It is much more challenging to set up a foreign business in China considering the hiring practices and labor regulations under Chinese law. Most of the time, a foreign-invested enterprise will have to hire Chinese employees and should be very particular with their legal rights. On the other hand, hiring practices related to foreign employment may also vary depending on policy changes.
Have a look at our previous article on Foreign Experts Recruitment Plan in China
Foreign companies with operations in China need to register their employees, the manner of which depends on the entity’s type of business presence in China. Moreover, they also need to observe existing restrictions to uphold the rights of employees and avoid incurring hefty penalties.
Hiring practices for foreign businesses in China
PRC laws and regulations regarding foreign-registered employers and their employees may differ depending on certain circumstances. The hiring practices for foreign-registered companies in China usually vary depending on what company structure they have registered, whether it is a subsidiary company (Wholly Foreign-Owned Company or WFOE) or a representative office (RO).
Subsidiary Company
A subsidiary company incorporated in China will fall under a WFOE. It can hire employees directly or retain employees from its respective foreign parent company (expatriates imported from the parent company) since WFOE is considered a legal entity in China. In other words, subsidiary companies are allowed to hire employees under their name.
Representative Office
Representative Offices in China are not considered legal entities because they cannot take part in profit-making activities. Its funds are fully provided by the foreign parent company, capitalization is thereby minimal, and hiring staff to take care of operations must be dealt with through a local HR agent. Moreover, ROs are only allowed to hire Chinese employees, and again only through an employment agency that will officially take the title of the employer. The reason behind this is to protect the rights and claims of employees who can only have the right to claim against employers with established legal personalities in China. ROs are not suitable entities to be claiming such rights but HR agencies and POEs, which are capitalized legal entities, are viable companies.
Hiring practices and restrictions in the application processes
Certain restrictions exist to protect employees’ rights as well as uphold the integrity of companies existing in China. Some of these restrictions are described below.
PEO services
- Professional Employment Organizations (PEO) can support foreign-invested enterprises in their Human Resource needs. The Ministry of Human Resources and Social Security (MOHRSS) provided regulations that strengthen the protection of employees. In doing so, local PEO companies may be able to overcome the many challenges faced by foreign-invested enterprises in terms of hiring a local workforce in China. PEOs are updated with local labor and administrative laws, knowledgeable with the Chinese market, and licensed to hire Chinese staff on behalf of foreign companies.
Interview questions (relating to women)
- According to the Circular related to further Action to Promote Employment for Women, restrictions exist that employers and human resource agents are deemed to follow particularly during the recruitment process of female candidates. It is explicitly stated therein that employers, human resource agents, or any authorized personnel interviewing prospective female staff candidates, are restricted from raising inquiries regarding the female candidate’s marital or pregnancy status. Otherwise, penalties of up to RMB 50,000 may be imposed upon those who breach such restrictions.
Background checks
- To avoid potential legal disputes, employers should obtain the candidate’s (written) consent before undergoing or implementing any background checks. Moreover, the background checks must be done according to the requirements of the Civil Code. This means that any information obtained through such means must be legitimate, just, necessary, and not excessive.
- In other words, the employer should only obtain information that directly pertains to the employment contract. Background checks or interview questions should never impinge on the employees’ rights to privacy or their equal employment rights. Further, employees are also obligated to bestow such information truthfully.
Online job recruitment
- Gender, ethnicity, and religious beliefs may have been sources of discrimination in the (online) recruitment process. However, effective March 1, 2021, the Ministry of Human Resources and Social Security promulgated a new set of regulations to rid of all sorts of discrimination based on the aspects mentioned.
- HR agencies are now required to strengthen the protection of candidates’ online applications and their respective information. It is expressly stipulated that HR agencies are prohibited from leaking, altering, destroying, or illegally selling or providing others with the ID number, age, gender, address, and contact and other personal information of individuals they have collected. Moreover, companies who fall under this category are asked to conduct annual security audits, making certain that the personal information they have collected is protected continuously.
Advantage of Cloud-based platforms for HR management
Cloud-based company solutions aim to aid employers and various departments in organizing and standardizing everyday business needs. When it comes to human resource department needs, Cloud-based platforms like Kwikdroid provides an efficient solution where your HR team can store and manage all employee’s information in one place, manage employment contracts, and keep track of your employees’ profiles. Information such as job status, title, contract type, daily schedules, and more are in one safe and convenient place.
Moreover, human resource departments will be able to receive alerts for new leave or allocation requests. Once received, the authorized personnel may be able to approve or refuse leave requests from any device, anywhere in China or the world.
Learn more about Implementing a Digital Approach to HR
Conclusion
Varying recruitment practices in PRC apply to foreign-based or foreign-owned entities. To preserve company integrity and avoid penalties and fines, foreign companies need to adhere to correct hiring practices based on their type of their structure. Moreover, it is also helpful for companies to implement different HR management solutions. The ultimate goal, however, would be to achieve the mission of the company while upholding the rights of employees as well as all stakeholders.
Contact us
S.J. Grand provides HR advisory and payroll support for foreign-invested enterprises and their employees based in China. Contact us to avail of our services.
Moreover, we have been at the forefront of promoting full automation of business operations, especially for startups and SMEs. We have introduced our Cloud-based advanced solution, Kwikdroid, to make business transactions easier with us, no matter what type or size of the company. Visit our Kwikdroid page to learn more about the services we offer.
You may be interested to read about how to manage your company remotely using the advantages of Kwikdroid. Check it out!
