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1、Produced in association withGuide to HR Compliance and Best Practices in China 2Guide to HR Compliance and Best Practices in ChinaDisclaimer This Guide to HR Compliance and Best Practices in China was produced by a team of HR professionals at Dezan Shira&Associates,with Zhou Qian acting as technical

2、 editor.Creative design of the guide was provided by Miguel Enrico Anciano and Aparajita Zadoo.2024 Asia Briefing Ltd.The contents of this guide are for general information only.For advice on your specific business,please contact a qualified professional advisor.No reproduction,copying or translatio

3、n of materials is permitted without prior permission of the publisher.3Guide to HR Compliance and Best Practices in ChinaOperating a business in China has become increasingly complicated due to shifts in the economy,geopolitical factors,diversifying supply chains,and evolving regulatory frameworks g

4、overning taxation,data compliance,and other areas.These changes,combined with a more focused implementation of human resources(HR)policies,underscore the critical importance of adhering to best practices in HR management and ensuring compliance with Chinas labor laws when managing a companys talents

5、.For companies that are newly setting up,whether they are establishing a wholly foreign-owned enterprise,partnering with a local business,or simply registering a representative officeone critical aspect is securing local employees.Understanding effective recruitment and management practices,along wi

6、th your legal responsibilities as an employer,is imperative.These steps not only enhance your competitive advantage but also facilitate strategic decision-making and solidify your foothold in China for the long term.The Guide to HR Compliance and Best Practices in China,compiled by professionals at

7、Dezan Shira&Associates in May 2024,introduces the fundamentals of HR management and labor compliance in China.Within its chapters,we delve into essential topics that businesses must understand and pay attention to as employers.Our primary focus includes insights into Chinas changing labor market,the

8、 countrys labor law framework,and essential steps for achieving effective employment management and compliance.We also provide additional links in several sections that can be used to explore specific topics in more detail.Whether youre a new entrant or an existing player,this guide equips you with

9、the knowledge needed to navigate HR complexities in China.For personalized assistance,feel free to contact C.PrefaceCONTACTDezan Shira&Associates ADAM LIVERMOREPartnerDezan Shira&Associates4Guide to HR Compliance and Best Practices in ChinaDezan Shira&Associates is a pan-Asia,multi-disciplinary prof

10、essional services firm,providing legal,tax and operational advisory to international corporate investors.Operational throughout China,India and ASEAN,our mission is to guide foreign companies through Asias complex regulatory environment and assist them with all aspects of establishing,maintaining an

11、d growing their business operations in the region.With more than 30 years of on-the-ground experience and a large team of lawyers,tax experts and auditors,in addition to researchers and business analysts,we are your partner for growth in Asia.Our Services Accounting Audit and Financial Review Busine

12、ss Advisory Business Intelligence Corporate Establishment and Governance Due Diligence HR and Payroll Intellectual Property Mergers and Acquisitions Outbound Direct Investment Risk Management Tax TechnologyAbout Dezan Shira&Associates5Guide to HR Compliance and Best Practices in ChinaOur LocationsDe

13、zan Shira&Associates OfcesDezan Shira Asian Alliance Members NEPALUNITED ARAB EMIRATES INDIAMONGOLIACHINAVIETNAMTHE PHILIPPINESHONG KONG SARJAPANSOUTHKOREASINGAPOREMALAYSIATHAILANDINDONESIABANGLADESHSRI LANKA6Guide to HR Compliance and Best Practices in China1Table of ContentsPreface03About Dezan Sh

14、ira&Associates04Part 1|Chinas Changing Labor Market7Prominent trends in Chinas labor market9Strategies for recruiting and retaining talent in China11Part 2|Understanding Chinas Labor Law Framework13General features of Chinas labor law framework14Chinas major labor laws15Importance of compliance with

15、 Chinas labor laws16Part 3|Essential Steps for EffectiveEmployment Management andHR Compliance in China17The employee handbook:Your policy cornerstone20Hiring and contract management24Payroll management28Termination35Managing foreign employees37Data privacy issues in HR management38Leveraging techno

16、logy to improve HR and payroll management41About Dezan Shira&Associates HR Compliance and Payroll Services44Meet our HR Compliance and Payroll Professionals457Guide to HR Compliance and Best Practices in China1Chinas Changing Labor Market Prominent trends in Chinas labor market Strategies for recrui

17、ting and retaining talent in China8Guide to HR Compliance and Best Practices in ChinaChinas labor market,the largest in the world,is currently experiencing rapid transformation.As the population ages,the working age demographic is decreasing and alternative employment models are gaining prominence.I

18、n response,China is actively upskilling its workforce to enhance productivity and efficiency.For foreign invested enterprises(FIEs)operating within this dynamic landscape,understanding the evolving labor environment is crucial for effective talent recruitment and retentionessential factors for susta

19、ined success and growth.Moreover,as labor laws continue to improve and employee awareness grows,maintaining compliance with Chinas labor regulations remains paramount.According to the Ninth National Workforce Survey released by the All-China Federation of Trade Unions(ACFTU)in March 2023,Chinas tota

20、l number of laborers has grown to 402 million people at the beginning of 2022,up from 391 million recorded in 2017 when the last workforce survey was conducted.Chinas Changing Labor MarketSource:Ninth National Workforce Survey,All-China Federation of Trade Unions,National Bureau of Statistics.*Refer

21、s to workers who provide online distribution,travel,transportation,housekeeping,and other services through internet platforms,often on a fexible basis.*Refers to workers who move from rural areas to urban areas to fnd work.Overview of Chinas Labor MarketTotal Workforce733.5 millionMigrant Workers*29

22、3 millionMonthly Minimum Wage(May 2024):RMB 1,450 RMB 2,690Average Yearly Income of Urban Residents(non-private sector):RMB 120,698Per Capita Income from Wages(2023):RMB 22,053Total Laborers402 millionAverage Age38.3 yearsNew Laborers*84 millionAverage Education13.8 yearsOverview of Chinas Labor Mar

23、ketTotal Workforce733.5 millionMigrant Workers*293 millionMonthly Minimum Wage(May 2024):RMB 1,450 RMB 2,690Average Yearly Income of Urban Residents(non-private sector):RMB 120,698Per Capita Income from Wages(2023):RMB 22,053Total Laborers402 millionAverage Age38.3 yearsNew Laborers*84 millionAverag

24、e Education13.8 years9Guide to HR Compliance and Best Practices in ChinaProminent trends in Chinas labor marketAge increasing,but so are education levels The average worker age in China increased to 38.3 years in 2022 from 37.1 in 2017.The average age of industrial workers was 38.29,while the majori

25、ty of professional technical personnel were between 30 and 50 years old,and were mostly working in the education,manufacturing,and healthcare and social work industries.The average length of education of workers also increased slightly to 13.8 years in 2022,up from 13.6 in 2017.Over 85 percent of wo

26、rkers had a high school diploma or above,and 35 percent had a college degree.Diversified industry distribution The vast majority of industrial workers 82.7 percent work in secondary industries,and 77.6 percent work in manufacturing and construction.Meanwhile,one of the new major changes to Chinas la

27、bor force is an increase in the proportion of people working in new forms of employment.This concept is similar to that of gig workers in the West,referring to people who provide various services through internet platforms on a flexible to-order basis,such as online car-hailing drivers,couriers,take

28、away delivery drivers,and others.There are currently around 84 million people doing this type of work,around 20.9 percent of the total workforce.Rising labor costs Labor costs have continued to rise in China,due primarily to rising costs of living and income levels as the economy grows and moves up

29、the value chain.The average yearly income of urban residents in non-private sector(the statistical group to which FIEs belong to)reached RMB 120,698(approx.US$17,128)in 2023.The industry with the highest average income was information transmission,computer services,and software industries,with an av

30、erage annual income of RMB 223,088(approx.US$31,659),while the lowest was in the water,environment,and utilities management industry,with an average annual income of RMB 54,516(approx.US$7,736).The average monthly wage of a migrant worker was RMB 4,780(approx.US$678),up 3.6 percent from 2022.The inc

31、reasing labor costs in China correspond with an overall increase in spending and costs of living.According to data from the National Bureau of Statistics(NBS),Chinas disposable income per capita grew to RMB 39,218(approx.US$5,565)in 2023,a nominal increase of 6.3 percent“Chinas labor market is curre

32、ntly undergoing rapid transformation.Understanding the prominent trends is crucial for recruiting and retaining talent,as well as ensuring compliance.”DAVID NIUPartnerHuman Resources&PayrollBeijing Office10Guide to HR Compliance and Best Practices in Chinayear-on-year.Meanwhile,costs of living have

33、increased,in particular in manufacturing hubs,such as Shanghai and Guangdong Province.In addition to rising wages and living standards,the increase in costs is also being driven by the increase in employees education and training.As China strives to move its economy up the value chain by modernizing

34、 traditional industries and focusing on the production of high-value goods,so does its need for higher-skilled labor,which comes at a higher cost.Improving protection of labor rightsIn addition to continued efforts on preventing work-related injury,ensuring timely salary payment,as well as building

