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How to Establish a Structure in China via an Umbrella Company?

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Umbrella Companies (UC) or PEO (Professional Employment Organizations) are agencies who handle the majority of the back office or administrative and judicial duties of a business. UCs recruit employees, pay taxes and fees, enroll or apply for visa, and all other services, so the business itself won’t have to create a structure in China. UCs offer a solution where they would handle most of the major problems that have a connection with the Chinese law, so that the business itself would just focus with the work at hand.

UCs assist foreign companies in handling all of their administrative and salary procedures needed to set up on the Chinese market. Commonly, the UCs take care of the following:

  • Recruitment of skilled workers for the foreign company’s needs
  • Obtaining the visa needed for the skilled workers of the foreign company
  • Payroll and contract conditions procedures for each worker hired
  • Insurance of each skilled worker and the foreign company itself
  • Tax compliance needed by the foreign company

Usually, UCs also have a wide range of other services to make it easier for start-up foreign companies in China, such as the renting option of work spaces or warehouses in Shanghai and the accompaniment in the creation of structure for the foreign company’s long-term goals.

What to Keep in Mind When Finding the Right Umbrella Company in China

It is imperative to carefully process your company’s needs and objectives and find the right UC to assist your establishment in China. Some factors that ought to be considered when choosing a UC are:

  • Competitive prices. Find an UC that is committed to offer quality services to foreign companies, at reasonable price
  • A serious and thorough team. One that makes sure to always look for serious solutions to every foreign company’s problems and needs and have fast effective results
  • Consistent respect of the Chinese Law. Your UC should make sure to know every way to decipher the Chinese law for clients so they will not have face any risks in illegality issues
  • Multiple language project management. It is extremely important to find a UC that shares the same language and values as you

Study Case: A Foreign Company Wanting to Establish in China

A  company looking to enter the Chinese market but cannot do it because:

  • The company is a small to medium sized company thus with limited resources
  • The business habits are very different
  • The firm lacks a mandarin speaker
  • The company lacks the knowledge on the local legal and payroll system
  • The firm doesn’t have an office in China to send its employee

Contacting a PEO allowed the firm to bypass these obstacles by letting the PEO take care of it.

► The Chinese legal system is very complex, every region applies the law in a different way, new laws take time to be uniformly applied to the whole mainland China. Therefore having studied on-line information prior to arriving in the country is far from enough.

However the PEO has a team of local legal and HR experts that will help your employee work in China, and focus on the development of his company, without having the need to take care of the paperwork and legal requirements imposed by the Chinese authorities.

PEO Services have proved themselves to be a sustainable solution

Now better regulated, PEO services are an attractive alternative for outsourcers as for independent consultants, partly because it offers better guarantees to the parties.
The French Law defined the obligations that a PEO should apply to perform, including:

  • Having a financial security designed to secure outsourced people’s money
  • Paying to minimum, on a conventional basis, outsourced people at the end of a month of service, no matter if the customer has paid his bill or not

It is important to note that if these minimum requirements are not met, PEO are then illegal and thereby endanger professionals with both a financial risk and a refusal to compensation by Employment Organization.

The INS Solution

INS advises and provides expertise during your establishment process in China. We have became a leading consulting firm offering PEO solutions, Payroll outsourcing and human resources management for foreign companies in China.

What distinguishes us from the others? In addition, INS has a particular interest in the trust of its customers and continually works to maintain healthy relationships with them based on trust and transparency. That is why it is committed to keeping its customers regularly informed of all steps of their accounting processes and guide them throughout their project on potentially feasible adjustments to accelerate their business.

Over 200 foreign enterprises rely on the expertise of INS Consulting. Indeed, thanks to its structure, it is a very dynamic and responsive company that meets the customer requirements.

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