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Independent Contractor in China

What is an Independent Contractor in China?

When expanding in China, a company may have the need for a specific kind of expertise, or may require workers for a specific project or period of time. In these circumstances it may be considered appropriate to enter into a contract with an individual that will not become a full or permanent member of that company’s workforce.  

While not illegal in China, hiring an independent contractor can be complicated, and it presents as many challenges as it does benefits.   

Independent contractors allow companies to hire experienced workers on an hourly rate and without organizing the kind of workers’ benefits that would typically be required of a company hiring an employee.  

Independent Contractor in China - Summary

Advantages of using an Independent Contractor in China

Increased Efficiency

Contractors are typically experienced veterans in their field. They will set their own hours and workflow while working as independently as you like, allowing you to focus on other tasks.   

Save Money

As an independent contractor is not treated as a full employee of your company, you save money on all of the usual benefits and contributions required for a worker.   

Flexible working contracts

The increased flexibility that comes with hiring a contractor for a specific project or job allows you to increase or decrease the size of your team according to your needs.   

Lower Liability

Less liability allows you to avoid many of the typical complications that can arise if the situation requires you to fire or replace a contractor.   

Employee Expertise

Make the most of a contractor’s expertise when you bring them onto your team. The right contractor can fulfill important needs while also allowing your employees to benefit from their knowledge and experience.   

What's the Difference Between an Independent Contractor and an Employee in China?

The status of an independent contractor in China might be considered odd in China when compared to other countries. Put simply, a worker must be directly employed by a company when working in China, whether that is in a standard employer-employee relationship, through a PEO / EOR such as INS Global, or as an employee of their own legal entity.  

Companies in China are expected to manage all areas of an employee’s tax and social security contributions, and to organize their employee benefits in line with national labor law. A company does not need to arrange these for an independent contractor (or freelancer as they may be known) in China, but if the processes to establish this relationship are not followed correctly, it may bring more problems than benefits.   

That being said, you may need employees for specific projects or time periods, and an independent contractor (or simply contractor) may be a method to save you time and money.  

testimonial from Manuel Ramos

Testimonial

Manuel Ramos

TERAO ASIA

Managing Director

We think INS Global is a good solution about starting in a market like China. Understanding the market doesn’t mean you need to set up a company immediately. 

5/5

What is Required to Hire an Independent Contractor in China?

While it’s not absolutely necessary to have a separate legal entity in China in order to hire an independent contractor, it is advised to avoid added complications.   

An independent contractor must be hired for a job that is temporary, specific, or auxiliary to the work performed by the employees of the company.   

Any contract made in this way would allow the company to avoid any of the typical social contributions made on behalf of employees in China, but it must be made in a very specific way that clearly does not interpret the independent contractor as an “employee”.   

While the independent contractor is required to make sure that their situation is fully compliant with Chinese tax laws before they can receive payment, the company should also be aware of the potential fines and complications that can arise if the process is not carried out in the correct manner.   

The advantages of hiring through a PEO instead of an Independent Contractor

While hiring an independent contractor in China may be possible, and it may have some advantages in terms of filling temporary needs, it is typically safer and simpler to hire a worker through a PEO agreement.   

A PEO (Professional Employer Organization) like INS Global can take care of all the recruitment, payroll, and employee HR services for you when you need to find the right employee to help your expansion into the Chinese market. By working with a PEO you can have many of the same advantages as you would have with an independent contractor, but with the increased legal compliance and local expertise that comes with working with a local partner.   

 

A PEO agreement can give you:  

  • Better assurance of legal compliance  
  • Less risk of potential conflicts with Chinese labor requirements  
  • Streamlined and simplified HR systems and procedures  
  • Key local knowledge for finding and managing workers in China  

Why choose INS Global?

INS Global can help you to hire and ensure legal compliance for your independent contractors by taking care of recruitment and other HR services such as payroll outsourcing.   

INS Global has over 15 years of experience in Chinese market. We make use of the very best of local expertise and global best practices to help you expand in the safest, fastest, and best way possible.   

  

Contact our team of experts today for more information at:   

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FAQs

No, it is necessary to use a local entity abroad to comply with each country labor law.

Foreign companies can either set up a local entity in each country or use the services a local PEO (Professional Employment Organization) to hire the staff on-site directly.

The employer of record is the legal entity liable for the staff employed in a specific country. In practice, a foreign company can either open a subsidiary to become the employer of record of its abroad employees or use a PEO to act as the employer of record.

Liabilities may vary from country to country and include all the staff management responsibilities: labor contract issues, payroll management, and tax compliance, social security management, expenses claim declaration, hiring and termination
procedures, etc.

In general, 1-month is necessary to have an employee based out abroad using an existing PEO as the employe of record. When incorporating a new subsidiary to be the employer of record, the delay varies from 4-12 months.