35、up a mandatory social security system,the labor authorities in China have also been ramping up protections to certain disadvantaged groups.For instance,in 2021,Chinas State Administration of Market Regulation(SAMR)issued policy guidelines that ordered internet platforms providing food delivery servi

36、ces to ensure workers are paid the minimum wage,are not subject to excessive working hours,and adhere to certain safety standards,among other requirements.China has also made major in-roads into the protection of the rights of women in the workforce.In October 2022,China passed the Law on the Protec

37、tion of Womens Rights and Interests(Womens Protection Law),which incorporates gender discrimination in the workplace into the scope of labor security supervision and further clarifies the definitions of sexual harassment in the workplace,thus strengthening the enforcement of other laws and regulatio

38、ns.Work-life balance and technical upskilling An important development in Chinas work culture over the past few years is a greater awareness of work-life balance and an increasing backlash against overwork.This is particularly true in white-collar professions,perhaps due to the higher level of visib

39、ility of these positions within society.A number of high-profile incidents at tech companies in particular have renewed criticism and backlash against the“996”work culture.According to the ACFTU survey,it is found that employees are also placing higher importance on their long-term development,with

40、95.3 percent of workers interested in learning new vocational skills or knowledge.This proportion is particularly prominent among employees aged 18 to 40 and employees with a bachelors degree or above.Growing demand for more flexible work arrangementsA shift to more flexible work arrangements is wel

41、l underway.This has a lot to do with the psychological changes of workers in the post-pandemic era.11Guide to HR Compliance and Best Practices in ChinaFirst,the diversification of current social employment forms has impacted the traditional eight-hour working day.Under the same salary benchmark,pers

42、onal free time has become increasingly important for workers.Secondly,psychological adjustment during the epidemic has intensified workers reflection upon planning their lives.In the face of a global public health emergency,people have become more cognizant of the shortness and fragility of life,and

43、 this has forced them to take stock of the things that matter the most to them and how to live a more fulfilling life.Remote workforce becoming more commonAnother trend observed in Chinas labor market is that telecommuting has been adopted by more and more employers.Telecommuting,also known as telew

44、orking,refers to the practice of working from a location outside the companys office.Through telecommuting,a companys workforce is distributed across a country or region and do not work in traditional offices.The distributed employees may telecommute for long periods of time or may choose to telecom

45、mute only temporarily.Thanks to telecommuting,the talent pool has greatly expanded irrespective of the location of the enterprise.Recruiters will,however,need to adopt new hiring practices and expand their search far beyond the traditional geographic boundaries they might once have adhered to.It als

46、o provides job opportunities for people with disabilities and mobility problems.The model could appeal to people who need to work flexibly,such as parents with young children.Strategies for recruiting and retaining talent in ChinaBuilding employer branding and cultivating company cultureEmployer bra

47、nd value is increasingly gaining widespread attention and recognition and has become one of the best indicators of a workplace culture for job seekers.Establishing a strong employer brand will help your company stand out in the job seeker market and ultimately help you attract and retain better tale

48、nt.Company culture is an indispensable part of any company.It can create a positive workplace environment,improve the staffs cultural exposure and ethical standards,and allow internal employees to naturally form a cohesive and tightly knit team.Company culture can help enterprises play a positive ro

49、le in the work lives of their staff as well as assist in rationally allocating enterprise resources to improve competitiveness.12Guide to HR Compliance and Best Practices in ChinaTo effectively build a good company culture and a positive employer brand image,we suggest adopting the“4P”strategies,nam

50、ely:People,Product,Position,and Promotion.These concepts can be understood as follows:People:Identifying the type of people and desired skills and expertise your company wants to attract to inform the development of your brand image.Product:Regarding the company as a product and identifying your com

51、panys unique selling proposition,such as what experiences and benefits your company can offer employees and prospective employees.Position:Identifying your companys brand positioning in the employment landscape and refining your brand message using concise and effective language.Promotion:Promoting

52、your employer brand remember,your current employees are your most effective advocates and the best resource for promoting your company as an employer.Adopting strategies to retain talentRetaining talent,especially excellent talent,is a top priority for any enterprise.Keeping employees loyal,producti

53、ve,and employable is an important skill for every leader and HR department to have today.The first tactic to improve employee retention is to increase flexibility and set boundaries.Flexibility is one of the things most employees will focus on.Younger workers prefer to be measured by performance rat

54、her than time.A flexible schedule that includes the option to work from home,flexible start and finish times,paid vacations,career breaks,choice of location,and shorter weekly working hours are attractive perks that companies can offer to seek and retain top talent.The second tactic is to make work

55、fun and give good feedback.Whether they are at the office or at home,leaders can have a big impact on their employees work.People who are happy at work will stay longer.The company should also provide good,actionable feedback and motivation in a timely manner.Feedback is crucial for employees to lea

56、rn and grow and helps to foster loyalty and retain employees.People also need to receive respect and approval for their work,which can come from constructive feedback.Employee incentives can help satisfy the various needs of staff and stimulate their enthusiasm for work,so that they maintain a posit

57、ive mood,enabling them to fully explore their potential.This will not only improve the efficiency of the company itself,but also empower its employees to achieve professional progress and achievements.213Guide to HR Compliance and Best Practices in China2Understanding Chinas Labor Law Framework Gene

58、ral features of Chinas labor law framework Chinas major labor laws Importance of compliance with Chinas labor laws14Guide to HR Compliance and Best Practices in ChinaUnderstanding Chinas Labor Law FrameworkChinas labor law framework is complex,not only due to its content and scope but also because i

59、t continually evolves to align with the countrys socio-economic development.Additionally,local variations are common while the central government establishes several laws that must be followed,numerous bylaws and regulations are instituted at the local level.Under such circumstances,understanding th

60、e general features of Chinas labor law system is imperative for evaluating the resources needed to ensure HR and payroll compliance in the China market,in addition to knowing the major labor laws.General features of Chinas labor law frameworkIn general,Chinas labor law framework features the followi

61、ng points:Emphasis on protecting workers:Chinas labor laws tend to prioritize safeguarding workers rights,recognizing their often vulnerable position in labor relations.For instance,these laws establish minimum wage standards and ensure that workers have reasonable working hours,vacation time,and ac

62、cess to social insurance benefits,thereby securing their fundamental labor rights.Emphasis on employer responsibility:Chinas labor laws not only require workers to adhere to relevant labor discipline and regulations but also emphasize the responsibilities of employers in ensuring labor protection.Em

63、ployers must establish robust occupational safety and health systems,provide safety education to workers,and furnish necessary protective equipment to safeguard workers physical health and safety.Primacy of mandatory standards:Chinas labor laws primarily rely on mandatory norms,with specific legal p

64、rovisions dictating the labor protection standards and requirements that employers must comply with.Integration of substance and procedure:Chinas labor laws address both substantive content and procedural aspects.While safeguarding workers rights,they also require employers to follow proper procedur

65、es during employment,including contract formation,modifications,and terminations.This ensures the legality and stability of labor relationships.Adaptation to changing times:As Chinas socio-economic development and labor market evolve,labor protection laws continually update and improve,making labor

66、compliance in China more challenging.Local variation:Local regulations can significantly differ across provinces and municipalities.Employers must be aware of regional nuances when implementing labor policies.For instance,different cities may have different minimum wage,social security contribution

67、standards,number of maternity leave days,and medical treatment period policies.“Chinas labor law framework is intricate,not only due to its complex wording but also because it continually evolves to align with the countrys socio-economic development.”ALLAN XUPartnerBusiness Advisory ServicesShanghai

68、 Office15Guide to HR Compliance and Best Practices in ChinaWhat is the importance of original employment contracts in China?Q&A answered by Adam Livermore,PartnerEXPLORE DETAILSChinas major labor lawsDespite local variations,most labor laws align with the national principles and guidelines establish

69、ed by major labor legislation.These local differences fall within the permissible scope of discretion granted by national law.The Labor Law of Peoples Republic of China(the Labor Law)and the Labor Contract Law of Peoples Republic of China(the Labor Contract Law)are two primary source of employment r

70、egulations within Chinas labor law framework.They play a crucial role in safeguarding workers rights,regulating labor relations,and promoting harmonious stability in labor relations.The Labor Law,first implemented in 1995 and last revised in 2018,establishes the fundamental structure of labor relati

71、ons and specifies core elements such as the labor contract system,labor protection,working conditions,wages,and labor discipline.It provides essential guidance and a basis for the formulation and implementation of other labor laws and regulations.Meanwhile,the Labor Contract Law,first implemented in

72、 2008 and last revised in 2012,serves as a subsidiary law to the Labor Law.It provides detailed regulations on various aspects of labor relations between employees and employers,including establishment,modification,as well as the signing,execution,and termination of labor contracts.The Labor Contrac

73、t Law offers more precise and specific legal guidance for the practical operation of labor relations.Other labor laws instituted centrally that investors should take note of when doing business in China include:Law on the Protection of Rights and Interests of Women:This law safeguards womens rights

