beijing, unless anything in the labor con-
tract specifies that a higher amount should be paid.
The following points should also be taken into account:
5 While the employer is in general entitled to terminate a labor con-

tract after the completion of the illness or injury leave period (assu-
ming the employee has not recovered), it should make a one-off
compensation payment to the employee equal to 1month of salary
for every year worked at the company.
5 Further compensation for medical expenses should also be paid to
the employee; irrespective of how long they worked at the company.
This amount should be not lower than an amount equal to 6months
75 4
of salary and should be increased by at least 50% if the illness is
defined as serious and by at least 100% if the illness is defined as
terminal.
5 The employer shall also pay 1month of salary for every year worked
as compensation to the employee when implementing such a ter-
mination (as above, this is also calculated based on the average total
monthly salary received over the previous 12months).
5 If the internal company rules stipulate that sick/injured employees
should receive higher compensation than the above regulations indi-
cate, these internal rules must be followed.
The total amount payable for such an employee could rise to more
than 24months of the employees salary in Beijing. One major dif-
ference between Shanghai and Beijing is that the cost to the company
during the recuperation period will be smaller compared to Shanghai,
unless the labor contract signed with the employee specifies some more
preferential treatment.
Example: Employer Payments in Beijing
An employee serving for a full 6years in Beijing would be eligi-

ble to receive salary for 6months after the commencement of an
illness or injury. This is much lower than the payments necessary
in Shanghai.
The employee would receive at least 80% of the Beijing mini-
mum wage (80% of RMB1,260 in 2012) during their 6-month
recuperation period. After this period, the employer would
in most cases be able to terminate the labor contract with the
individual.
If, at the end of the 8months sick/injury leave period the
employee was unable to make a recovery, the company should
burden the following:
5 Payment of 80% of Beijing city minimum wage for 6months.

5 Payment of 6months of full salary upon termination (econo-
mic assistance).
5 Payment of a further 6months of full salary upon termi-
nation (medical expense compensation), possibly rising to
912months depending on the definition of their condition.
5 Payment of 6 months of full salary upon termination (payable
to all employees who are released by the company1month
for every year served); the monthly payment is limited by three
times the monthly average social salary in Beijing for that year.
4.3 Pregnant Employees
A policy implemented
in April 2012 extended
While an employer may be fortunate enough to avoid staff catching a
serious illness or having an accident, it is probably too much to expect
payment of salary to pregnant that a proportion of the female employees will not become pregnant at
employees from 90 to 98 some point during their employment. This section explains the respon-

days. sibilities of an employer toward pregnant employees. Please note that
as with so many laws in China, there are many local regulations that
4 Sarah Wei further complicate the issue. We have based the following analysis on
HR & Admin Manager national rules, supplemented by the regulations issued by the Beijing
Dezan Shira & Associates Beijing local government.
Office Assuming the company has been paying social insurance contribu-
tions on behalf of its employees, the payment of salary to a pregnant
china@dezshira.com
employee during maternity leave will be burdened by the social insu-
www.dezshira.com
rance system. The salary paid to the employee will equal the individuals
current month mandatory benefit contribution base divided by 30 and
multiplied by the number of maternity leave days.8
The employee will generally be allowed to receive this payment for a
period of 98days.9 There are various extensions to this period depen-
ding on the age of the mother at delivery, the difficulty of the birth, the
number of babies delivered, etc. We will not detail them all here. She
will also receive a lump sum to cover some of the expense of the time
spent in hospital for the childbirth. This amount will vary by region and
also depend on the method by which the baby is delivered.
From the above, we can see that the financial responsibility to the
company during the pregnancy leave is not so greatthe company does
need to keep open the position for the employee.
As you would expect, an employer may not terminate a pregnant
employee (it is irrelevant whether or not the company knew about the
pregnancy at the time of the termination) unless they have adequate jus-
tification for it under the Labor Contract Law.
In certain cities like Shanghai, fathers are also allowed a short period
of leave during the period immediately after the birth of a child. They
may take 3 working days, during which period their salary will be bur-
dened by the Social Insurance Bureau.10
We would like to mention one final point on pregnancy in China.
Due to problems of overpopulation, until relatively recently it was only
permitted for most Chinese women to give birth to one child.11
Although the current law allows couples that were both single children
8Article 15 of the Beijing Enterprise Employees Maternity Insurance

9Article 14 of the Beijing Enterprise Employees Maternity Insurance

10Article 33 of the Shanghai Population and Family Planning
Regulations implemented on April 15, 2004.

