Contractors in China
When you wish to grow your company, you may hire globally to support your goals. Before you begin recruiting, you should consider the legal parameters for independent contractors in China to ensure compliance.
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When you wish to grow your company, you may hire globally to support your goals. Before you begin recruiting, you should consider the legal parameters for independent contractors in China to ensure compliance.
While there is no legally recognized independent contractor status in China, the country does allow employment relationships based on a contract of service where neither party is considered subordinate.
Hiring independent contractors in China
Before you begin the hiring process, it’s crucial to understand the regulations surrounding independent contractors to keep your company compliant throughout the working relationship.
Employees vs. independent contractors
The law will refer to the concept of an employment relationship to determine the worker classification that would apply. Three factors constitute an employee-employer relationship:
- Both parties must be legally allowed to enter an employment relationship.
- The employer has rules and regulations the employee must abide by, and the employee is subject to labor management with paid work.
- The employee’s work is a part of the employer’s business.
Local courts may provide more clarification about the employment relationship.
Penalties for misclassification
The country will enforce penalties if you have an employment relationship with an individual but fail to provide the required provisions. Possible penalties include:
- Doubled salary for the misclassified employee
- Publishing of your company name and violation for public display
- Fines and sanctions
- Random inspections by the Bureau of Labor
How to hire independent contractors in China
The contractor hiring process should involve three key steps.
1. Carefully conduct interviews
Hiring practices are generally the same as with employees. During the contractor interview process, you should focus on skills and experience rather than character traits or an individual’s contributions to the company culture.
2. Create a service agreement
While contractors will not require benefits like paid leave or social security contributions, creating a contract of service will clarify all terms of your relationship and prevent legal action. Your contract of service should include:
- Payment method and schedule
- Description of the project and deadlines
- Applicable termination policies
3. Introduce necessities
While it’s not a requirement, a training program can help contractors adjust to your company and its workflow. Introduce your contractor to any employees they may interact with and clarify when you’ll meet to review the project progress and who they can turn to if questions arise.
How to pay independent contractors in China
You may choose to pay your contractor hourly or with a single fee once the designated project is complete. You may also offer a pre-payment arrangement or a partial deposit where you provide part of the fee at the beginning of the agreement and pay the rest when the project is done.
Contractors are responsible for paying their own taxes, but you may be responsible for reporting these amounts even if you don’t deduct them yourself.
Terminating independent contractors
A company can terminate an independent contractor with notice based on terms set in the contract for service or in the Contract Law of the People’s Republic of China. Severance is not required unless agreed upon by both parties in the contract. Both parties may also agree on termination without cause.
If a termination violates your contract or contract law, your contractor may claim compensation for damages.
Turn to Globalization Partners when hiring independent contractors in China
As an extension of Globalization Partners’ Global Employment Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.