74、in the workplace,addressing issues such as equal pay,maternity leave,and protection against discrimination.Social Insurance Law:This law plays a crucial role in providing social security coverage to employees,including pensions,medical insurance,unemployment insurance,maternity insurance,and work-re

75、lated injury insurance.Regulations on the Housing Fund:These regulations provide guidance on how employers should register and contribute to housing fund schemes for their employees.Labor Dispute Mediation and Arbitration Law:This law provides guidance on resolving disputes related to labor contract

76、s,working hours,wages,safety,and other labor-related matters.Trade Union Law:This law outlines how trade unions should be organized in China,their role in labor protection,and the responsibilities of employers.Law of the Peoples Republic of China on Work Safety:This law enhances supervision and cont

77、rol over work safety,aiming to prevent accidents and protect lives and property.Administrative Provisions on Employment of Foreigners in China:This law lays out the requirements and procedures for hiring foreign employees in China.16Guide to HR Compliance and Best Practices in ChinaImportance of com

78、pliance with Chinas labor lawsCompliance with Chinas labor laws plays a vital role in maintaining a harmonious and productive workplace.It is essential for preventing labor disputes,avoiding penalties from regulatory authorities,and attracting and retaining top talents.Preventing labor disputesGiven

79、 Chinas strong emphasis on employee protection in labor relations,employers often find themselves at a comparative disadvantage when labor disputes arise.Therefore,implementing effective strategies to prevent such disputes is crucial for minimizing the risk of financial loss.Adhering to labor laws a

80、nd regulations plays a pivotal role in preventing misunderstandings and conflicts between employers and employees.By ensuring that workers rights are safeguarded and that employment terms are transparent and equitable,companies can significantly reduce the likelihood of disputes.Avoiding penalties f

81、rom authorities As previously mentioned,Chinas labor laws place substantial responsibility on employers.Failing to comply with relevant mandatory norms can lead to potential audits,investigations,and significant financial penalties.Maintaining strict compliance with labor regulations allows business

82、es to operate smoothly within the legal framework and avoid these risks.Attracting and retaining talent While China has an abundant labor supply,finding suitable candidates isnt always straightforward.Attracting and retaining top talent is a key priority for businesses.Companies known for their comm

83、itment to labor compliance and fair treatment of employees tend to be more appealing to job seekers.Conversely,companies with labor dispute records or violations of labor laws may discourage potential candidates.317Guide to HR Compliance and Best Practices in China3Essential Steps for EffectiveEmplo

84、yment Management andHR Compliance in China Employment management and HR compliance in China at a glance The employee handbook:Your policy cornerstone Hiring and contract management Payroll management Termination Managing foreign employees Data privacy issues in HR management Leveraging technology to

85、 improve HR and payroll management18Guide to HR Compliance and Best Practices in ChinaDezan Shira&Associates holds a labor dispatch license and provides professional HR and payroll services to our clients across Asia.SERVICESEXPLORE DETAILSEssential Steps for EffectiveEmployment Management andHR Com

86、pliance in China Effective employment management and HR compliance are multifaceted challenges that demand expertise across various domains.Various key issues deserve specific attention by employers in China.We summarize some of these below,and delve into them in greater detail within subsequent sec

87、tions:Hiring options:An enterprise can hire staff through three basic options-direct hiring,labor dispatch,and outsourcing.Professional employer organization(PEO)service is growing in popularity as an alternative hiring option Representative offices:Representative offices,being one of the simplest f

88、oreign investment structures in China,face limitations when it comes to direct staff hiring.Instead,they must engage dispatch agencies.These agencies must hold a government-issued special license that allows them to hire employees on behalf of their clients(for instance,Dezan Shira&Associates holds

89、such dispatch licenses)Dispatch limits:Labor dispatch can only apply to three types of positions-temporary position,auxiliary position,and replaceable position.The number of total dispatched employees used by an employer should not exceed 10 percent of its total number of employees.Mandatory written

90、 contracts:All directly hired employees must be given a written contract within one month of their start date.Failure to do so entitles the employee to double salary.Electronic labor contracts are regarded as written contract as well by satisfying certain conditions.Probation period:The range of leg

91、itimate grounds for dismissing an employee is considerably wider during their probation period.The employer may also pay only 80 percent of the employees contractual salary during this time.Working hour system:In China,there are three main work hour systems-the standard work hour system,the comprehe

92、nsive work hour system,and the non-fixed(flexible)work hour system.The latter two systems are considered special work hour systems,which require special approval and compliance requirements.Payment and tax:An employees salary package could include base salary,allowances,bonuses,non-monetary pension

93、plans,and employers portion of social security contribution.The base salary should be stipulated in the labor contract.Employers are required to file individual income tax(IIT)for their employees on a monthly basis.Mandatory social security:Chinas social security system is made up of five different

94、kinds of insurance pension,medical,maternity,work-related injury,and unemployment,plus one housing fund.Both employer and employee are obligated to make contributions,but it is generally the employers responsibility to correctly calculate and withhold the payments for both parties.Employers obligati

95、on to make adequate and timely contributions cannot be alleviated or exempted by reaching mutual agreement with employees.Leave during the first year of employment:Employees are not entitled to any mandatory minimum number of leave days during the first year of their career,except public holidays su

96、ch as Chinese New Year around January-February,and the National Day celebrations in early October.19Guide to HR Compliance and Best Practices in ChinaA Comparison Between Direct Hire,Dispatch,Outsourcing and Utilizing Independent Contractors in ChinaPresented by Adam Livermore,PartnerEXPLORE DETAILS

97、 No at-will termination:Terminating employees in China is both difficult and expensive.While employees can resign with 30 days notice,employers face limited grounds for terminating an employee before their contract reaches its natural end.Non-fixed term contract after two fixed term contracts:After

98、an employee finishes their second contract with your company,he or she generally shall be offered a non-fixed term(permanent)contract as the third unless they want another fixed term contract instead.Such non-fixed term contract can only be terminated if there are valid grounds for dismissal.Notably

99、,some regions,such as Shanghai,offer more flexibility regarding this rule.Severance payments mandated by law:In practice,severance payments can be higher than the law prescribes,and can comprise a significant part of overall HR costs.Hiring foreign workers:China implements a tiered talents classific

100、ation system for hiring foreign workers.Different classes of talents are subject to different administration.Foreigners who want to work at companies in China should arrive on a valid work visa(Z-visa or R-visa).Employers need to obtain and renew Foreigners Work Permit and Residence Permit for their

101、 foreign staffs in a timely manner.Tech-powered HR and payroll solutions:Companies are now transitioning from fragmented,localized payroll software or Excel spreadsheets to comprehensive,technology-driven HR management platforms.These platforms streamline various processes,including onboarding,atten

102、dance tracking,leave management,claims processing,and potentially even talent management and training.Privacy and personal information protection:With the release of the Civil Code,the Personal Information Protection Law,as well as the other relevant data security laws and regulations,employers in C

103、hina are faced with a series of new compliance requirements in employment management.Companies need to audit their current policies and develop corresponding mechanisms to stay compliant.20Guide to HR Compliance and Best Practices in ChinaThe employee handbook:Your policy cornerstone The employee ha

104、ndbook plays an important role in human resources management in China,which not only sets forth daily management rules but also provides guidelines on employees behaviors in the workplace.However,not all employee handbooks are effective.It is imperative to ensure the employee handbook is made follow

105、ing the right procedures and is up to date.What is the employee handbook?The employee handbook,also commonly referred to as company rulebook,staff handbook,or work manual,is a set of written documents that stipulate the labor rules and regulations of the workplace and provides guidelines on employee

106、s behavior.It is like the internal laws that all employees must abide by.Under the PRC Labor Contract Law,employers are required to“establish and improve upon labor rules and regulations pursuant to the law to ensure workers entitlement to labor rights and performance of labor obligations”.The labor

107、 rules and regulations generally pertain to labor remuneration,working hours,rest periods and days off,labor safety and health,insurance and welfare,staff training,labor discipline,and labor quota management,and more.To put it simply,an employee handbook should clearly indicate how employees will be

108、 treated in the workplace,what they will be provided,what they are encouraged to do,what they are forbidden to do,and what are the consequences of their non-compliant behavior.In practice,various industries have unique and specific requirements for their employees,leading to differences in their res

109、pective employee handbooks.For instance,manufacturing factories prioritize punctuality and workplace safety,while service companies place a strong emphasis on professional ethics and confidentiality.As a result,manufacturing and service companies tailor their employee handbooks to address distinct c

110、oncerns and expectations.Why is it important for employers to have a well-drafted and properly formulated employee handbook in place?An employee handbook can provide supplemental explanations to the clauses of the labor contract,and thus make it easier to demonstrate the case where an employee break

111、s a company rule.“Not all employee handbooks are effective.It is imperative to ensure the employee handbook is made following the right procedures and is up to date.”DONFIL HUANGManagerBusiness Advisory ServicesGuangzhou Office21Guide to HR Compliance and Best Practices in ChinaRELATED READINGPlanni

112、ng for Uncertainty:Global Staffing Solutions to Facilitate Your China Market EntryChina Briefing ArticleJuly 6,2020Global Staffing Solutions(GSS)is a market entry strategy that alleviates the stress on businesses to establish a corporate entity and outsources the burden of keeping up with the day-to

113、-day management of an employees payroll and the entitys tax compliance to a local firm.This frees up critical resources for the foreign firm to explore its options in a new or unfamiliar market.AVAILABLE HEREConsider this scenario:An employee frequently engages in minor infractions,such as consisten

114、tly arriving late for work,leaving early,dishonesty with their manager,or making inappropriate remarks during working hours.While these may be minor transgressions,their repetition can lead to dissatisfaction or complaints from supervisors and colleagues.Consequently,the company may contemplate term

115、inating this employees contract.The legal grounds for terminating an employee without compensation are typically limited and stringent,one of which is the occurrence of a serious violation of labor rules and regulations.In this context,if there is no established set of labor rules and regulations,i.