11 Article 18 of the Population and Family Planning Law implemented
on September 1, 2002.
4.3 Pregnant Employees
77 4
themselves to have two babies, many urban Chinese will still choose to
have small families due to the high cost of raising more than one child.12
Many women will choose to rejoin the labor force after the maternity
period. Therefore, we can conclude that compared with other countries,
the direct financial effect on the company due to female employees
taking pregnancy leave will be relatively low.
4.4 Labor Unions
As a country with a long socialist history, it would be natural to assume

that trade unions wield a significant amount of power within China. In
fact, there is one centralized organization called the All China
Federation of Trade Unions (ACFTU) that as of December 2011 boas-
ted approximately 258 million members. It is not a democratically run
union with a high degree of accountability to its members, but instead
an organ of the Communist Party of China.13 Labor unions not affilia-
ted to the ACFTU are deemed illegal unless formal approval is received
from the relevant authorities.14 At the present time, we are not aware of
any cases in which non-ACFTU unions have been approved in main-
land China.
Underneath the umbrella of the ACFTU, there are provincial,
municipal, and county level chapters. In many cities, small companies
(with fewer than 25 employees) are required to register their emplo-
yees with the local chapter of this union. Chinas Trade Union Law sti-
pulates that a fee of 2 % of the employees salary is payable to the
union each month (by the company on behalf of all employeesnot
deducted from the salary of employees).15 Note that this regulation is
not being implemented in a uniform manner across the country, and
there are a large number of both domestic and foreign-invested com-
panies that do not affiliate their employees with the local chapter of
the ACFTU.
Companies with over 25 employees are supposed to establish their
own chapter of ACFTU specifically for their company, but a lot of
companies take the view that this should only be implemented if there
are requests from staff to form such a union. The current situation in
most parts of China is that employees are either reluctant to express
their wish to form such a union, or do not feel that the benefits are
12Article 17 of the Beijing Population and Family Planning Clauses

implemented on September 1, 2003.
13 Number of ACFTU affiliated members reaches 258 million, China
News July 18, 2012.

14 Article 35 of the Administration Rules on the Registration of Social
Unions issued by the State Council implemented on October 25, 1998.

15Article 21 of the Trade Union Law implemented on October 27,
2001.
worthwhile. As a result, there are still many companies that have not
formed trade unions.
If your employees are affiliated to the local chapter of ACFTU, this
organization has the power to get involved to protect the interest of the
employees in the event of any dispute. Apart from this point, there is
minimal interference from the local chapter of ACFTU in the internal
operations of the company.
If your company establishes its own ACFTU branch; however, there
4 are certain points to consider. Apart from the requirement to pay 2% of
salary to the union fund, the following are the most important:
5 When the company intends to unilaterally terminate the contract of

one of the union members it must first inform the union; the union
may write their opinion to the employer concerning the legality of
the termination and the company has a responsibility to investigate
the matter and reply to the union in writing.16
5 When drafting and amending rules and regulations of the employee
rulebook and other company rules and regulations that may affect
the workforce, employers must hold consultations with the labor
union.17
5 When the company considers issues that will have a serious affect on
the operation and development of the company, it should ask the
opinion of the union. When meetings are held to discuss issues that
will directly affect the interests of the employees (salary, work safety
and hygiene, and social insurance), a representative from the union
should be in attendance.18
5 Unless there are some special circumstances, the president, deputy
president, and committee members of the labor union should not be
dismissed from their employment, while they remain in position at
the labor union. If necessary, the term of the labor contract shall
automatically be revised to equal the term of service at the union.19
5 A certain amount of time must be allowed during working hours for
nondedicated members of the labor union committee (there are very
few foreign-invested companies with dedicated labor union repre-
sentatives) to carry out their responsibilities; this time allowance
should not exceed 3 days per month.20
In theory, the ACFTU is designed to protect the interests of it mem-

bers. It is debatable though, how proactive and effective the union is
16 Article 42 of the Trade Union Law implemented on October 27, 2001.

4.4 Labor Unions
79 4
when getting involved in disputes on behalf of its members. As menti-
oned above, at a central level the ACFTU is not ultimately controlled
by its members but by the Communist Party. At a local level, the regio-
nal governments have a certain amount of influence. Even at a company
level often the key roles in the union are taken by senior management
personnel in the organization. Therefore, there are conflicts of interest
throughout the union hierarchy.
To summarize, although labor unions are a factor that management
needs to consider in China, they are not as powerful as in many other
countries. Due to patchy implementation of laws around the country,
many companies have not even been required to institute a labor union.
81 5
Terminating the Employment

Relationship
This chapter focuses on issues relating to termination of staff

something that is never pleasant but occasionally necessary. With ade-
quate preparation and clear understanding of the law, at least the drama
can be reduced to some extent. There is also a more fundamental reason
to make sure a termination is handled properly; labor disputes can be
expensive for employers in China.
5.1 The Importance of Documentation
In the case of an employment dispute, the burden of proof will fall pri-
marily on the company, so it is critical that the employer organizes all
documentation relating to its employment relationships in a thorough
and consistent manner.
In the case of termination, to show that an employee is not properly
fulfilling their job duties or has violated company rules, employment
documentation from throughout the employment relationship may
prove useful, including:
5 Offer letter/letters of intent.

