Note on Recruitment in China for Foreign Invested Enterprises

Despite facing the pressure of economy downturn, China’s inherent business advantages and new opportunities remain attractive to investors. Information presented in the United Nations Conference on Trade and Development showed that China surpassed the United States in 2014, becoming the first destination country for foreign investment. While investing in China, recruiting locals as employees will speed up the process of market expansion in China. However, there are few matters shall be noted.

Recruitment Restriction

As stipulated by the Chinese law, foreign invested enterprises which only set up representative office or branch office but not incorporated company in China are not qualified to recruit. If such representative offices or branch offices plan to hire Chinese employees, they have to sign a contract with Foreign Affair Service Organisation, who will conduct the recruitment on behalf of the offices and send the

Recruitment of Employee Responsible for Special Duty

Enterprises in special industries need to employ candidates with relevant professional qualification which the designated positions are in relation to public security, personal health, safety of life and property and etc. Otherwise, enterprises should provide professional training for the employees then send them to work after they have obtained the relevant qualifications.

Introduction of Overseas Employees

Companies which have to employ talents from overseas should apply for the Foreigners Employment Permit, Foreigner Work Permit and Foreigner Residence Permit and file the records to the Ministry Human Resources and Social Security. In addition, the candidates whom the enterprises intent to employ should fulfil the following requirements:

• • At least 18 years old and being healthy
• • Have relevant professional skills and work experience
• • No criminal records
• • Confirmed employment
• • Have valid passport

The maximum validity period of the Foreigner Work Permit is five years. If the permit is valid for more than a year, the enterprise should arrange an annual inspection for its foreign employees within thirty days prior to the end of every year of employment.

Labour Contracts and Social Insurance

Once the employment is confirmed, enterprises should strike a labour contract in written form with the employees. The contract can be written in Chinese or foreign languages. If there is any ambiguity between the two versions, the Chinese version shall prevail. Moreover, enterprises should, in accordance with local government’s regulations, pay such social security insurance as pension, unemployment, medical, work-related injury and maternity insurance as well as contribute to the housing provident fund for employees, which are generally referred to as “Social Insurance”.

Individual Income Tax

Enterprises should pay the individual income tax monthly for their employees when issuing their pay packets. At present, China’s individual income tax is levied at a progressive rate ranging from 3% to 45% including a basic deduction of RMB 3,500 (RMB 4,800 for foreigners).

Dismissal

If the employee is incompetent to or, due to objective reasons, unable to discharge the duties written in the labour contract, the enterprise can dismiss but compensate the employee based on his/her employment period. The compensation is as follows:

Since the gradual improvement of China’s legal system, the protection of labour rights is getting increasing attention. Thus, foreign invested enterprises should be familiar with the operational details of the recruitment in China, so as to avoid violation of the relevant provisions, from which legal liability may arise.