116、e.,a well-prepared employee handbook,it becomes challenging for the employer to demonstrate the existence of a serious violation of the labor rules and regulations.Consequently,there may be no legal basis for dismissing the erring employee without compensation.This scenario exemplifies why an employ

117、ee handbook that clearly stipulates workplace rules and regulations is of utmost importance for employers.How to ensure the validity of the employee handbook?First and foremost,the contents of the employee handbook must align with applicable laws and regulations,including local mandatory rules.For e

118、xample,if City As local regulations grant employees 10 days of childcare leave per year,a company registered in City A should not reduce the childcare leave entitlement in its employee handbook.Any such attempt would render the rule invalid.Additionally,aside from complying with legal requirements,t

119、he contents of the employee handbook should be reasonable and fair.Consider a consulting company as an example.If the handbook stipulates that the company can immediately terminate an employee without compensation after just two instances of tardiness,this policy would be deemed unreasonable and unf

120、air for employees with flexible working hours.In the event of a labor dispute,such provisions could be invalidated by a court or arbitration tribunal.Secondly,once the employee handbooks contents are drafted,it must undergo a democratic process as mandated by the PRC Labor Contract Law.The democrati

121、c process entails a series of interactions between the employer and employees involving discussion,negotiation,and potential amendments to the employee handbook.This process is designed to demonstrate that the handbooks content has been thoroughly deliberated with employees,securing their full under

122、standing and substantial consent.To achieve this purpose,the democratic process is recommended to encompass the following steps:22Guide to HR Compliance and Best Practices in ChinaLegal requirementSuggested actionsSuggested documentsParagraph 1,Article 4 of the PRC Labor Contract Law:When an employe

123、r formulates,revises or decides on rules or major matters which directly involves the vital interests of workers,such matters shall be discussed by the employee representatives congress or all staff who shall make proposal and give their opinion and the employer shall carry out equal negotiation wit

124、h the labor union or employee representatives before making a decision.Call a meeting with labor union or all staff regarding the formulation/amendment of employee handbook.Notice of meetingHave the meeting with employees to discuss the draft of employee handbook and solicit initial comments and sug

125、gestions.Meeting sign-up sheetMinutes of meetingLegal requirementSuggested actionsSuggested documentsParagraph 2,Article 4 of the PRC Labor Contract Law:During the decision and implementation of rules or major matters,the labor union or staff can raise their concern with the employer on any inapprop

126、riate issues and such issues shall be revised through negotiation.Collect the concerns and comments from employees.Opinion collection and summary formDecide whether and how to amend the draft based on employees comments.Minutes of the executive management discussionCall the second(and additional)mee

127、tings.Notice of meetingHave the meeting with employees to discuss the revision to employee handbook in the second(and additional)meetings.Meeting sign-up sheetMinutes of meetingStep 1:Carry out negotiation with the labor union or employee representatives before making a decision.Step 2:Revise the em

128、ployee handbook based on concerns raised by the labor union or employee.23Guide to HR Compliance and Best Practices in ChinaStep 3:Announce the decision on rules or major matters or notify the employee.Legal requirementSuggested actionsSuggested documentsParagraph 3,Article 4 of the PRC Labor Contra

129、ct Law:Employers shall announce decisions on rules or major matters or notify the employees.Call training meeting(s)with all employees to interpret and learn the final version of the employee handbook.Notice of meetingMeeting sign-up sheetMinutes of meetingDistribute the final employee handbook to a

130、ll employees.Receipt for all employees to signOther important considerations when making the employee handbook include:Ensure the employee handbook has a Chinese version and make it clear which version shall prevail in case of discrepancies.Ensure the labor contract make clear reference to the emplo

131、yee handbook this will strengthen the companys case if it plans to dismiss an employee over a breach of company rules.Have the rulebook differentiate between minor and major rule breaches:A minor breach can lead to an official warning letter;A major breach can result in immediate dismissal without c

132、ompensation,though whether a breach is sufficiently serious to be regarded as major breach can be challenged in court;and A company is suggested to specify how many minor breaches may constitute a major breach.Have each employee sign a statement that they have read,understood,and agreed to the handb

133、ook(this process needs to be repeated whenever the employee handbook gets updated or amended).Update the employee handbook regularly:In recent years,there have been numerous legal and regulatory changes regarding employment management,including the processing of employee personal information,leave m

134、anagement,prevention of sexual harassment in the workplace,and more.In light of these developments,it is strongly recommended that companies regularly update their employee handbook to ensure compliance with the latest legal requirements in day-to-day employee management practices.24Guide to HR Comp

135、liance and Best Practices in ChinaFor assistance with automating your HR processes or advice on drafting labor contracts,please contact us at FOR MORE INFORMATIONEXPLORE DETAILSHiring and contract managementHiring staff is one of the first key decisions a company will come across.Before employing si

136、gnificant numbers of employees,a company should first consider the challenges and employer obligations that may arise when opening or expanding a business.Hiring optionsAn enterprise can hire staff through three basic options:Direct hiring Labor dispatch OutsourcingDirect hiring is a process in whic

137、h a company hire and manage employees directly without using a third party.Direct hire jobs are usually long-term positions,and the employee will report to the hiring company directly.It is the major form of hiring for businesses operating in China.Nevertheless,representative offices(RO)in China can

138、not hire staff directly.Instead,Chinese staff must be seconded by an agency that will take the title of official employer.This is because an RO is not a capitalized legal entity in China.If a company is qualified to hire employees directly and decides to do so,it should be especially noted that empl

139、oyers are required to sign a written contract with their employees within one month starting from the employees first day of work at the company.If not,the employee is entitled to a double salary.Labor dispatch is an important form of supplementary employment.Unlike direct hiring,labor dispatch has

140、a triangular form of employment relations,in which a host company hires dispatch workers from a dispatch agency.While dispatched workers work for and are supervised by the host company,the dispatch agency,which usually has considerable experience and knowledge of hiring local workers,is the de facto

141、 legal entity that is responsible for the administrative management of the employees.Thus,labor dispatch is regarded as an effective method to help businesses save hiring costs,avoid tedious administrative processes,and minimize risks and legal responsibilities for potential labor disputes.“Before e

142、mployingsignificant numbers of employees,a company should first consider the challenges and employer obligations that may arise when opening or expanding a business.”FUKI FUManagerHuman Resources&Payroll Shanghai Office25Guide to HR Compliance and Best Practices in ChinaTo be noted,however,labor dis

143、patch is only applicable for the following three types of positions according to the current effective laws and regulations:Temporary position:A position with a duration of no more than six months.Auxiliary position:A position that provides auxiliary services to the main or core business of the empl

144、oyer.Replaceable position:A position that can be performed by a dispatched employee in place of a permanent employee during the period when such an employee is away from work for study,vacation or other reasons.Moreover,the number of total dispatched employees used by an employer should not exceed 1

145、0 percent of its total number of employees,including regular employees and dispatched employees.Compared to direct hiring,labor dispatch is particularly preferred where:Business is not allowed to hire employee directly,either because the business is in the process of setup and hasnt got its business

146、 license or because the business is structured as a RO,which is legally required to recruit through dispatch agencies;Business priority is given to revenue-generating activities over any other concerns,especially when the business is small and at its very early stage;or There is an inconsistent work

147、flow for businesses in seasonal and project-based industries.Outsourcing is another form of supplementary employment.Its traditionally applied to tasks that require specialist skills,a high degree of confidentiality,or those that have a clear scope but incur major consequences if incorrectly impleme

148、nted,such as IT development,accounting,tax filing,HR administration,and payroll processing.Under this model,the client enterprise has no direct employment relationship with the outsourcing employees.The outsourcing agreement usually does not refer to specific employees or performance criteria but ra

149、ther defines the work that needs to be done.Like labor dispatch,outsourcing can help businesses avoid tedious administrative processes and still match workforce needs.With labor dispatch facing increasing scrutiny,many companies tend to use outsourcing as a substitute for dispatching as another alte