5 Labor contract.
5 Confidentiality agreement.
5 Noncompetition agreement.
5 Employee handbook.
5 Job description.
5 Appraisal forms.
5 Employee registration form.
What should be on an employee registration

form?
An employee registration form should make the employee per-

sonally responsible for the background information that they are
providing to the company. It should be filled in and signed by the

82 Chapter 5 Terminating the Employment Relationship
FOR MORE INFORMATION employee when the company issues the offer letter, and should
Contact: include the following:
5 Name of the employee, position applied for, and proposed
china@dezshira.com
date of commencement.
www.dezshira.com
5 Contact details.
5 Various personal information (including ID number).
5 Educational background and other professional certificates.
5 Work history.
5 5 Detail of any disciplinary action from a previous employer.
5 Disclaimer relating to possible release of private information
in the document.
5 Reminder that employees must inform the company promptly
about any change to the information provided.
5 Signature of employee.
The company should add a section for authorization of refe-

rences provided that should be signed separately by the employee.
Without this authorization, the company could have problems
confirming the validity of documents that the applicant has
provided to them. Many foreign universities will not release any
information about their past students without such a signed
authorization. For any applicants who have studied or worked
abroad, we suggest that this section be translated into English as
well and signed using both their English and Chinese names.
5.2 Terminating During the Probation Period
Before the introduction of the Labor Contract Law in 2008, it was rela-
tively easy for an employer to dismiss an employee during the probation
period. This led to an unfortunate situation where an individual would
quit a job to join another company, only to be discarded within weeks
for not being appropriate for the position.
Under the current Labor Contract Law, this situation has been reba-
lanced to the benefit of the employee. Article 39 states that:
A company may dissolve the labor contract if the laborer is pro-
ved during the probation period not to satisfy the requirements of
employment.
Therefore, the burden is on the company to prove that an employee
has not been able to meet the requirements of the position they were
hired to fill. There are two aspects involved here:
1. The job description shown to the employee prior to being hired must
be specific enough to give valid grounds to the employer for dis-
missing the employee if the employee proves to be unsatisfactory. It
5.2 T erminating During the Probation Period
83 5
should clearly indicate the key roles that the employee will be expected
to perform and the relevant skills that the employee should possess.
2. The company must gather clear evidence to prove that the employee
has not been able to meet the requirements that were established.
The probation period appraisal form can be used as the basis for asses-
sing the suitability of the employee and the degree to which they meet
the requirements for the position. This will be a useful piece of evidence
if the company wishes to dissolve the relationship at this point.
HR departments may also want to introduce more forms to make
the appraisal process more specific. For instance, some companies have
their managers sit down with employees during their first week and set
tasks for which employees will be assessed during this probation period.
These tasks are summarized in a document which is signed by the
employee and employer. At the end of the probation period, the emplo-
yee is assessed based on the degree to which these specific tasks were
completed. Managing the probation period in this way further reduces
the scope for dispute in the future, although there is a larger administra-
tive burden on the managers involved.
Although many employees are not aware of their rights under the
current Labor Contract Law, employers should prepare for the possibi-
lity that employees on probation will make a concerted effort to keep
their positions during this period, because once the probation period is
over it will be even harder for the company to terminate the contract.
There will be some chance that employees facing dismissal during this
period will look to the Labor Contract Law for protection. Companies
should carefully consider to what extent they wish to document the
details of employee performance during this period.
Check out Dezan Shira and
5.3 Terminating During a Fixed-Term Contract
Associates multimedia page
Including content on:
Upon completion of the probation period, the employee has a greater
degree of job security, at least until the expiry of their first fixed-term con- 5 Corporate Establishment.
tract. While the only additional requirement of the employee is to give the 5 Due Diligence.
employer 1 months notice if they intend to resign from the position, the 5 Intellectual Property.
employer has a higher hurdle to overcome when terminating an employee. 5 Human Resources Compliance.
First of all, let us look at the circumstances under which an employer 5 Visa and Work Permits.
can terminate an employee immediately and with no additional 5 Accounting and Bookkeeping.
compensation1: 5 Audit and Compliance.
5 Corporate Taxes.
1. The employee is deemed to commit a serious violation of the 5 Individual Income Tax.
companys internal regulations. 5 Corporate Structuring.
5 Transfer Pricing.
The key here for the employer is to prove that some infraction of inter- 5 Payroll Processing.
nal regulations is serious. The company should make clear in the 5 Human Resources Administration.
5 Social Welfare.
1 Article 39 of the Labor Contract Law implemented on January 1, 2008. www.dezshira.com/multimedia
company rulebook which type of infractions are considered to be

serious. The company can claim in the rulebook that several minor
infractions (for which official warnings must be issued) may cons-
titute a serious violation, however, such a claim may still be challen-
geable. Note that even if the company designates a certain infraction
as serious, it may still need to provide justification for doing so to a
judge in the event that there is a challenge from the employee.
2. The company suffers a serious loss that can be attributable to the
conduct of the employee.
5 In this situation, the company would have to convince the judge that the
loss came about because of the negligence or inappropriate conduct of
the employee, as well as that the loss can be considered serious.
3. The employee is convicted of a criminal offence during the term of

the labor contract.
Note that the employer may not terminate the contract due to the emplo-
yee having an existing criminal record when joining the company. It is
the responsibility of the employer to find out whether or not a potential
employee has been prosecuted for a criminal offence in the past. It should
be possible to find this information on the dangan of the individual.
In practice, the employer may only know about the conviction of an
employee if a prosecution for a criminal offence in some way involves
the employer, or if they are informed by the court or some other autho-
rity during the prosecution process.
4. Labor contract signed by employer under false assumptions or coer-

