In recent years, the Employer of Record (EOR) model has gained significant traction in China, particularly in cities like Shenzhen, a hub for innovation and global business. The EOR model allows companies to hire employees in a foreign country without establishing a legal entity there. While this approach streamlines operations and expands possibilities for global hiring, it also raises important considerations about employee risk protection. This article outlines key aspects of risk management for employees under the EOR model in Shenzhen. Click here to see ChaadHR China Employer of Record EOR hiring guide.
Understanding the EOR Model in Shenzhen
The EOR model functions as a third-party entity that acts as the legal employer for workers on behalf of a company. In Shenzhen, where businesses often seek to tap into the city’s skilled workforce and vibrant economy, this model provides a practical solution for foreign companies. However, it is essential to recognize that while the EOR assumes legal respon-sibilities such as payroll, tax compliance, and employee benefits, the actual day-to-day management of employees remains with the client company.
This dual role creates unique challenges and responsibilities when it comes to safeguarding employee rights and ensuring risk protection.
Key Risk Protection Considerations for Employees
1. Compliance with Local Labor Laws
Shenzhen operates under China’s comprehensive labor regulations, which emphasize em-ployee protections such as minimum wages, working hours, social insurance contributions, and severance rights. It is critical for the EOR to fully comply with these laws to avoid dis-putes or penalties that could affect employees. Workers should ensure their contracts clearly outline their rights under Chinese labor law and confirm that all statutory benefits are provided.
2. Social Insurance and Benefits
Under Chinese labor law, employers must contribute to mandatory social insurance pro-grams, including pensions, medical insurance, unemployment insurance, work injury in-surance, and maternity insurance. Employees hired through an EOR in Shenzhen should verify that these contributions are made accurately and consistently. Additionally, the EOR should provide access to supplementary benefits, such as private health insurance or housing funds, to enhance employee well-being.
3. Job Security and Termination Policies
The EOR model can sometimes create ambiguity around job security. Employees should understand the terms of their employment agreements, particularly regarding termination clauses. In Shenzhen, labor laws require employers to provide proper notice or compensa-tion in cases of termination without just cause. Employees should ensure these protections are explicitly stated in their contracts.
4. Risk of Misclassification
One potential risk in the EOR arrangement is the misclassification of workers as inde-pendent contractors instead of full-time employees. Misclassification can deprive employ-ees of essential benefits and protections under Chinese labor law. It is vital for employees to confirm that their employment status aligns with local regulations to avoid potential dis-putes or loss of entitlements.
Best Practices for Employees Under EOR in Shenzhen
To mitigate risks and ensure a secure working environment, employees should consider the following:
- Review Contracts Thoroughly: Ensure that employment agreements are comprehensive and align with Chinese labor laws.
- Stay Informed: Familiarize yourself with Shenzhen’s labor regulations to better understand your rights and entitlements.
- Communicate with the EOR: Maintain open communication with the EOR regarding payroll, benefits, and compliance matters.
- Seek Legal Advice if Necessary: In case of disputes or uncertainties, consult a legal pro-fessional experienced in Chinese labor law.
Conclusion
The EOR model offers significant advantages for businesses and employees alike, enabling access to Shenzhen's dynamic workforce without the complexities of establishing a local entity. However, employees must remain vigilant about their rights and protections under this arrangement. By understanding local labor laws, ensuring compliance from the EOR, and advocating for clear contractual terms, employees can enjoy a secure and rewarding work experience in Shenzhen.
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.