Jasper Zhang, HR & Admin Manager at PTL Group
Jasper Zhang has been working with us since 2011, and she is, undoubtedly the go-to person for questions on HR regulations and HR management in China. We asked Jasper to outline the most important aspects of HR management in China for international managers who hire teams in the country. Jasper didn’t only touch upon the most important points, but also shared some HR management tips – so keep reading.
In what ways is HR management in China similar to the rest of the world?
Employment laws and social benefits
In China, there is a broad framework of employment laws, and many of them would strike a familiar core with Western managers. For instance, the basic annual leave for local employees lasts between 5 to 15 days, depending on the accumulated work years. Other types of leaves are maternity leave and marriage leave. Another example is overtime compensation, whose rate is determined by the work time (weekdays, weekends, and national holidays).
Contribution to the employees’ social benefit insurance is another obligation by the employer. China’s social security scheme consists of several mandatory insurances + a housing fund, which is applicable to Chinese employees only. As any expert in employment services in China will tell you, failure to pay properly will lead to penalties on the employer.
Employees’ expectations and the competitive labor market
Much like the employees in your home country, Chinese employees will expect to be compensated with more than just their basic salary. That means an annual salary raise and special additional allowances, such as transportation allowances. But regardless of this anticipation coming from the employees’ side, employers tend to offer improved working conditions and different levels of insurance, as a means to attract skilled workers. As the labor market gets more competitive, employees won’t hesitate to issue an ultimatum if they feel they are not receiving what they’re due.
Conditions for termination of employment
Employers are not allowed to dismiss their employees unilaterally and without a substantial reason. Therefore, employers should carefully examine the grounds for termination before notifying employees of their dismissal. The termination’s legitimacy will be determined by its reason. This will also establish the grounds for severance and the amount of severance pay. If the grounds for dismissal are deemed unreasonable, we recommend that the two parties settle on termination by mutual agreement.
In what ways does HR management in China differ from the rest of the world?
The word can’t be stressed enough, and it’s pretty much the first thing to keep in mind for every company and in every aspect of doing business in China. Localization means that alongside the national directives, provinces and local governments have wiggle room to adjust the regulations in their jurisdictional area. When it comes to HR management, localization comes into play in two ways. First, is the localization of the labor contract in China, which means that contracts are province-specific and cannot be used in different localities across China, making matching the contract’s content to the province and city’s local regulations critical. Secondly, back to the social benefits payments, the amount contributed by employers to the different insurances varies between localities in China. For example, the employers’ contribution rate to employees’ medical insurance is 10.5% and 9.8% in Shanghai and Beijing, respectively.
Employer of record
An employer of record in China (EOR) is a third-party organization that employs and pays your local employees on your behalf. Put differently, the EOR acts as the official employer in China for tax purposes and is responsible for the employment arrangements and additional legal & administrative HR requirements. Two main benefits are attributed to outsourcing employment in China to an EOR. First, a shortened time-to-market, as both the recruitment and HR management processes can be carried out immediately, eliminating the need for a physical presence of a relocated foreign manager. Second, in the face of the expanding legal framework in China and the stricter enforcement, a market-specialist employer of record in China will ensure that the local operation is 100% compliant and abides by all national and local regulations.
The Employee Handbook
The Employee Handbook is the must-have China employment document. Quite similar to an article of association, the Employee Handbook serves as a workplace’s guidelines and it specifies supplemental rules and regulations pertaining to the company’s operation. The Employee Handbook should help prevent cases of gray areas and vagueness, by adding another layer of protection to the company in the event of a work dispute. In that sense, it is important to highlight that the Employee Handbook is a legally valid document that courts might refer to, and that is also why you must have your employees sign it.
Five HR management tips for international managers
1) Conduct background checks – When recruiting in China, “bother” to spend some time on background checks. Once we conducted a background check that exposed that the candidate was not only working for the competing company, but that he was also the company’s owner, and was trying to get a job to extract information.
2) Schedule your recruitment in China – The best time to recruit new employees in China is between March and April, when the market is already back to its normal routine after the Chinese New Year’s holiday. The hardest season for recruitment in China is the winter, aka before employees have been given their annual bonus.
3) Think twice before hiring employees as freelancers – Hiring freelancers means that there are no “formal” employment relations between the company and the freelancer, and that control over any freelance employees is limited. Therefore, we always recommend that international companies hire Chinese employees legally – within the realm of the China Labor Contract Law.
4) Sign labor contracts with an end date – Remembering that termination processes in China are tough, labor contracts with an end date will allow you to terminate the employment more easily, simply by not renewing the contract.
5) The English proficiency requirement – A high-level English requirement will narrow the number of potential candidates and raise their desirable salary. Therefore, it is advisable to consider the required level of English for each position.
On a personal note – our HR department team is ready to answer any question you may have. For more inquiries on HR regulations, or if you wish to learn more about PTL Group’s HR services in China, get in touch and we’d love to help.