cion from the employee.
The most common situation falling under this category is due to mis-
representation of information on the resume by job applicants. For
instance, falsely claiming to have a degree or other qualification is a
relatively common phenomenon. We would suggest employers to insist
that prospective employees present originals of graduation certificates
and licenses obtained and also sign a copy of each one to be held by the
employers HR department. Additionally, the company should ask the
employee to sign an authorization of reference/qualification confirma-
tion document. Such a document allows the company to request details
about the employee from educational establishments and previous
employers. It also acts as a deterrent for potential employees to make
false claims about job history or educational background.
5. Employers interests harmed due to the employee taking up a post at

a separate entity.
If the employer discovers that an employee is working on behalf of ano-

ther company and that this activity is having a negative effect on their job
85 5
performance, the employer must first request the employee to terminate the
second position. Only in the event that the individual refuses to stop carry-
ing out the second role may the employer terminate the labor contract.
Note that these are the only five instances in which an employee can
be summarily dismissed without additional compensation.
Next, let us consider the conditions under which an employee can
be dismissed with 30days notice and compensation (based on length of
serviceto be defined in detail below):
1. The employer and the employee reach an agreement, and it was the
employer that first proposed the termination.
2. The employee is sick or is injured for a nonwork-related reason and
cannot resume their original position after the expiration of the
prescribed time period for medical treatment, nor can they assume
any other position arranged by the employer. (Note that compensa-
tion payable under such a situation will be higher).
3. The employee is incompetent for the position and is still incompe-
tent after training or being assigned to another position.
4. The objective situation on which the conclusion of the employment
contract is based has changed considerably, making it impossible to
perform the employment contract, and no agreement on changing
the contents of the employment contract has been reached after
negotiations between the employer and the employee.
5. The employer is being restructured according to the Enterprise
Bankruptcy Law.
6. The employer encounters serious difficulties in production and busi-
ness operations.
7. The employer changes its products, makes important technological
renovations, or adjusts the way of business operations, and it is still
necessary to layoff some employees after modifying the employment
contract.
8. Other objective economic situations on which the employment con-
tract is based to change substantially, making it impossible to per-
form the employment contract.
At this point, we should clarify the minimum (mandatory) compensa-

tion that should be payable to employees dismissed under any of these
circumstances.
Compensation by period of service
Service period (X) Compensation
0<X<6months (but out of probation period) Average monthly wage * 0.5
6monthsX1year Average monthly wage * 1
1year<X<1.5years Average monthly wage * 1.5
1.5yearsX3years Average monthly wage * 2
X>3years Average monthly wage * No. of full years served (maximum of 12)
Additional points:
5 The average monthly wage is calculated based on the average

salary paid to the employee over the previous 12months2; it does not
include social insurance contributions made by the employer.
5 If this average monthly wage exceeds 300 % of the average social salary
in the area where the business operates, 300 % of the average social
salary will be adopted to calculate compensation to the employee.3
5 Any employees who have worked for the employer for more than
12years are not eligible to receive more than an amount equal to
5 12months salary as compensation.4
5 Certain cities have a slightly different method of calculation from the
above example, so HR managers should enquire with the relevant
authority when necessary.
In situations, where the employer cannot make a clear case for a ter-
mination based on any of the above legal requirements, the cost to the
employer is likely to be higher. For employees on contracts nearing
expiry it will often be quicker and easier to pay the employee for the
remainder of the contract (plus compensation for service time) rather
than get involved in an arbitration process.
In cases, where the employee has a long time remaining on a con-
tract it is recommended that the employer gather as much material as
possible concerning the shortcomings of the employee concerned before
taking any action. During a dispute, the arbitration panel will take into
account the evidence provided by both sides concerning job perfor-
mance before making a decision on how much compensation to award
to the employee.
There is a common misconception that in the event an employer
unilaterally terminates an employees contract with no valid reason,
the liability of the employer is limited to twice the amount of compen-
sation payable under the conditions that the termination was made in
accordance with the law. This has arisen from Article 87 of the Labor
Contract Law, which states that the employer can violate the law and
still only be liable for double compensation based on the provisions
under Article 47. However, Article 48 of this law stipulates that if an
employer terminates a labor contract in violation of the law, the emplo-
yee can require continued performance of the contract. Only in the
event that the employee does not demand continued performance, or if
continued performance becomes impossible should the company pay
double compensation to the employee.
The potential cost to the employer of terminating an employee
during a fixed-term contract could in fact be quite high.

3Ibid.
4Ibid.
87 5
Components would potentially include:
5 Payment of salary for remainder of the contract term (not limited by

300 % of average social salary provision).
5 Legally stipulated compensation at the end of the contract term (1
month of compensation for each year of service after January 1, 2008
when the current law came into force).
5 Any court costs incurred.
As a final point, an employer is not able to dismiss an employee that is

on recuperation leave, a pregnant employee or a female employee with a
child under 1 year of age.5 An exception to this rule would be the case
where a pregnant employee is summarily dismissed based on one of the
five scenarios explained above.
Average Monthly Social Salary in Various Cities Around China2012
City Amount (RMB) City Amount (RMB)
Beijing 4,672 Ningbo 3,179
Chengdu 2,834 Qingdao 2,730
Dalian 4,144 Shanghai 4,331
Guangzhou 4,789 Suzhou 4,305
Hangzhou 2,978 Xian 3,473
Nanjing 4,248 Zhongshan 4,035
Sources Various Social Insurance Bureaus

