Getting a business licence in China is the start line, not the finish. Once your entity is live, the real work begins: hiring and paying staff, running monthly payroll and tax filings, keeping labor and tax compliance current, and handling the administrative follow-through that local bureaus expect. Foreign companies that treat these as an afterthought accumulate risk — companies that run them on a disciplined routine compound their advantage.
This guide explains what operating a company in China involves in practice: building your local team, the two legal hiring routes, compliant labor contracts and social insurance, payroll and individual income tax, and the ongoing compliance rhythm that keeps your China operation out of trouble. If you are still choosing your entity type, start with our China company registration hub, or the detailed guides on WFOE formation, joint venture registration and representative offices.
What Operating in China Involves, Month After Month
Steady-state operations in China run on a fixed rhythm: monthly payroll and individual income tax withholding, social insurance and housing fund contributions, bookkeeping with VAT and corporate income tax filings, annual reconciliations and the annual report to the market regulator — plus the people side, from recruitment and onboarding through renewals and offboarding. Each of these runs in Chinese, on local deadlines, with penalties for misses. The sections below walk through the people-related core of that rhythm; the wider operations engagement — accounting, tax and administrative support — is structured through our China market entry solutions.
Why Foreign Companies Hire a Local Team in China
Credibility that a overseas HQ cannot deliver
Chinese buyers, distributors and government partners expect a local counterpart who answers the phone in Chinese, visits the factory the same week and shows up at the trade fair. A properly staffed local entity signals commitment — and it is frequently the difference between being shortlisted and being filtered out.
Compliance handled on the ground
Monthly social insurance filings, individual income tax withholding, annual reconciliations and the employee file requirements of local Human Resources bureaus all happen in Chinese, on local deadlines. A local HR and finance function keeps these obligations invisible — until someone else has to fix them.
Cost discipline
Senior local hires cost a fraction of an expat package, and cities across the Yangtze River Delta and the Beijing-Tianjin-Hebei region offer deep talent pools at layered salary levels. The right mix of local management and foreign oversight is usually the most cost-effective structure for a China operation.
Two Legal Routes: Hire Through Your Own Entity or an Employer of Record
Route 1 — hire through your own entity. Once your WFOE or joint venture is registered and has opened its bank accounts, it becomes the legal employer: it signs labor contracts, enrols staff in social insurance and runs payroll. This is the standard route for companies building a permanent China team. Note that a representative office is not a full employer — ROs in China generally cannot sign labor contracts directly and must engage staff through a licensed labor dispatch agency.
Route 2 — hire through an Employer of Record (EOR). If you are testing the market, or your entity is still in registration, an EOR arrangement lets you employ staff in China legally from day one: the EOR is the legal employer on paper, while the employees work exclusively for you. It is the fastest compliant way to hire in China without an entity — most placements are live within days.
Recruitment and Onboarding in China
China’s hiring market is fast-moving and platform-driven. Resumes move through local channels, salary expectations are negotiated up-front, and strong candidates typically hold two or three offers at once. Foreign employers compete best when they move quickly, explain the global context of the role, and can state clearly what the China entity will and will not do. We manage the full cycle — job descriptions calibrated to local salary benchmarks, screening, offer letters, background checks and onboarding — so your first China hires do not stall in translation.
Labor Contracts, Social Insurance and the Housing Fund
China’s Labor Contract Law requires a written employment contract signed within one month of the start date; employing someone without one exposes the employer to double-pay claims. Every employee must be enrolled in the “five insurances and one fund” — pension, medical, unemployment, work-related injury and maternity insurance, plus the housing fund. Employers must complete social insurance registration within 30 days of the employment start (Social Insurance Law, Art. 58; official source: Ministry of Human Resources and Social Security).
Employer contributions are city-specific, but as a planning figure they typically add roughly 27%–32% of gross salary on top of pay, subject to local contribution bases and caps. We model the true all-in cost per role before you extend an offer, so budget surprises stay out of your China P&L.
Payroll and Individual Income Tax Compliance
Chinese payroll runs on monthly withholding under the cumulative withholding method, with a standard basic deduction of RMB 5,000 per month (RMB 60,000 per year) plus social insurance contributions and special additional deductions claimed by the employee. Employers file monthly IIT returns and support the annual reconciliation between March and June (official source: State Taxation Administration). Payroll errors here are not private mistakes — they surface in the employee’s own annual tax reconciliation, which is one of the fastest ways to lose a good hire.
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Probation, Termination and Ongoing Compliance
Probation periods are capped by law: a maximum of one month for contracts of one year or less, two months for contracts over one year and under three years, and six months for open-ended contracts and contracts of three years or more (Labor Contract Law, Art. 19). Termination is similarly rule-bound — “at-will” dismissal as understood in the US does not exist in China, and unlawful termination triggers statutory compensation. Ongoing obligations also include renewals, the employee handbook that local arbitration panels will actually read, work permit renewals for foreign staff, and offboarding that returns equipment without returning a lawsuit.
How Rheaura Assists: Operations Support for the Long Run
Rheaura Group is not a registration agent that disappears after the licence arrives — we stay on as your operations partner in China:
• Registration-to-operations handover — your WFOE or JV registered, banked and able to legally employ, with the first operating month planned in advance
• Recruitment and team build-out — role calibration, sourcing, screening and offer negotiation against live local salary benchmarks
• HR and payroll operation — labor contracts, social insurance and housing fund enrolment, monthly payroll runs and IIT filing
• Accounting and tax compliance — bookkeeping, VAT and corporate income tax filings, annual reconciliations and statutory reports
• Compliance housekeeping — employee handbooks, contract renewals, work permits and clean offboarding
• Ongoing advisory — one desk, in English and Chinese, for the questions that surface between deadlines
These services are available individually or bundled inside our service packages, and you can see how they have played out for other investors in our successful cases.
Questions about running your China operation? Chat with us on WhatsApp →
Frequently Asked Questions
Can a foreign company hire employees in China without a local entity?
Not directly. Only a PRC-registered legal entity (or a licensed labor dispatch agency) can be the legal employer of staff in China. Without your own entity, the compliant route is an Employer of Record: the EOR signs the contracts and runs payroll while the employees work for you. Once your WFOE or JV is established, you can transfer the staff over.
How much does the employer pay in social insurance and housing fund?
Contribution rates are set city by city, but the employer share typically totals roughly 27%–32% of gross salary, applied to a local contribution base with minimum and maximum caps. Tier-1 cities such as Shanghai and Beijing sit toward the higher end. We prepare a per-role cost model before you hire so the all-in figure is clear.
How long can a probation period be in China?
Up to one month for contracts of one year or less, up to two months for contracts longer than one year but shorter than three years, and up to six months for three-year or open-ended contracts. Probation salary may not fall below 80% of the contracted salary or the local minimum wage.
Do employment contracts in China have to be in Chinese?
The law does not mandate Chinese-language contracts, but in practice local authorities and courts work in Chinese, and a bilingual contract (with a defined prevailing version) is strongly recommended for foreign employers.
Can we employ someone in China through our Hong Kong or Singapore company?
No. A Hong Kong, Singapore or other offshore company cannot be the legal employer of staff working in mainland China. The options are a PRC entity of your own or an Employer of Record arrangement — anything else creates social insurance and tax exposure for both the company and the employee.
How quickly can we start hiring?
Through an EOR, hiring can typically start within days. If you are setting up a WFOE first, expect roughly four to eight weeks from preparation to a registered, banked entity that can sign contracts — see our WFOE formation guide for the step-by-step timeline.