150、rnative to avoid directly hiring employees.26Guide to HR Compliance and Best Practices in ChinaPEOs employer service Traditionally recognized as a form of full-service HR outsourcing,PEO(Professional Employer Organization)employer services have been utilized by some foreign investors to match their

151、workforces needs at certain stages.Under the PEO employer service arrangement,the PEO service provider signs separate contracts with both the foreign company and the employees designated to work for the China investment.While the day-to-day control and working relationship with employees remain with

152、 the overseas company and its outsourced hires,the local PEO service provider in China manages payroll and tax filing,benefits administration,compliance,and risk mitigation.This setup allows foreign companies to benefit from having full-time staff working in overseas markets while staying compliant

153、with local laws,without the time and investment required to establish and operate an overseas establishment.When investors first enter the China market,they can leverage this arrangement to gain firsthand knowledge of the local business environment and culture,assess market suitability,plan against

154、supply chain disruptions,and establish a sustainable long-term strategy.For those reconsidering their China strategy and contemplating scaling down their exposure without a complete exit,PEO employer services offer a viable option to maintain a small number of employees on the ground conveniently an

155、d at a lower cost.Labor contract managementIf a company is qualified to hire employees directly and decides to do so,it should be specially noticed that employers are required to sign a written contract with their employees within one month starting from the employees first day of work at the compan

156、y.Otherwise,the employer must pay the employee double wages for each month from the first day of work to less than one year,even if the delay is caused by the employee.If the employment relationship extends beyond one year,the employer and employee are considered to have entered into a non-fixed ter

157、m labor contract.An exception to these rules applies to part-time work,where an oral agreement is considered sufficient.To conclude an effective labor contract with an employee,foreign investors are advised to use a Chinese version of the contract for legal certainty.While monolingual foreign langua

158、ge contracts are accepted by Chinese courts,the foreign language contract must be translated by court-approved institutions.On the other hand,a bilingual contract that does not specify which language is controlling will automatically default to Chinese as the authoritative language.Additionally,if b

159、oth languages in a bilingual contract claim to be the controlling version,Chinese will again be accorded primacy.“Fixed-term labor contract is the most commonly used type of labor contract in employmentrelationships and can be applied to both part-time and full-time work.”HAZEL WANGManagerLegal&Huma

160、n Resources ComplianceTianjing Office27Guide to HR Compliance and Best Practices in ChinaDepending on how the term is defined,labor contracts can be divided into three categories:fixed-term labor contracts,non-fixed-term labor contracts,and job contracts:Fixed-term labor contract:This type of contra

161、ct creates an employer-employee relationship for a specific period.It is the most commonly used type of labor contract in employment relationships and can be applied to both part-time and full-time work.Non-fixed-term labor contract:This contract does not have a set end date and effectively guarante

162、es the employee job security until retirement age.Termination by the employer can only occur through mutual agreement or on valid grounds.Job contract:This contract is defined by the task or project the employee is to work on,rather than by a length of time.Job contracts are sometimes used for seaso

163、nal jobs where the scope of work can be clearly defined.However,defining the scope of work can be challenging,and the current legal framework does not provide guidance on what to do when a project is left uncompleted for whatever reason.Additionally,employers cannot set a probation period for a job

164、contract.Due to these complexities,most employers avoid this type of arrangement.According to relevant laws,mandatory clauses to be included in the labor contracts are as follows:Name of the company,address,and name of the legal representative or key person-in-charge of the employer Name of the empl

165、oyee,along with a valid address and identification number Term of the labor contract Description of the job and its location Working hours,rest periods,and off days Salary details Statement that the employer will contribute to social insurance for the employee Labor protection,working conditions,and

166、 protection from occupational hazardsDepending on the specific situation,it is recommended to include the following additional terms in the labor contract:Probation period(for labor contracts with a term longer than three months)Non-competition clauses(typically used for senior management personnel,

167、senior technical personnel,etc.)Confidentiality clauses(usually included when the employer requires the employee to keep certain corporate secrets)Allowances and benefits(particularly for foreign employees)Reference to the employee handbook(this will strengthen the companys case if it plans to dismi

168、ss an employee for breaching company rules)28Guide to HR Compliance and Best Practices in ChinaPayroll management Payroll management in China encompasses a comprehensive set of tasks and responsibilities to ensure compliance with local regulations and efficient handling of employee compensation.This

169、 includes structuring compensation packages,calculating salaries,managing social security contributions,withholding taxes,and handling leave and overtime pay.Efficient payroll management is crucial for maintaining employee satisfaction and avoiding penalties or disputes with regulatory authorities.S

170、tructuring a salary packageThe structure of the salary package for each position in a company should be carefully considered.Some employees need to be incentivized,while other roles require a more fixed salary.Additionally,the employer should take into account the individual income tax(IIT)that the

171、employee will bear based on the proposed salary package.This consideration is particularly important if the company offers a net salary package to its employees.The total of the base salary,allowances,bonuses,non-mandatory pension plans,and the employers portion of social insurance contribution are

172、added together to form the total compensation and benefits(C&B)amount.Work hour systems and overtime paymentsWork hour systems define specific work hours,rest periods,and overtime payments rates for employees.In China,there are three main work hour systems:the standard work hour system,the comprehen

173、sive work hour system,and the non-fixed(flexible)work hour system.Compliance with these regulations is essential to correctly maintain payroll expenses and avoid unnecessary costs,including potentially damaging labor disputes.Employers should familiarize themselves with the different work hour syste

174、ms in China,identify which one best suits their business,and take appropriate steps to comply with local labor laws.Work Hour Systems in ChinaREAD MOREEXPLORE DETAILS“Efficient payroll management is crucial for maintaining employee satisfaction and avoiding penalties or disputes with regulatory auth

175、orities.”SANDY ZHANGSenior ManagerHuman Resources&PayrollShenzhen Office29Guide to HR Compliance and Best Practices in ChinaSocial security contributionsChinas social security system comprises five different types of insurance:pension,medical,maternity,work-related injury,and unemployment,along with

176、 a mandatory housing fund.When hiring new staff,employers must register their employees with the local social insurance bureau and the housing fund bureau.Although both employers and employees are obligated to make contributions,it is generally the employers responsibility to correctly calculate and

177、 withhold payments for both parties.Furthermore,employers are obliged to make timely contributions for themselves and their employees.Late contributions can result in fines,while failure to contribute may lead to labor disputes.Its important to note that the employers obligation to make adequate and

178、 timely contributions cannot be alleviated or exempted by reaching a mutual agreement with employees.For instance,employers and employees(especially those with lower gross salaries)may mutually agree not to contribute to the social security schemes or to make smaller contributions to save labor cost

179、s and maximize the employees take-home pay.However,in the case of a labor dispute between the employer and the employee,the court would consider such an agreement invalid.The employer might be required to repay the evaded social security contributions or provide extra severance payment to the employ

180、ee upon termination.Foreign employees working in China have been required to participate in Chinas social insurance scheme starting from 2011,though a range of inconsistencies exists among cities.Foreign employees are also eligible for social insurance exemptions if they come from countries that hav

181、e social insurance exemption agreements with China.To date,12 countries have reached such agreements with China and 11 such agreements have been implemented between China and the following countries:Germany,South Korea,Denmark,Canada,Finland,Switzerland,the Netherlands,Spain,Luxembourg,Japan,and Ser

182、bia.China has signed an agreement with France,but it is not yet in effect.Online Guide to Social Insurance in ChinaREAD MOREEXPLORE DETAILS30Guide to HR Compliance and Best Practices in ChinaStatutory leaves and payment calculationEmployees in China are entitled to various paid leaves,including stat

183、utory annual leave,public holidays,recuperation(medical treatment)periods,leaves related to childbearing and caring,as well as marriage leave.However,the leave pay calculation is not always straightforward and can be very complex in certain occasions.For example,if an employee hasnt taken all their

184、paid annual leave within a year and doesnt agree to carry over the untaken leave to the next year,the employer must compensate the employee.This compensation includes 200 percent of the employees average daily wage for the prior 12 months for each day of unused annual leave,in addition to their regu

185、lar daily wage.However,when employers provide additional annual leaves(other than statutory annual leave),they have the right to create internal HR rules regarding compensation schemes.As a result,such unused annual leaves might go uncompensated.Another example can be observed in calculating overtim

186、e payment for hours worked on a public holiday.While its a common practice in China that Saturdays and Sundays are often connected with the official public holiday to make the breaks longer,the overtime payment rates are different depending on the type of rest days and the working hour system implem

187、ented:Under the standard working hour system,for work on an official public holiday,not less than 300 percent of the normal wage shall be paid;for work on an adjusted rest day,and where such rest days cannot be postponed and taken at another time,not less than 200 percent of the normal wage shall be

188、 paid.Under the comprehensive working hour system,for work performed on public holidays not less than 300 percent of the normal wage shall be paid.However,no rest day is outlined under this system,so that for work performed on those adjusted working days and weekends,no overtime payments are availab