Note Written documentation hard to obtain, please use as a general
guide only
5.4 Terminating at the End of a Fixed-Term

Contract
The expiry of a fixed-term contract provides an important opportunity Find related articles at:
for the employer to evaluate the contribution of the employee and come www.china-briefing.com
to a decision on whether or not to renew them.
It is relatively straightforward for an employer to terminate an
employee at this stage. The employer does not need to give the emplo-
yee a reason for the companys decision. However, employers should
bear in mind the following points:
5 If the employer does not provide a new contract to the employee

by the end of the contract term, and the employee still works in the

company after this point, the labor relationship effectively continues

the employer shall take liability for absence of the labor contract.
5 If the employer elects not to renew the contract at the end of the
period, the company must still pay economic compensation to the
employee. One month of compensation should be paid to the emplo-
yee for each year of service at the company (please note that the calcu-
lation for years of service shall commence from January 1, 2008, when
the current Labor Contract Law was implementedthis only relates to
compensation payable at the end of a fixed-term contract, not com-
pensation payable when a contract is terminated during the period of
5 a fixed-term contract, which was covered in the previous section).
5 If the employer offers the employee a renewed contract on equal
or better terms to the expired contract but the employee refuses to
accept it, the employer is not required to pay any compensation to
the employee.
The company should have a clear understanding of which emplo-

yees are approaching the expiry of their fixed-term contracts. Around
2 months before the expiration, the relevant managers should come to
an agreement on whether or not to retain the employee. Both the per-
formance of the employee and current and anticipated future business
conditions should be considered when making the decision.
At this time, there is some debate about whether or not the emplo-
yer is entitled to dissolve the labor relationship at the conclusion on
the second fixed-term contract. Common sense would suggest that the
employer should be able to do this; however, the terminology in the
Labor Contract Law is vague and introduces a degree of uncertainty. No
clarification of this point has yet been provided by the government. As
a result, a lot of disputes relating to this issue have arisen. The lack of
clarification from the central government suggests that it is happy to see
such disputes administered locally (and therefore affected by the specific
situation in that area) rather than at the national level.
5.5 Terminating During an Open-Term

Contract
After the second renewal of a fixed-term contract, or once the emplo-

yee has worked for the employer for a consecutive period of 10 years,
an employer is obligated to offer the employee an open-term contract.
Effectively, this means that the employer no longer has any opportunity
to terminate the contract of the employee without a valid reason.
If the company is terminating employees due to adverse business
conditions instead of employee misconduct, the company must bear in
mind the following important points:
5 The company should give priority to retaining employees with open-

term contracts or relatively long-term fixed contracts, or those that
5.5 Terminating During an Open-Term Contract
89 5
are the sole wage earner in their family or have a dependent for
which they are responsible.6
5 If the company carries out hiring activity within 6 months of termi-
nating employees due to adverse business conditions, it should give
preference to rehiring those previously dismissed employees.7
5 The company may not terminate employees who have worked for
the company for more than 15years and have less than 5 years
remaining until retirement.8
As you can see, employees with open-term contracts are well protec-
ted by the law. Employers should try to ensure that only productive,
responsible employees are rewarded with the security offered by such
contracts.
5.6 Severance Pay and its Tax Treatment

Some companies will offer to pay their employees more than the manda- Subscribe to China Briefing
tory severance payment amounts for various reasons. These may include:
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5 The company wishes to maintain a good relationship with the
employee even after the employment relationship is broken.
5 The company wishes to show to other employees that it treats all
staff well in order to maintain their levels of.
5 The company appeals for voluntary redundancies.
As a result, severance payments can be quite significant. While there

will be no tax on severance payments for most employees, those who
receive quite a large sum will have some tax burden, and employees who
have received a very large sum and worked for a short period shall have
a relatively larger tax burden.
Individual income tax laws prescribe a special treatment for sever-
ance payments.9 As the terminated employee may have no income in
the coming months, the IIT burden is far lower than in the situation
where an employee receives a similar amount as a salary or even as a
bonus. Below, we explain the steps for making the calculation:
1. Decide on an amount for the total compensation package that will be

provided to the employee. The amount should be paid in one lump
sum to the employee in order to be able to take full advantage of the
termination IIT calculation.

7Ibid.
8Article 42 of the Labor Contract Law implemented on January 1, 2008.
9Notice in Relation to Levying Individual Income Tax on Employees
Severance Pay implemented on October 1, 2001.
2. Deduct an amount equal to 300 % of the annual social average salary

