The Employer of Record (EOR) model has gained significant traction in China as businesses navigate the complexities of local labor laws while expanding their operations. Shanghai, as one of the country's most dynamic and economically vibrant cities, has unique labor regulations that companies must adhere to. This article explores how the EOR model supports businesses in managing employee working hours and overtime compensation in Shanghai, ensuring compliance and operational efficiency. Click here to see ChaadHR China Employer of Record EOR hiring guide.
Understanding the EOR Model
The Employer of Record (EOR) is a third-party service provider that acts as the legal employer for a company’s workforce in a specific region. While the EOR handles administrative and legal responsibilities such as payroll, tax compliance, and employment contracts, the client company retains control over day-to-day operations and employee management.
In China, the EOR model is particularly beneficial for foreign businesses unfamiliar with local labor regulations. It simplifies entry into the market by ensuring compliance with employment laws, including those governing working hours and overtime compensation.
Working Hours Regulations in Shanghai
Shanghai’s labor laws align with national standards stipulated by the Labor Law of the People’s Republic of China. The standard working hours system is eight hours per day and 40 hours per week, with employees entitled to at least one rest day per week.
For businesses operating under an EOR arrangement, understanding these regulations is crucial. The EOR ensures that employment contracts reflect compliance with these standards, protecting both the employer and employees. Additionally, the EOR monitors working hours to avoid violations that could result in legal or financial penalties.
Flexible Working Hour Systems
Shanghai also allows for alternative working hour systems, such as the comprehensive working hour system and the irregular working hour system. These arrangements require approval from local labor authorities and are typically applied to roles where standard schedules are impractical, such as managerial positions or jobs requiring frequent travel.
An EOR can assist companies in applying for these systems and maintaining compliance with reporting requirements. This flexibility enables businesses to optimize productivity while adhering to legal standards.
Overtime Compensation Rules
Overtime compensation is a critical aspect of labor law in Shanghai. Employees who work beyond standard hours are entitled to additional pay, calculated as follows:
1. Weekday Overtime: At least 150% of the regular hourly wage for hours worked beyond eight hours a day.
2. Weekend Work: At least 200% of the regular hourly wage if no compensatory rest day is provided.
3. Public Holidays: At least 300% of the regular hourly wage for work performed on statutory holidays.
The EOR plays a pivotal role in managing overtime compensation by accurately tracking employee hours and ensuring timely payment. This reduces administrative burdens for client companies while safeguarding employee rights.
Avoiding Overtime Disputes
Overtime disputes can arise from misunderstandings or non-compliance with compensation rules. An EOR mitigates these risks by maintaining transparent records of working hours and payroll transactions. Furthermore, they provide guidance on implementing clear policies regarding overtime work, fostering trust between employers and employees.
Benefits of Using an EOR for Labor Compliance
Streamlined Administration
For businesses unfamiliar with Shanghai’s labor laws, navigating employment regulations can be daunting. An EOR simplifies this process by handling all administrative tasks related to employee management, including compliance with working hour and overtime rules.
Risk Reduction
Non-compliance with labor laws can lead to fines, legal disputes, or reputational damage. By partnering with an EOR, companies can minimize these risks through expert guidance and meticulous adherence to local regulations.
Focus on Core Operations
Outsourcing employment responsibilities to an EOR allows businesses to focus on their core operations without being bogged down by administrative complexities. This is particularly valuable in a fast-paced city like Shanghai, where agility is key to success.
Conclusion
The EOR model offers an effective solution for managing employee working hours and overtime compensation in Shanghai. By ensuring compliance with labor laws and streamlining administrative processes, an EOR enables businesses to operate efficiently while fostering positive employer-employee relationships. For companies seeking to expand into Shanghai’s competitive market, leveraging an EOR can be a strategic advantage that ensures sustainable growth and legal peace of mind.
How Chinese Employer of Record (EOR) Works
As a local Employer of Record (EOR), we take on the legal responsibility of employing your new workforce in China. While you manage the day-to-day activities of your employees, we legally hire them through our agency. ChaadHR operates in over a hundred countries and utilizes local networks of experts to gain in-depth knowledge of local laws and regulations, as well as recruitment customs and trends. By partnering with us as an EOR, you gain access to this expert knowledge, which can be invaluable when expanding your business into China.
Our employment contract with your employees complies with Chinese labor laws and includes benefits such as insurance and pensions. We can hire, onboard, and manage your new employees in China in a matter of days, ensuring a fast and efficient process.
Hereis how we can assist you:
- We ensure that your new hires are compliant with Chinese laws and regulations.
- We take care of the employment contract, HR (Human Resources) matters, taxes, and payroll.
- We arrange the required visas or work permits for your employees.
- Our team keeps your employees informed about holiday arrangements, benefits, and any changes in labor laws.
- We keep you updated on changes in local laws and ensure that we comply with them.
-Your employees' declarations are forwarded to us on a monthly basis. Once we receive your payment, we deduct taxes and other contributions, and ensure that your employees receive their salaries promptly.
- You retain control over the daily activities and responsibilities of your employees.
🌎💼Compliantly Hire and Pay Talent in 160+ Countries With ChaadHR
With our comprehensive Global Employer of Record (EoR) solution and integrated Global Payroll solution, we empower businesses to confidently and compliantly hire and pay their workforce in over 160 countries. By partnering with ChaadHR, companies can eliminate the burdensome task of entity establishment and navigating complex labor laws, while ensuring their payroll operations are fully compliant with local regulations.
ChaadHR helps businesses expand globally. We provide support for testing new markets, hiring employees, and setting up subsidiaries. Our platform offers compliant onboarding of international contractors, remote employee hiring, and consolidated payroll management through a single dashboard. Book a demo to learn more.