189、le.Under the non-fixed work hour system,no less than 300 percent of the normal wage shall be paid for work on public holidays.However,there are differences in overtime regulations across different regions.For instance,in Beijing,employees under the non-fixed work hour system are not entitled to over

190、time pay for hours worked on public holidays.However,in Shanghai,these hours are considered overtime,and employers are required to pay compensation of up to 300 percent of the normal wage.For adjusted working days on weekends,no overtime payment is due.The calculation of maternity allowance is also

191、very sophisticated in some cities.For example,in Shanghai,the social security bureau will cross check the company average salary,the social average salary in the bureaus jurisdiction,and the employees monthly salary before the maternity leave(hereinafter employees salary):Online Guide to Statutory L

192、eave in ChinaREAD MOREEXPLORE DETAILS31Guide to HR Compliance and Best Practices in China If the company average salary is no more than three times the social average salary,the maternity allowance paid by the bureau matches the company average salary.If the company average salary exceeds three time

193、s the social average salary,the maternity allowance is capped at three times the local average salary,with any excess paid by the employer.If the bureaus maternity allowance is lower than the employees salary,the employer covers the difference.In addition,the maternity allowance is subject to minimu

194、m standards maternity allowance generally cannot be lower than 60 percent of the local social average salary.Employers are advised to study relevant mandatory regulations carefully and establish an effective leave management system to accurately track employee leave and calculate payments.Additional

195、 payroll costsCertain cities and regions require additional mandatory payments be made to employees,such as winter heating fee in north China and summer allowance for both south and north China.Although these additional fees may not appear significant,especially by Western standards,they highlight t

196、he impact of regional policies on employee compensation.Companies that fail to follow these rules can face fines.Its essential for employers to stay informed about regional allowances and consider them when processing monthly payroll.Calculating and withholding individual income tax In China,its gen

197、erally the employers responsibility to accurately calculate and withhold individual income tax(IIT)on employment income,including but not limited to wages and salaries,bonuses,stock options,and allowances,before paying a net amount to its employee.Individual taxpayers are divided into two categories

198、-resident taxpayer and non-resident taxpayer:Individuals who have a domicile in China,or individuals who do not have a domicile in China but have resided in China for 183 days or more cumulatively within a tax year,are categorized as resident taxpayers;and Individuals who do not have a domicile in C

199、hina and have not resided in China,or individuals who do not have a domicile in China and have resided in China for less than 183 days cumulatively within a tax year,are categorized as non-resident taxpayers.A tax year starts from January 1 of a calendar year and ends on December 31.And having domic

200、ile here means habitually residing in China due to household registration,family,and economic interests.“Accurately calculating and timely withholding individual income tax for their employees is one of the most important payroll obligations of employers in China.”ANGELA ZHANGManagerHuman Resources&

201、PayrollBeijing Office32Guide to HR Compliance and Best Practices in ChinaTo put it in a simple way,domestic employees and foreign employees who stayed or are expected to stay in China for at least 183 days are most likely to be regarded as resident taxpayers,while expatriates who come to China for s

202、hort-term(less than 183 days)work,such as commercial performance and training,are likely to be regarded as non-resident taxpayers.Under the new IIT system,resident taxpayer and non-resident taxpayer have different tax liabilities to their income,as summarized below:Tax Liability of Resident Taxpayer

203、 and Non-Resident TaxpayerTaxpayer statusDomicile and residence time Tax liabilityResident taxpayer Having domicile in China Income sourced in China;and Income sourced outside of China No domicile in China;and The number of consecutive years residing in China for 183 days or more cumulatively is ove

204、r six Income sourced in China;and Income sourced outside of China No domicile in China;and The number of consecutive years residing in China for 183 days or more cumulatively is no more than six Income sourced in China;and Income sourced outside of China but paid or borne by a Chinese enterprise or

205、individualNon-resident taxpayer No domicile in China;and Residing in China for no more than 183 days in a tax year Income sourced in China No domicile in China;and Residing in China for no more than 90 days in a tax year Income sourced in China that is paid or borne by domestic employer From the abo

206、ve table,we can see individuals who have no domicile in China wont be subject to paying IIT on their worldwide income until their number of consecutive years residing in China for 183 days or more is over six.This is the so called six-year rule.According to the official statement,the six-year rule c

207、ounts starting from January 1,2019.That is to say,the number of years before 2019 wont be included into the count of the six-years,and individuals who have no domicile in China wont be subject to worldwide income taxation liability before the year of 2024.Besides,the count of the six-year can be res

208、et by living in China for less than 183 days in a tax year,or by leaving China for more than 30 days continuously where their days of residence in China has reached 183 days in a tax year.We therefore suggest companies with foreign employees to kindly arrange their clock-reset trip before reaching s

209、ix years to avoid being taxed on their global income in China.33Guide to HR Compliance and Best Practices in ChinaFor resident taxpayers,their income from wages and salaries,remuneration of independent services,authors remuneration,and royalties are consolidated into a new category comprehensive inc

210、ome and are subject to yearly computation.The taxable income amount of comprehensive income of a resident individual shall be the balance after deduction of the standard deduction(RMB 60,000 per year),as well as special deductions,special additional deductions and other deductions determined pursuan

211、t to the law,from the income amount of each tax year.The comprehensive income is subject to progressive rates ranging from three percent to 45 percent,based on the following brackets:IIT Rates Table for Resident Individuals(Yearly)Taxable income amount(RMB)IIT rateQuick deduction(RMB)36,0003%036,000

212、-144,00010%2,520144,000-300,00020%16,920300,000-420,00025%31,920420,000-660,00030%52,920660,000-960,00035%85,920960,00045%181,920Although the IIT on comprehensive income is subject to yearly computation,employers who pay wage and salaries to their employees are still required to compute,withhold,and

213、 file the IIT on a monthly basis(the detailed method is introduced in the later sections).Where resident individuals have comprehensive income other than wage and salaries,they are required to go through an annual IIT settlement process between March 1 and June 30 the following year,during which the

214、y may need to pay extra tax or get tax refund,based on the result of yearly computation.Online Guide to Individual Income Taxation in ChinaREAD MOREEXPLORE DETAILS34Guide to HR Compliance and Best Practices in ChinaDistributing salariesThe majority of companies in China handle salary distribution th

215、rough electronic funds transfer(EFT).HR managers upload EFT files via bank websites,which are then approved online by finance managers for employee payments.However,challenges arise for companies using international banks as their primary accounts.In such cases,individual salary details appear on st

216、atements.To mitigate this issue,some companies establish domestic bank accounts.They transfer funds to a designated payroll account before remitting them to employees.Alternatively,companies can also partner with a qualified service provider.This approach offers several advantages,including increase

217、d efficiency,accuracy,transparency,and confidentiality,while also reducing costs and liability.Here are the key attributes of a dependable payroll processing agent:The agent should handle all interactions with the local HR team via email and in English.This allows management to closely monitor the p

218、rocess.The agent should have a reliable software system that can meet the specific requirements of the company,ensuring seamless payroll management.The agent should only engage with members of the HR team and their supervisors.Direct contact with other individuals should be avoided.Ideally,the agent

219、 should process the payroll from a remote location,preferably not the same city as the client,and only one or two internal employee should be involved in the processing work.Should not do any executive search operations as a side business no company would want to entrust its employees salary records

220、 to a company that may misuse them for other purposes.Online Guide to Salary and Wages in China READ MOREEXPLORE DETAILS35Guide to HR Compliance and Best Practices in ChinaTerminationTerminating an employee in China is indeed more complex and costly compared to many other countries.The Chinese Labor

221、 Contract Law provides robust protection for workers job security,making it challenging for employers to terminate employment unilaterally.There is no at-will termination in China,meaning an employer can only terminate an employee based on mutual agreement or valid grounds in most cases.Wrongful ter

222、mination can result in double severance payments as economic compensation,the restoration of the employment relationship,or costly labor disputes.Terminating Staff in China-An OverviewType of terminationAdmissible groundsType of employeeSeverance paymentDuring probation Employee doesnt meet the job

223、requirements stated in the job description Serious violation of company rules Serious loss attributed to employee Fraud to reach the labor contract Criminal offense during employment Employee taking second job,and harming the employer Incompetent for the position even after training or a job transfe

224、r Employee unable to work after sickness or injury Fixed-term Non-fixed termNo(except for the termination based on the last two admissible grounds)Mutual agreement Agreed with employee Fixed-term Non-fixed termYes(if the termination is put forward by the employer)Immediate(unilaterally)Serious viola

225、tion of company rules Serious loss attributed to employee Giving false information to employer Criminal offense during employment Employee takes up second job,harming first employer Fixed-term Non-fixed termNo30 days notice(unilaterally)Employee incompetent for position Employee unable to work after

226、 sickness/injury Job cannot be performed due to fundamental change in objective circumstances Fixed-term Non-fixed termYesNot renewing contracts After one or two fixed-term contracts,differs per city Fixed-termYes(unless the employee refuse to renew the contract upon maintaining or raised provision

