Employers hiring foreign nationals in China often face greater HR challenges than those who do not have an expatriate workforce.
Labor Law of the PRC and Labor Contract Law of the PRC (hereinafter jointly referred to as “Chinese Labor Laws”) provide the framework for hiring employees in China. However, employers hiring foreign employees in China must also understand the 《Regulations on the Administration of Employment of Foreigners in China》 which can supersede Chinese Labor Laws and apply only to foreign nationals employed in China.
Learn more about the key provisions of Chinese Labor Laws.
In some cases, the 《Regulations on the Administration of Employment of Foreigners in China》 overlap with Chinese Labor Laws which can create confusion. In other words, employers in China cannot universally apply Chinese Labor Laws to foreign nationals and must ensure their labor contracts with expatriate employees comply with the prevailing rules and regulations.
We will discuss some of the key questions employers face when hiring foreign nationals in China.
Can foreign nationals in China be employed by two different companies simultaneously?
No. Article 23 of the 《Regulations on the Administration of Employment of Foreigners in China》 states that the employer of the expatriate must be consistent with the employer indicated on the expatriate’s work permit. In other words, the expatriate is not permitted to conclude a labor relationship with any other company or employer other than the one indicated on their work permit.
If the validity period of the work permit is less than that of the employment contract, which shall prevail?
In the event that a work permit is issued with a validity period less than the duration of the labor contract concluded between the expatriate and the employer, the validity period of the work permit shall prevail. The employer should submit an application to renew the work permit within 30 days before the expiration of the work permit and will be subject to the approval of the local labor bureau.
In other words, regardless of the duration of the labor contract, the employment relationship between the employer and expatriate employee is predicated on a valid working permit.
Are foreign nationals in China able to sign a non-fixed term or “open-ended” employment contract?
No. Article 17 of the《Regulations on the Administration of Employment of Foreigners in China》state that the term of a labor contract concluded with expatriate employees shall not exceed five years. If the employer and employee mutually agree to extend the term of a labor contract, they must apply for an extension of the working permit to the local labor bureau to effectively extend the term of the contract.
What’s the difference between concluding a labor contract with the China company and the overseas headquarter company?
A foreign national who concludes a labor contract with an overseas company and is dispatched to China to perform his or her duties has not fulfilled the requirements to constitute having entered into a labor relationship with the Chinese company under Chinese Labor Laws. Any labor disputes between the foreign national and the Chinese company thus fall under Civil and Commercial Law in China and not Chinese Labor Laws.
Foreign nationals dispatched to China for the purpose of work are required to obtain a working permit. When applying for the working permit, the dispatched employee must sign a labor contract with the Chinese entity which may cause confusion as to whether the labor relationship is between the foreign national and the overseas company or the Chinese company. It’s suggested that the contract stipulates the labor contract is for the purpose of the work permit only to avoid this confusion.
Additionally, if the dispatched employee has not entered into a labor relationship with the Chinese company, they do not need to pay social insurance in China under Chinese Labor Laws. On the other hand, depending on their duration of stay in China, the dispatched employee could fulfill the requirement of tax residency in China and be liable to pay tax in China on income derived from their work in China regardless of where the wages are paid.
Are expatriate employees eligible for overtime pay in China?
If a foreign national signed a labor contract directly with the Chinese company and satisfies the criteria for overtime pay, then the expatriate employee is entitled to overpay pay at the statutory overtime rate outlined in Chinese Labor Laws.
The statutory overtime rates are as follows:
- Any work performed after 8 hours within a single day are considered overtime and shall be paid at 150% of the employees’ hourly rate;
- Overtime hours performed on rest days should be paid at 200% of the employee’s hourly rate; and
- Overtime hours performed on statutory holidays should be paid at 300% of the employee’s hourly rate.
In many cases, foreign nationals in China are serving in senior management positions and are awarded a high wage to compensate for their relocation. Employers may implement a flexible working hour system for employees who serve as senior management, field personnel, sales personnel, on-duty personnel, and other employees who cannot be measured by a standard working hours system due to the special nature of their work.
Under a flexible working hour system, the employee can determine their own work schedule autonomously on the premise of completing their prescribed work or completing a fixed number of working hours. Under this system, the employer is not required to pay overtime for work carried out on rest days, statutory holidays, or for working hours beyond 8 hours within a single day.
Can foreign nationals in China enjoy maternity or paternity leave and allowance?
Yes. Under article 22 of the 《Regulations on the Administration of Employment of Foreigners in China》foreign nationals employed in China shall enjoy the standard working hours, rest, holiday, work safety, as well as health and social security provided by relevant state and local regulations.
In other words, foreign nationals who sign labor contracts directly with a Chinese company can enjoy statutory maternity and paternity leave according to the applicable rules and regulations of the jurisdiction in which the company is registered. If the employer does not withhold and contribute to the expatriate employee’s social insurance, which includes maternity leave, the employer cannot claim compensation for the wages and benefits provided to the employee during maternity or paternity leave.