for the region in which the company is based from the total compen-
sation package.
3. Divide the remaining amount by the number of full years that the
employee has spent with the company (maximum of 12).
4. Deduct RMB3,500 (RMB4,800 for nonmainland Chinese) from the
amount derived in step 3 above.
5. Refer to the IIT percentage and quick deduction amount relating to
the income level derived in step 4 above.
6. Multiply the amount in step 4 above with the IIT percentage.
5 7. Deduct the quick deduction amount from the figure derived in step
6 above.
8. Multiply the amount in step 7 by the number of full years served by
the employee at the company (maximum of 12). This will be the ter-
mination IIT burden for the employee.
Note that any tax burden payable by the employee on money received
as part of a termination package should be deducted by the company
before payment of the remaining amount to the employee.
Example: IIT on Severance Pay
An employee worked for a Beijing-based company for 20years and was recently made redundant. The
company agrees to pay the employee one lump sum severance payment of RMB560,000. The previous years
average social salary in Beijing is RMB56,061
Tax-exempt Severance Pay 56,0613=RMB168,183 Multiply annual social salary by 3
Taxable Severance Pay 560,000168,183=RMB391,817 Subtract lump sum severance pay by

tax exempt severance pay
IIT (391,817 12)-3,500=RMB29,151 Determine income level to which IIT

rate is applicable
(29,15125%1,005) x Determine total IIT burden

12=RMB75,393
5.7 Mass Layoffs
A mass layoff is defined as being when a company terminates the labor

contracts of at least 20 employees or a number of employees equal to 10
% of its total workforce, whichever is lower.10
There are several situations in which a company may implement a
mass layoff, namely11:

11Ibid.
5.7 M
ass Layoffs
91 5
1. The company undergoes restructuring under the enterprise bank-
ruptcy law.
2. The company suffers serious problems with production or other
business operations.
3. The enterprise changes products, makes important technological
renovation, or adjusts the methods of its business operation, and it is
still necessary to layoff the number of employees after changing the
labor contract.
4. Other major changes occur in the objective economic environment
relied upon at the time of conclusion of the labor contracts, rende-
ring them nonperformable.
Three of these four conditions have been left relatively vague in the
Labor Contract Law, which gives the courts quite a lot of discretion con-
cerning how to define them. We can expect the interpretation of these
terms to vary quite widely across different areas of the country.
The process for implementing a mass layoff is as follows:
Company explains the circumstances of the mass layoff to its labor
union or directly to the staff 30days before the intended implementa-
tion of the layoff.
5 The opinions of the labor union or the employees are taken into
account by the board of the company.
5 The company reports the implementation of the mass layoff to the
local labor administration department.
5 Once the 30-day period expires, the mass layoff can be implemented.
Note that the government will not usually get actively involved in the
mass layoff process; however, it is important that companies follow the
above procedure carefully. If the mass layoff is not implemented pro-
perly, the government may apply penalties and the employees may also
claim additional compensation if their contracts have not been termina-
ted in the appropriate way.
93 6
Organizing Visas
One final important point for companies is to ensure that their emplo-
yees have the right paperwork, allowing them to do their job legally in
the country where they are employed. Here, we focus on the processes
involved in getting working visas for foreign employees in China.
Visas are an inconvenience for expatriate workers all over the world,
and of course China is not exception. The process for obtaining the
most convenient visa for long-term employees (the Z visa) can be time- FOR MORE INFORMATION
consuming and bureaucratic. Contact:
The other option for a foreigner who needs to visit China for a Dezan Shira and Associates
very short trip (usually less than 28days) will apply for a tourist (L) china@dezshira.com
visa. Such visas can generally be issued at very short notice and do not www.dezshira.com
require a letter of invitation, however extending them can often cause
problems.
6.1 F Visa
The F visa, commonly referred as a business visa, is used by foreign

businesspeople who come to China on business but are not employed at
a Chinese entity (either domestic or foreign-invested).
In order to receive an F visa, the foreigner must be invited by a com-
pany that is established in mainland China. Therefore, before the formal
incorporation of their foreign-invested company in China, foreign staff
that the company wishes to send to work in China will generally need
to apply for an F visa. If your company does not have a Chinese part-
ner that can issue the necessary invitation, there are many agents that
are prepared to organize this for you and manage the F visa application
process on your employees behalf.
There are several different variations of F visa. They can be single-
entry, double-entry, or multiple-entry. The main inconvenience of an F
visa is the maximum period of time the holder may spend inside China
on any one visit. This period may be as short as 1 month or as long as 6
months. Unfortunately, it is hard to guarantee which kind of F visa the

94 Chapter 6 Organizing Visas
Chinese government may be prepared to issue to an individual employee.

The final decision can be based on several factors, and the Immigration
Bureau is not required to explain its final decision to the applicant.
Therefore, F visas are most suitable for employees who will:
5 Spend less than 6 months in China during any one calendar year.
5 Be frequently flying in and out of China.
5 Not be holding a formal senior position at an entity based in China.
5 Not be paid by a company incorporated in China.
F visas can be renewed, however, there is always the risk that the
Immigration Bureau may refuse the application. This risk grows if the
foreigner has resided in China almost permanently for a long period of
6 time, as the Immigration Bureau may conclude that such an applicant is
effectively working in China.
6.2 Z Visa and Residence Permit
The Z visa is usually referred to as a working visa. It is used by foreig-