227、proposed by the employer)Mass layoff Company being restructured under the PRC Enterprise Bankruptcy Law Serious difficulties in productions or operations Company changes production method,making staff unnecessary Objective economic situation makes employment impossible Fixed-term Non-fixed termYesAu

228、tomatictermination upon bankruptcy/revoke/dissolution The employer is declared bankrupt pursuant to the law The employers business license is revoked The employer is ordered to close down or revoked by government bureaus The employer has decided to dissolve prematurely Fixed-term Non-fixed termYesTe

229、rmination with 30 days notice and mass layoff not allowed for The employee is suspected of having occupational disease(s)and waiting for diagnosis;The employee has completely or partially lost labor capability due to occupational disease(s)or work-related injury;The employee is still in the legal re

230、cuperation period for non-work-related illness/injury;The employee is pregnant,on maternity leave or in breast-feeing period;and The employee has continuously worked for the employer for more than 15 years and is less than five years before retirement.Note:When unilaterally terminating an employee,t

231、he employer needs to notify the labor union if there is one.36Guide to HR Compliance and Best Practices in ChinaEmployees not allowed to be terminatedUnder the current labor law system,certain groups of people are specially protected,including:Employees who are suspected of having an occupational di

232、sease and waiting for diagnosis;Employees who have completely or partially lost labor capability due to occupational diseases or work-related injury;Employees who are still in the legal medical treatment period for non-work related illness/injury;Employees who are pregnant,on maternity leave,or in n

233、ursing period;and Employees who have worked for the employer continuously for more than 15 years and are less than five years away from retirement.The groups of employees mentioned above cannot be terminated for reasons listed under termination with 30 days notice and mass layoff.Additionally,upon e

234、xpiration of their labor contracts,they cannot be terminated until the corresponding circumstances cease,except where the employee has completely or partially lost labor capability due to occupational diseases or work-related injury.In such cases,the employee shall be terminated and treated in accor

235、dance with the provisions on work-related injury insurance.However,the employer can still terminate these specially protected employees by mutual agreement or if any circumstance under immediate termination for inappropriate behavior of the employee exists.Termination pay and its tax treatmentThe fo

236、rmula of calculating the severance payment is:SEVERANCE PAYMENT AVERAGE MONTHLY SALARY X YEARS OF SERVICE=For the average monthly salary:It is calculated as the employees average monthly salary during the last 12 months preceding the termination.If the employee worked for less than 12 months,the ave

237、rage monthly salary shall be calculated according to the actual working time.Three-time restriction:For any period after January 1,2008 the date of the enactment of the PRC Labor Contract Law where the employees average monthly salary is more than three times the average monthly salary in the locati

238、on of employment,the latter will be used to calculate severance pay.This rule does not apply to the period prior to the enactment of the PRC Labor Contract Law.For the counting of the years of service:For a working period that is less than six months,it shall be counted as half a year,and half a mon

239、ths salary must be paid as severance payment.Online Guide to Terminating Staff in China READ MOREEXPLORE DETAILS37Guide to HR Compliance and Best Practices in China Total amount restriction:For employee whose average monthly salary is more than three times the average monthly salary in the location

240、of employment,the severance is limited to a maximum of 12 months average salary,even if he/she worked for a company for over 12 years.The calculation method provided above is only the minimum amount an employer is required to pay by law.In practice,however,employers often pay a higher amount than th

241、e statutory minimum amount.Managing foreign employees With expatriates working in China becoming more common,how to effectively manage foreign-related relations has become one of the top concerns for many executives.Compared to the management of domestic employees,foreign-related labor relations are

242、 more complicated.On the one hand,the employment of foreign personnel involves administrative procedures that are different from general labor relations.On the other hand,foreign-related labor relations are limited by a series of special legal norms.Moreover,foreign employees generally have higher s

243、alaries,which means that once a labor dispute arises,the cost will inevitably be higher than average.Given these circumstances,companies have been paying growing attention to legal provisions related to foreign employee management,to avoid legal risks and prevent labor disputes to the greatest exten

244、t.In general,the following special features apply to foreign employees in labor relations management:A work permit and a residence permit are mandatory for hiring expatriates.Without a work permit and residence permit,the provision of labor to a company in China is illegal,which may lead to penaltie

245、s for both the company and the foreign employee.Once the employer changes,the work permit and residence permit need to be renewed.Strict restrictions apply to foreign interns.Under relevant Chinese laws,employers can only recruit foreign students who are studying in universities in China as interns.

246、In addition,for a legal internship,foreign students should obtain the consent of their schools and go to the exit-entry administration agency of the Bureau of Public Security to complete the internship endorsement procedures.Foreign employees are prohibited from labor dispatch,business outsourcing,a

247、nd cross-region part-time work.Key Points in the Application of Chinese Labor Laws to Foreign EmployeesREAD MOREEXPLORE DETAILS38Guide to HR Compliance and Best Practices in China Non-fixed-term labor contracts do not apply to foreign employees.Article 17 of the Regulations on the Administration of

248、Employment of Foreigners stipulates that the term of a foreign employees labor contract shall not exceed five years.If it is necessary to renew the expatriates labor contract,the employer needs to first obtain the approval and complete the procedures for the extension of the work permit within 30 da

249、ys before the expiration of the original labor contract.Foreign employees are required to participate in Chinas social insurance schemes,but the payment obligation can be exempted under bilateral social insurance exemption agreements.Judicial practice shows that mutual agreement on termination condi

250、tions with foreign employees may be allowed in certain cities,such as Shanghai.Foreign employees do not strictly enforce the Chinese retirement age.In the case where the foreign employee has reached the retirement age in China while the work permit has not expired,the employer cannot terminate the f

251、oreign employee just because the foreign employee has reached the retirement age.Or else,labor disputes may arise.After the cancellation of the work permit,the foreign employee cannot claim the restoration of the labor relationship,even in the case of unlawful termination.Data privacy issues in HR m

252、anagementPrivacy and personal information protection are becoming increasingly important in China,as in most major economies.With the release of the Civil Code,the Personal Information Protection Law(PIPL),as well as the other relevant data security laws and regulations,employers in China are faced

253、with a series of new compliance requirements in HR management.Right to privacyAccording to Article 1032 of the Civil Code,privacy encompasses a natural persons private life,private space,private activities,and private information that they do not wish to be disclosed to others.No organization or ind

254、ividual may infringe upon another persons right to privacy by spying,invading personal space,harassing,disclosing,publishing personal information,or using any other means.In practice,disputes related to privacy rights between employers and employees typically arise during three stages:the recruitmen

255、t period,employment period,and post-leaving period:Privacy right and employment discrimination:Some companies consistently seek to collect extensive personal information from job seekers,including details such as marital status,fertility status,and whether the individual carries an infectious diseas

256、e.These practices can lead to privacy disputes.If a job seeker discloses such information during the recruitment process but is not ultimately employed by the company,the company faces the risk of employment discrimination.“Privacy and personal information protection is becoming increasingly importa

257、nt in China,as in most major economies.”FANNY ZHANGSenior Manager Business Advisory Services Beijing Office39Guide to HR Compliance and Best Practices in China Employees privacy right and employers employment management right:Employers may take measures to exercise their employment management rights

258、,such as installing monitoring equipment in office areas or discreetly investigating an employees health conditions.While such measures may be necessary from the companys perspective,they can also infringe upon the employees privacy rights if not handled properly.Privacy right in the post-leaving pe

259、riod:Companies often prefer to hire suitable and compliant job seekers to ensure employment stability and there might be industry blacklists shared among companies that track job seekers records.Such practices may potentially infringe on the employees privacy rights,damage their reputation,or even v

260、iolate their labor rights.To strike a balance between employers employment management rights and employees privacy rights,companies should handle employees privacy based on the principles of legitimate,reasonable,and consensual practices.Personal information protectionAccording to Chinas PIPL and ot

261、her data laws,employers are the personal information processor,because they are the one to“independently decide the purpose and method of processing and other personal information processing matters”of the employees personal information.This concept is similar to the data controller under GDPR.Perso

262、nal information,which is referred to as“personal identifiable information”in the US or“personal data”in the EU,pertains to various kinds of information that is related to any identified or identifiable natural persons as recorded by electronic or other means.For example,the employees full name,date

263、of birth,gender,address,resume,fingerprint,ID number,etc.The exception in this regard is that information processed anonymously will not count as personal information.Processing of personal information refers to types of behaviors in relation to personal information,including the collection,storage,

264、use,processing,transmission,provision,publication,and erasure of personal information.In employment scenarios,for example,when the employer asks newly onboarded employees to fill in the onboarding form with their names,phone number,contact address,emergency contact person etc.,they are“collecting”th

265、eir personal information.When the employer inputs the employees information onto the HR systems for efficient administration,they are“storing”their personal information.When the employer provides the employees information to an insurance company for the purpose to purchase group insurance for our em

