5 Top Mistakes to avoid when hiring Employees in China
If you are expanding to China, one of the best things you can do for your business is to hire a local team. You see, most people find it comfortable conducting business with people who can speak their language. You will need a local team if you are to attract such customers. In addition, the locals understand the culture and the way of the people. In this case, they can serve the customers better while avoiding cultural nuances that can potentially offend these customers.
However, hiring in a foreign land can be challenging. It can be easy to make mistakes that can end up costing your business eventually. If you are looking at hiring employees in China, here are some mistakes that you should avoid.
1. Not understanding employment regulations?
Just like in any other country, China has its own set of rules and regulations regarding hiring employees. Each employer in China is expected to abide by these laws. Failure to do so can amount to serious legal tussles with the government, which can derail your business growth in the country.
It is in your best interest to understand the rules and policies regarding staff employment in China before deciding to hire locals or foreigners. It is good that you hire a local law expert to guide you through all the clauses to ensure that you fully adhere to the law.
2. Contracting employees without a legal entity?
The People’s Republic of China’s Labor Law only allows limited companies to sign employment contracts with employees. If you are planning to establish your presence in the country through a Representative Office, don’t make the mistake of contracting employees directly.
Thankfully, you can still have employees work for you by hiring through a PEO as their employer of record. A PEO services provider offers global payroll ", and recruitment services to companies expanding internationally including in China. They can make sure that you have a team working for you in compliance with the country’s labor laws without having to establish a limited company.
3. Misclassification of workers
It is common for employers to engage workers as independent contractors in a bid to limit employees’ liabilities and costs. However, you run the risk of misclassification where the worker could be working for you as a formal employee rather than an independent contractor.
For instance, a worker can prove to be a formal employee if you pay him or her a fixed amount of money at regular intervals. In addition, if you control the time and work methods and the employee is governed by the company’s internal rules, he or she is deemed to be a formal employee. If a worker claims to be an employee and proves that in court, you could end up paying unpaid benefits and salaries as well as penalties.
If you are planning on hiring workers as independent contractors, it is very important that you clarify the same in the contract. Additionally, avoid doing anything that can deem the worker to be a formal employee.
4.. Not understanding termination grounds
When hiring in China, it is important to note that terminating an employee’s contract is very difficult. You can only do so if the employee failed to fulfill the job requirement when under probation, or if the employee has violated the company’s regulations, or has committed a civil crime. Note that you have to prove the same under the three circumstances. Otherwise, the employee can go to court to object to the termination. In most cases, the court rules in favor of the employee regardless of the employer’s objection.
If you need to terminate an employee’s contract, it is best that you sit down with the employee and have a mutual negotiation. You agree on compensation and have it in writing. This way, you can avoid costly legal battles and save on cost.
5. Withholding benefits
In China, employees are entitled to a salary, mandatory benefits, paid leave days, and public holidays. Before you make a job offer, it is important to know the industry’s average salary for the position as well as how these benefits are calculated. This way, you will know if your budget allows you to hire that employee or not.
You should note that withholding such benefits could result in serious problems for you, as employees know that they are entitled to them.
Employment laws and regulations in China can be complicated for a foreign business. However, that doesnt exempt you from being penalized if you violate them. Whether you choose to do it in-house or hire a third party, it is paramount that you ensure you are keeping the law up to the last letter to avoid legal battles.