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How to Establish a Structure in China via an Umbrella Company

How to Establish a Structure in China via an Umbrella Company

July 21, 2022


Picture of INS Global



Picture of INS Global



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Key Takeaways

  1. An umbrella company can manage many key HR tasks for international companies
  2. Similar to the services provided by a PEO, they are time-saving and efficient
  3. Both Global Employment Outsourcing options are increasingly popular for companies seeking to enter China

An Umbrella Company (UC) or PEO (Professional Employment Organizations) is an agency who handles 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.

These companies, along with PEOs, offer a solution where they would handle most of the major problems that have a connection with the Chinese law. As a result, the business itself would just focus with the work at hand.

UCs assist foreign companies in handling all of the 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 major cities. They may also help with the creation of a 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 umbrella company 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 for Chinese Law. Your UC should make sure to know every way to decipher Chinese laws for clients so they will not have face any risks despite constant and sudden changes
  • International project management experience. It is extremely important to find a UC that shares the same language and values as you


Case Study: A PEO or Umbrella Company for a Foreign Company Wanting to Establish in China


A company may wish to enter the Chinese market, but can’t do it because:


  • The company is a small to medium sized enterprise with limited resources
  • The company’s standard operating procedures are very different from those in China
  • The firm lacks mandarin speakers
  • The company lacks in-depth knowledge of local legal and payroll systems
  • The firm doesn’t have an office in China to host incoming employees


► Contacting a PEO can allow the firm to bypass these obstacles by letting the PEO take care of them.

► 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 studying online information prior to arriving in the country is far from enough.

However, in this case, the PEO has a team of local legal and HR experts that will the company’s employee work in China. This way, they focus on the development of their 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 long-term solution


Now with better regulation than in the past, PEO services are an attractive alternative for independent consultants. This is partly because they offer better guarantees to clients in the long-term.

As part of the way PEO services have improved, they’re expected to meet a minimum threshold of service options. They must:


  • Have financial security designed to secure outsourced people’s money
  • At a minimum, pay outsourced staff at the end of each month of service (dependent on the payment of outstanding fees by the client)


It is important to note that if these minimum requirements are not met, a PEO is illegal and thereby endangers professionals with both a financial risk and a refusal to meet labor law regulations in China.


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The INS Global Solution


INS advises and provides expertise during your establishment process in China. We are an industry-leading firm offering PEO solutions, payroll outsourcing and human resources management to  foreign companies in China and 100+ countries worldwide.

What distinguishes us from the others? INS has a particular interest in the trust of its customers and continually works to build healthy working relationships around trust and transparency.

That is why we commit to keeping customers regularly informed at every step of the process. We ensure  and guide them throughout projects with feasible adjustments to accelerate a company’s business potential.

Over 600 foreign enterprises worldwide rely on the expertise of INS Global. Contact us today to learn more about what we can do for you.


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