266、ployees,they are“using”and“transmitting”their personal information.From collection to deletion,this can be viewed as a“life cycle”of the personal information.All these steps in the life cycle are collectively called“processing”of personal information.40Guide to HR Compliance and Best Practices in Ch

267、inaTo be noted,even if the employer is registered and processing personal information outside of China,it may still be subject to the PIPL in the below two circumstances:Where the company provides products or services to individuals inside China;and Where the company analyzes and evaluates the activ

268、ities of individuals inside China.As personal information processors,employers assume liability for their behavior related to the handling of employees personal information.Therefore,they must take necessary measures to ensure the compliance of personal information processing throughout its life cyc

269、le to minimize risks.Among others,employers need to:Process employees personal information based on the principles set out in the PIPL,such as the principle of legality,the principle of necessity,minimum principle,and security principle.Properly obtain the consent from employees based on the kind of

270、 personal information processes and the type of processing activity.Implement required compliance procedures for providing personal information to overseas stakeholders.Conduct personal information protection impact assessment(PIPIA)when“processing sensitive personal information,making automatic dec

271、ision-making for the use of personal information,entrusting other parties to process the personal information,and providing personal information to overseas parties”.Ensure the rights of individuals for their personal information as stipulated in the PIPL,such as deleting their personal information

272、when withdrawing consent or terminating the use of the product or service.Employers are suggested to take a cautious approach towards their obligations under the PIPL and make necessary adjustments sooner than later.Below are some practical tips for employer to start with:Internal training regarding

273、 the PIPL Auditing all current personal information held by the employer Auditing current policies involving personal information,such as policies requiring employees to submit personal information in different stages Audit third-party service providers to guarantee they have capability in ensuring

274、security of the employees personal information and in ensuring compliance with the PIPL Amending labor contract template to reflect the requirements of the PIPL Amending company rulebook to add a separate chapter regarding personal information management,and develop relevant policies formulating the

275、 collection,storage,use,transmission,and deletion of personal information Building PIPL compliance into the companys IT infrastructure and systems,such as implementing data masking to protect employees personal information41Guide to HR Compliance and Best Practices in ChinaLeveraging technology to i

276、mprove HR and payroll management Beyond outsourcing the HR and payroll management to a third-party service provider,more and more international businesses today are seizing upon the advantages of using a tech-powered HR and payroll solution to help them with their China and Asia-wide employee manage

277、ment.In doing so,they are transforming their businesses into more efficient and mobile operations,which better meet the norms of international business,with more capable apps or portals to serve their internal customers.What is a tech-powered HCM portal?Beyond the simple software management of payro

278、ll processing and HR administration,is the concept of a Human Capital Management(HCM)portal.Companies are increasingly moving away from separated,localized payroll software or Excel,and towards integrated HCM platforms that streamline multiple HR processes,often including onboarding,attendance,leave

279、,claims,and possibly even areas like talent management and training.Such integrated HCM platforms offer a game changing shift in terms of how a company is able to manage its collective areas of HR internally,and even beyond the department and firm itself.In general,a tech-powered HCM portal has adva

280、ntages over traditional methods in addressing the pain points in employment management,including:Improving efficiency;Reducing inaccuracy;Making payroll locally compliant;Achieving real-time data analysis;Better data privacy and employee confidentiality;and Managing remote staffHow does the HCM port

281、al work?The HCM portal is easy to use and can be customized to fit the needs of the company,but adoption is key.In addition to considerations of adoption and compatibility,the functional value and benefits of a technology-driven solution for a company depend on the following factors:Integration of v

282、arious processes onto a unified platform.Implementation of standardized procedures across all processes.Efficient and smooth flow of data among different processes.Optimization of processes using mature technologies.“More and more international businesses today are seizing upon the advantages of usi

283、ng a tech-powered HR and payroll solution to help them with their China and Asia-wide employee management.”ADAM LIVERMORE PartnerDezan Shira&Associates Dalian Office42Guide to HR Compliance and Best Practices in ChinaWhat processes can be integrated into the HCM portal in China today?The following p

284、rocesses can be integrated into an HCM portal for China or multiple countries in Asia:Standard HR processes,such as onboarding of employees or offboarding;Employment relationship management,such as probation,promotion,relocation,or termination;Contract management,including employment contract and re

285、newal notifications;Attendance management;Employee time management;Leave application and approval;Claims management;Payroll computation;Visualization of the employees cost productivity;and Data analysis,such as generating reports and creating dashboards to analyze employee data.Potential obstacles i

286、n adopting technology solutionsWhile new technology-driven methods offer numerous advantages,they also impose additional pressures on both the in-house HR staff and the company as a whole.For instance,the HR team may encounter challenges in determining the most appropriate solution for the companys

287、transition to technology.In cases where there is lack of adequate IT support or if the internal IT advisor is not proficient enough,HR professionals may not be able to identify whether a specific option can fit into their current system,how it would fit in,and how to make the system as efficient and

288、 productive as possible.Selecting an appropriate software and a suitable vendor would be an extremely challenging and overwhelming task in such a scenario.Then after choosing the automation model and the software,the company may find it hard to customize the system by themselves considering the stan

289、dard solution might not 100 percent fit with the companys actual situation.More often than not,the internal professionals will feel they lack the expertise and capabilities in this aspect,having no idea of what to do and where to start.Moreover,for smaller firms,they may lack the resources and budge

290、ts to optimize and streamline the HR and payroll processes and keep them in line with Chinas laws and regulations.43Guide to HR Compliance and Best Practices in ChinaTips for successful implementationThe below tips can be referred to when implementing the integrated HCM portal:Tips for Successful Im

291、plementation of the HCM PortalClearly defining calculation methods in the HCM portal for branch officesActively communicating the difference between the local management and overseas management to global/main headquartersApplying a top-down implementation methodProviding a standardized operation man

292、ual and in-time training to employeesClear division of authority and secondary verification of data to ensure the accuracy and promptnessUse a third-party tech-powered service providerWhere the company doesnt have the budget or time to develop its own internal team to handle the difficulties mention

293、ed above and doesnt want to miss the automation trend to improve their business operations,one practical option is to cooperate with a third-party HCM service provider.A qualified HCM service provider usually has rich knowledge and experience in both human capital management and technology applicati

294、ons.They hold the following advantages:They can easily grasp the needs of the client company,and integrate the service demands with the appropriate technologies.They can customize the HCM portal to meet particular requirements.They can provide training to the companys in-house HR and other departmen

295、ts to ensure the smooth implementation of the system.They are also responsible for the maintenance of the portal and are dedicated to timely system updates for the purpose of full compliance with laws and local practices.The last point is really a value-added service,considering the frequent changes

296、 to relevant legislation,from social insurance rates to individual income tax.This creates an extra level of complexity for the HCM portal.By constantly keeping an eye on these developments,the HCM service provider can save great trouble for clients by dealing with the complexities in the HCM portal

297、 caused by the regulatory updates and provide an extra layer of safety to the company regarding its compliance status.44Guide to HR Compliance and Best Practices in ChinaAbout Dezan Shira&Associates HR Compliance and Payroll ServicesDezan Shira&Associates understands that HR compliance and payroll p

298、rocessing in Asias emerging economies can be challenging for international firms due to ever-changing local regulations,unique and dynamic local practices,the natural complexities of managing people in multiple countries,and rapidly evolving technologies.With three decades of HR related Asia experie

299、nce,we have accumulated an abundance of knowledge and expertise in local markets that we apply through the professional HR and payroll services that we provide to our clients.Our certified HR and payroll specialists identify practical,compliant and efficient solutions for clients.Our approach focuse

300、s upon helping HR teams to fulfill their true strategic functions in the organization,by offering clients customized processes,reliable stress-free payroll management,HR expertise and administrative relief,leading HR technology,and complete support that enables them to compliantly build happy and ef

301、fective teams in Asia.Our areas of expertise include:asiaadmin-Your HR and Payroll Solution for Asia Executive Search and Recruitment Human Resources Payroll PEO and Global Staffing Solutions Labor contract and company policies preparation Labor dispute resolution Work permit and residence permit45G

302、uide to HR Compliance and Best Practices in ChinaMeet Our HR Compliance and Payroll ProfessionalsDavid NiuPartnerHuman Resources&Payroll DalianSandy ZhangSenior ManagerHuman Resources&Payroll ShenzhenFuki FuManagerHuman Resources&Payroll ShanghaiKatrina HuangManagerHong Kong Human Resources&Payroll

303、ShenzhenHazel WangManagerLegal&Human Resources Compliance TianjinJanice DongManagerInternational Payroll&Tax DalianReggie XueSenior Implementation ConsultantHuman Resources Information System DalianAllan XuPartnerBusiness Advisory Services ShanghaiDonfil HuangManagerBusiness Advisory Services Guangz

304、houAngela ZhangManagerHuman Resources&Payroll BeijingScan this QR codeVisit our mobile page andget the latest updates investors news and resources with Asiapedia is a collection of resources based on what we have learned about doing business in Asia.Are you making changes to your operations in Asia?

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