ners who are actually employed by a company that has been incorpo-
rated in China (either domestic or foreign invested). An employee that
possesses a Z visa may subsequently apply for a residence permit. The
residence permit allows the foreigner an unlimited number of trips into
and out of China during the term, which is usually for 1 year.
Applying for a Z visa will allow the holder more flexibility and also
virtually eliminate the risk of not being able to extend the visa (assu-
ming the employers China entity remains in compliance with relevant
laws). On the other hand, the application procedure is more time-con-
suming and expensive. It is not necessary for employees on occasional,
relatively short-term business trips to go through the process to obtain
a Z visa. Once the parent company has established a foreign-invested
entity in China, this entity is capable of issuing the invitation letter
which an employee requires to apply for an F visa.
Employees working at companies in China should arrive at China
on a Z visa. Unless this precondition is met, the employees will not be
able to obtain residence permits which allow them to reside in China
and travel in and out as they wish during the specified term. In this sec-
tion, we explain the general process for obtaining a Z visa. Please note
that the precise procedures will vary from city to city inside China, and
possibly from embassy to embassy outside China.
Applying for a Z Visa
Step 1Application for an Alien Employment Work Permit from Labor

Bureau
6.2 Z
Visa and Residence Permit
95 6
This step can be handled by the coordinator at the company that will
be employing the foreigner. The following documentation is usually
necessary:
5 Application form.
5 Business license (original and copy).
5 Curriculum vitae of the foreign employee.
5 Final degree/diploma.
5 Health check report.
5 Offer letter.
5 Copy of passport of the foreign employee.
5 Two passport size photos.
Some of these documents will need to be affixed with the company

chop.
Normally the issuance of the Alien Employment Work Permit can
be completed quite quickly, although this is not necessarily the case in
certain smaller cities where the government is not used to issuing such
documents.
Step 2Application for an official invitation letter

Unlike the F visa, it is necessary to submit an official invitation let-
ter issued by one of the organs of the government to receive a Z visa.
Precisely which bureau will issue this document depends on the city in
which the employee will be based. As in Step 1, the local coordinator at
the company can handle this procedure on behalf of the foreign emplo-
yee. The following documentation is usually necessary:
5 Application form. FOR MORE INFORMATION

5 Copy of passport of the foreign employee. Find related articles at:
www.china-briefing.com
Both the documents will need to be affixed with the company chop
before submission. Issuance of the invitation letter usually can be com-
pleted within a few days.
Step 3Application for Z visa

This application must be made from overseas through a Chinese
embassy or consulate. The requirements of the embassy or consu-
late can vary considerably depending on the nationality and personal
circumstances of the applicant. We will not attempt to list them here.
Please note that the application for a Z visa generally must happen at
a consulate/embassy in the home country of the applicant or another
country in which the applicant has legal residency. It will usually take
several days to issue the Z visa, which will be attached to the passport of
the applicant.
Once the individual has achieved the Z visa, they may come to China
to take up the employment. Once they arrive, some procedures will still
need to be completed. These will be introduced in the following section.
Applying for a Residence Permit
Receipt of a residence permit into the passport of the employee working

at the China-based company signifies the completion of the visa issu-
ance process. The permit is normally valid for a full year and allows the
applicant to travel into and out of China as regularly as they require.
Not only the employee but also their dependents may receive such a
residence permit (note that dependents do not need to be included at
earlier stages of the application processthey can come to China on a
tourist (L) visa instead of a Z visa).
Usually, in order to receive the residence permit, an applicant must
submit the following documentation:
6 5 Application form.
5 Application letter.
5 Two passport size photos for each applicant.
5 Certificate of service at the Chinese entity.
5 Alien employment certificate from the Labor Bureau.
5 Health check report for all applicants over 18years old.
5 Passports for each of the applicants.
5 Business license of the Chinese company (original and copy).
5 Enterprise code certificate of the Chinese company (original and copy).
5 Accommodation registration certificate (original and copy).
5 Apartment lease agreement (N/A if living in a hotel).
5 Marriage certificate.
5 Certificate evidencing relationship of relatives accompanying
applicant.
Please pay attention to the following points:
1. The accommodation registration certificate should be achieved from

the police station closest to the residence of the foreigner. It should
be applied for no later than 24h after the foreigner arrives in the
city, otherwise a penalty may be applied.
2. In the event that a spouse or children will also be applying for a resi-
dence permit together with the employee, both the marriage certi-
ficate and the relatives relationship certificate should be notarized
by an authorized notary in the home country of the applicant and
then verified by a Chinese embassy or consulate based in that coun-
try. Note that these individuals should arrive in China using a tourist
(L) visa. They will be permitted to receive a residence permit without
going through any of the previous steps.
Renewing a Residence Permit
Renewing a residence permit/Z visa is not as difficult nor as time-consu-

ming as making the initial application. The most important point is that
6.2 Z
Visa and Residence Permit
97 6
the company is organized enough internally to know when each for-
eign employees visa will expire. Overstaying a visa in China can cause
extra cost and problems, both for the company and the employee. We
will explain the process for renewal in Beijing. Note that processes else-
where in the country may be slightly different. There are two basic steps
involved:
1. Renewal of the alien employment certificate at the Labor Bureau

The following documents need to be arranged:
5 Labor contract of the employee.

5 Copy of the companys business license.
5 Passport of the employee.
5 Registration form for renewal.
The process for renewal should take around one working week.
Note that it will likely take longer during the Chinese holiday periods in
February and October.
2. Renewal of residence permit/Z Visa

The following documents need to be arranged:
5 Original of the companys business license.

