Foreign businesses entering China can do so in several ways including various types of entities such as a wholly foreign-owned enterprise (WOFE), joint venture, or representative office. The China market is huge and complex, and setting up an entity includes some of these unique challenges:
- at present, a pressing issue for new businesses in China is that business license approvals and entity set-ups have been very drawn-out and difficult due to both the ongoing disruption caused by Covid-19 and limitations on overseas Director’s ability to enter China and be verified in person
- any minimum or regulatory capital invested into China is largely trapped as China has currency controls that prevent the ability to easily withdraw funds from China
- compliance risk is high as China’s law and regulations are very complex, contain significant grey areas and employment law is very employee-friendly
The alternative to setting up a legal entity in China is to engage an Employer of Record or Professional Employment Organization (EOR/PEO) to for you have staff in China and enter the China market within 48 hours.
How do EORs and PEOs work?
An EOR provider acts as the legal employer, hiring your staff on behalf of you. The provider puts your employees on its payroll. A PEO provider acts as a co-employer and will work alongside you as they take on a wider spectrum of the HR functions such as payroll, benefits, workers’ compensation, and training.
In short, EOR and PEO provider will help you manage your company more efficiently, as they take care of functions that you may be unfamiliar with, sparing you the unnecessary time and effort spent navigating a new territory. The bottom line is that you still retain control of your company whilst an outsourced HR professional provider operates on tasks that you are unfamiliar with nor have the time to manage on your own.
Entity Set Up vs. EOR/PEO
If you choose not to use the EOR or PEO service, the other option is to set up the entity on your own. However, you will find that an EOR/PEO service is more convenient for the below reasons:
Specifically on costs, you will also spend even more on bank set up, legal and financial counsel management in-house, and system related annual maintenance costs without the help of an EOR/PEO service.
How to select a good EOR/PEO service in China
Deciding to go with the EOR / PEO service is the first step – the next, and arguably even more crucial one, is choosing the right service provider. Important aspects to be mindful during your search are:
- In-country support: select a service provider who has in-country services so they can tend to you in a timely manner. Links’ EOR/PEO services, for example, can get someone on the ground for you in as little as under 48 hours.
- Expert in local regulations – given China’s employee-friendly labour law, it is critical to ensure you deal with providers who are well-versed with Chinese company and labour law regulations, as a lack of knowledge will hinder your business growth and can lead to compliance issues.
- Reputation – you want to work with a service provider who has been in the market for a while and is good at what they do. Sufficient experience is key to ensuring that they can serve your specific needs properly.
- Technology – a trustable service provider will be equipped with the right technology when helping with your business operations. They must focus on data security and privacy including China’s PIPL, as they will handle sensitive information pertaining to your employees. They should also have a comprehensive system and that can integrate your business data in a single platform.
- Regional presence – trailing from the point above, it is even better to have a service provider who has worked in multiple countries as this shows that they are able enable companies to expand internationally, in tandem with their business growth.
- Range of services – for your own convenience, you can work with service providers who offer other services that can alleviate your HR functions besides EOR/PEO. This will enable you to outsource functions that you may struggle to handle as your business matures so you can always focus on managing the other aspects of your business.
To sum up, an EOR/PEO service is highly beneficial for companies that want an agile yet legal entry into China.
Links has over 20 years of HR excellence in Asia and we provide 100% in-country EOR/PEO services– all in under 48 hours upon confirmation of service!
Want to know more? Contact us today and we’ll be in touch with you!
- Shanghai Company Registration Guide
- What China’s Personal Information Protection Law (PIPL) Means for HR teams? – An HR PIPL Compliance Checklist