Hiring in China with an EOR: costs, rules, and best providers (2026)
Add up China's statutory employer contributions and you land at 35.2% of gross salary on top of whatever you pay your employee. That figure covers pension, medical, unemployment, work injury, maternity insurance, and the Housing Provident Fund, and every component is mandatory. There is no legal way to replace these contributions with a higher cash salary, and the rates and contribution bases are set locally, so the actual cost varies by city.
What you get for that cost is access to a labour force of roughly 768 million people, a monthly payroll cycle, and a statutory framework that is detailed, strictly enforced, and heavily weighted toward employee protection. Annual leave starts at just 5 days, there is no thirteenth-salary obligation, and the standard working week is 40 hours. The low statutory leave floor can look attractive on paper, but the contribution burden and the termination rules are where the real financial exposure sits.
Thirty-five providers publish EOR pricing for China, with published base prices running from $99 to $699 per employee per month. An EOR hire can be live in 3 to 5 days; setting up your own entity takes 3 to 6 months. Which path makes sense depends almost entirely on how you read the termination and severance regime.
How should you hire in China?
| Employer of Record (EOR) | Your own legal entity | Independent contractor | |
|---|---|---|---|
| Time to first hire | Days | Months | Immediate |
| Upfront cost | None | Incorporation, registrations, local counsel | None |
| Ongoing cost | From $99–$699/employee/month | Payroll, accounting, filings, benefits administration | Contractor invoices only |
| Best when | You want 1–5 hires fast, without a local entity or in-house payroll expertise. | You are building a long-term team (roughly 5+ employees) and want full control. | Genuinely project-based, independent work. Misclassifying an employee as a contractor carries real penalties. |
- Time to first hire
- Days
- Upfront cost
- None
- Ongoing cost
- From $99–$699/employee/month
- Best when
- You want 1–5 hires fast, without a local entity or in-house payroll expertise.
- Time to first hire
- Months
- Upfront cost
- Incorporation, registrations, local counsel
- Ongoing cost
- Payroll, accounting, filings, benefits administration
- Best when
- You are building a long-term team (roughly 5+ employees) and want full control.
- Time to first hire
- Immediate
- Upfront cost
- None
- Ongoing cost
- Contractor invoices only
- Best when
- Genuinely project-based, independent work. Misclassifying an employee as a contractor carries real penalties.
Rule of thumb: an EOR wins on speed and simplicity for the first handful of hires; once a team in China grows past roughly five people, running your own entity usually becomes cheaper than paying a monthly fee per employee.
Start with termination, because it shapes the cost of every hiring decision in China. The Labour Contract Law requires just cause for most dismissals. For economic layoffs or unilateral terminations, the employer must give 30 days' notice or pay in lieu, and severance is calculated at one month's salary per full year of service. The formula sounds straightforward until you factor in the cap: the monthly salary used in the calculation is capped at three times the local average monthly wage, which can significantly reduce payouts for highly paid staff but also means the formula is rigid and non-negotiable. Unlawful termination triggers double compensation. If you are hiring someone you may need to let go within a year or two, the severance exposure is real and calculable from day one.
Given that termination risk, the EOR-vs-entity question is less about speed and more about commitment. In my view, an EOR is the right structure for any employer testing the China market with one to five hires, or for roles where headcount may fluctuate. The EOR absorbs the compliance burden of city-specific social insurance registration, written contract requirements, and work-permit administration, all of which carry financial penalties if mishandled. The 3-to-5-day onboarding window also matters in a competitive talent market. A wholly foreign-owned entity makes sense once you have enough headcount and operational permanence to justify 3 to 6 months of setup time and the ongoing administrative overhead of local payroll, HR, and compliance functions.
On contractors: China's Labour Contract Law looks at the actual working relationship, not the contract label. Workers who are directed, integrated into daily operations, and economically dependent on a single employer are routinely reclassified as employees by labour arbitration tribunals, which triggers full social insurance arrears, penalties, and potential double-compensation claims. The risk is particularly acute for long-term, full-time arrangements. For genuinely project-based, short-term work with multiple clients, a contractor structure can work, but it requires careful structuring and regular review.
China employment facts at a glance
What it costs to employ in China
Based on OECD 2026 aggregate data for a single earner at average wage.
Termination and severance in China
China's Labor Contract Law requires just cause for termination and provides strong employee protections. Employers must provide 30 days' notice or payment in lieu for economic dismissals, and pay severance compensation of one month's salary per year of service. The law caps severance at 12 months for high earners and provides double compensation for unlawful terminations.
Source: Employ Borderless research · 2024. Statutory minimums; collective agreements and contracts can set higher terms. During the probation period (up to 180 days) shorter or no notice may apply.
What catches employers out in China
China's employment rules contain several provisions that consistently surprise foreign employers. Each of the following is worth reading before you sign your first contract.
Mandatory written contracts and the double-salary penalty
Every full-time employee must have a written employment contract in place within one month of starting work. Miss that window and the employee is entitled to an additional month's salary as a penalty for each month the contract is absent. Let it run past one year without a written contract and the relationship is automatically deemed open-ended, giving the employee indefinite-contract protections that are very difficult to unwind. Foreign employers used to verbal or informal arrangements are frequently caught by this rule.
Social insurance and the Housing Provident Fund cannot be waived
Employers must register every employee for all five statutory social insurance schemes plus the Housing Provident Fund. These obligations apply to foreign employees in most cities as well. You cannot legally substitute a higher cash salary for these contributions. Failure to register or contribute triggers orders to pay arrears, late-payment surcharges, and administrative penalties. The contribution bases and rates are set at the municipal level, so the actual cost differs between Shanghai, Beijing, Shenzhen, and every other city where you hire.
Severance is formula-driven and tied to local average wages
Statutory severance is one month of salary per full year of service, with the monthly salary figure capped at three times the local average monthly wage. For high earners, this cap can materially reduce the payout compared with what a purely contract-based calculation would produce. The formula is set by law and cannot be contracted away downward. Foreign employers accustomed to discretionary or purely negotiated severance often underestimate how rigid and locally anchored this calculation is.
A single China contract template is not enough
Employment law in China applies primarily at the location where the employee works, and key terms including working-hour systems, social insurance handling, and certain benefits are regulated at the provincial or municipal level. A contract that is compliant in Shanghai may not be compliant in Chengdu. Foreign employers cannot simply translate a global template or reuse a contract from one Chinese city in another; each contract must be adapted to the specific statutes and local rules of the employee's work location.
Foreign nationals require an employment license before they start work
Foreign employees must hold both an employment license and an employment permit, and the employer must apply through local labour authorities before the individual can legally begin work. The permit ties the foreign national to a specific employer and region; working outside those boundaries is a violation. Employing a foreigner without the correct permits can result in fines and potential criminal liability for the employer. The cancellation procedure on termination is also mandatory and time-sensitive.
Your next step
35 EOR providers can employ for you in China. Compare them independently, or tell us about your hire and get a shortlist matched to your situation.