When entering the Chinese market it is essential to fully understand the different establishment possibilities. Below we compare two of them: Labor Dispatch and WOFE.
Labor Dispatch is a market entry method utilized by foreign companies that lack a local structure in China and desire a fast, economic and less risky market entry in order to start operating profit-making activities as soon as possible. In other words, the foreign company’s representative’s contract is outsourced to a PEO (Professional Employment Organization), and this one will cover the foreign employee’s administrative and legal procedures (visa, payroll, expenses management, medical insurance, tax declaration, office rental, etc). Labor dispatch complies all legal requirements according to China’s labor law.
WOFE (Wholly Owned Foreign Enterprise) is type of local structure that 25% or more is controlled by foreign investors. With this method, foreign companies have 100% control over the company, meaning that all administrative, legal and fiscal procedures must be managed internally.