Formal Employment: Key to a Stronger China Team

Most businesses purchasing from China have a “man on the ground” – someone to visit factories during issues and communicate in Chinese with suppliers. They may also bring product/engineering expertise to assist with new product development, factory negotiations, or sourcing new factories.

But how do you secure their services? Options include paying a day rate, a monthly rate, or perhaps a commission. While all these methods are viable, what does the average representative on the ground desire?

Stability – achieved through a formal employment contract. Here are a few reasons why:

Employment Contracts are More Compliant and Secure

Your team member will feel more at ease knowing you have taken the steps to set up an employment contract. This action signifies an investment in their future and demonstrates confidence in that team member. As a result, they will likely invest more time and effort into your company. After experimenting with various management styles, we found that Chinese people appreciate being part of a team with strong leadership. Implementing an employment contract will further integrate them into your company’s organizational structure.

Managing Social Insurance Payments Effectively

When an employer hires someone, they must pay social insurance for the employee. You can read more about social insurance in our blog, but it includes statutory medical insurance in the city in which they are employed. Thus, if your team member needs hospital care, they will have insurance to cover treatments.

If your team member is not formally employed, they will not receive social insurance and may have to pay for it themselves. This situation can create both administrative and financial burdens for your team member.

Ensuring Accurate Tax Payments for Employees

Similar rules apply to taxes. When employed in compliance with regulations, the employer typically deducts income tax from the employee’s salary and pays it directly to the tax bureau. However, with an informal arrangement, the responsibility to pay taxes falls on the employee, who may not pay the correct amount.

Thus, properly employing your personnel ensures they do not have to worry about accurately and timely paying their taxes.

Streamlined Salary Disbursement in RMB

An employment contract with a China-based entity allows for direct payment in RMB into the employee’s current account. The significance of this benefit cannot be overstated – transactions within China are instant, whereas cross-border payments involve considerable administrative tasks and fees. Your team member will appreciate the convenience of receiving their salary without the need for additional time or effort.

Improving Mortgage Eligibility with Formal Employment

Property is a massive part of Chinese life and society, with about 70% of Chinese wealth tied up in property. Owning a home is considered a fundamental element of stability. Therefore, the ability to apply for a mortgage is very important and an employment contract with a fixed income facilitates this process. A team member, knowing that their employment is supporting their future property goals, is likely to feel more stable within your team and work with greater dedication.

Securing the Best Talent with Formal Employment Terms

In our experience recruiting on the ground, most professionals in China want to have a full-time employment contract, so by not offering one, you are missing out on the best talent in the market. With all this in mind – if you are not offering employment to your team members in China, you are likely to be missing a huge proportion of potential talent on the ground. Lack of stability may also cause your employees to look for other sources of revenue, outside or indeed inside your operation, which can lead to conflicted performance and mistrust.

Don’t burden your team members with a heap of admin and insecurity – hiring your team member under The China Desk is a great way to keep them focused on the job and more loyal. As a supply-chain-focused employer of record, we understand the challenges your team members face in the field and are here to support them.

Want to know the different ways you can hire in China? Our next blog (Coming soon!) dissects the different methods, with their respective advantages and disadvantages.

Check out our case study to learn how The China Desk can help you engage your team members better and ensure their commitment to your company!