5 Passport.
5 Passport photo.
5 Alien employment certificate.
5 Application form.
This process for renewal should take about one working week. We
would recommend that visa applications and renewals be coordinated
by a reliable agent, unless your organization is already structured to
effectively manage the visa.
6.3 Sending Chinese Staff to Work Abroad
Every country has its own regulations about what documentation needs
to be submitted for various visa types.
Chambers of Commerce in China, including the American, German,
and Australian Chambers, can be extremely helpful in coordinating visa
applications for Chinese staff to work abroad and advising employers
what supporting documentation is necessary.
This documentation may include:
5 Letters confirming employment at the entity in China.

5 Paper payslips (preferably on security paper) issued to the employee
for past months which will show length of employment and amount
of salary received.
5 Letters explaining details of the work carried out at the China entity,
reasons why the company would like to send the employee abroad
and future prospects for the employee at the China entity upon
returning from the USA.
This documentation should be stamped with the company chop and

include the name of a person at the company who can be contacted by a
consular official.
6
99
Further Reading: China
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101
Beijing: +86 10 6590 0236 Shanghai: +86 21 5090 3649 Shenzhen: +86 755 8213 4080
beijing@directhr.cn shanghai@directhr.cn shenzhen@directhr.cn
Dalian: +86 411 3977 6808 Ningbo: +86 574 8848 7007 Macau: +853 2848 1433
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Tianjin: +86 22 8787 7818

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102 Further Reading: China
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Scan this QR code with your smartphone to visit us at: www.dezshira.com

103
HUMAN RESOURCES AND PAYROLL IN C HINA

Chinese law places significant obligations on employers to remain legally
compliant in all labor matters. In this guide, we address the major issues in
managing employment relationships in China.
Including:
Recruiting Professionals
Hiring Staff
Handling Payroll
Managing the Employment Relationship
Terminating the Employment Relationship
Organizing Visas
Within these topics, we address labor contracts, company rulebooks, salary

packages, social insurance contributions, special circumstances for employees
(extended sickness or pregnancy), termination and severance pay, and visas
for foreign staff and Chinese staff being sent to work abroad.
2012 Asia Briefing Ltd, a Dezan Shira Group company. All rights reserved.
Unit 1618, 16/F, Miramar Tower
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China Brieng The Practical Application of China Business

The Practical Application of China Business

The Practical Application of China Business

For further volumes:

ISSN 2191-0634 ISSN 2191-0642 (electronic)

Library of Congress Control Number: 2013939337

Asia Briefing Ltd. 2012, 2014

Printed on acid-free paper

Springer is part of Springer Science+Business Media (www.springer.com)

4 Managing the Employment Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

5 Terminating the Employment Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Further Reading: China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

A firm understanding of Chinas laws and regulations related to human

The first chapter of this guide focuses on specifics of the recruitment

Direct HR and Dezan Shira & Associates

Recruitment is defined as the profiling, attraction, search, selection,

1.2 CANDIDATE IDENTIFICATION

Advertising jobs online Research databases

Dezan Shira & Associates (*)

1 Finding qualified staff,

top 3 business challenges for

The profiling stage is a critical planning phase in the recruitment process

Analyze Company Needs

In order to assess a companys recruitment demands, an inventory has

Specify Job Content

Job content should include the jobs objectives, responsibilities, and

Define Job Title

Define Candidate Profile

It is increasingly common that companies in China are employing a

1. Is the qualification criteria kick-out, required or preferred?

Types of employees to recruit to work in China

China Chinese English Other Know-how Employment Market Salary

Local +++ +++ + + + +++ +

Overseas + + +++ ++ +++ ++ ++ +++

Foreigners +++ +++ +++ ++ ++ +++

Preferred criteria =candidate will still be considered even if criteria

2. What is the relative importance of the qualification compared to

1 Candidate profile: Senior quality engineer

Candidate details KO Weight

Educational REQ Bachelor degree or higher, major in casting or mechanical engineering 10

PRE Alternatively a professional college education with focus on casting

Professional REQ Above 4years hands-on supplier development and production KO 20

Above 3years of quality control and assurance experience in casting

In-depth understanding of quality control and assurance processes

PRE Knowledge of EU and international regulations and standards for

Technical skills REQ In-depth and solid knowledge of metallurgy KO 20

In-depth know-how of casting techniques

PRE Familiarity with ISO9000 and PED system

Soft skills REQ Strong work spirit and ethic 20

Good coordination and communication skills

Good organizing and planning skills

PRE Good coaching skills

Language skills REQ Fluent in spoken and written English (TEM 8) KO 10

Fluent in spoken and written Chinese

PRE Knowledge of spoken German is a plus

Personality REQ Meticulous/pays attention to detail 10

PRE A strong self-initiator

Motivational REQ Willing to travel extensively within China 5

Desired age PRE >28 3

Other requirements REQ In good physical and mental health 2

PRE Driving license for passenger cars

Conducting research on compensation in China will allow a company

Compensation research channels

Preferred criteria =candidate will still be considered even if criteria

S uitable for middle- Hudson www.hudson.com

S uitable for entry-middle Zhaopin www.zhaopin.com

S uitable for quick and

1.2 Candidate Identification