Three best strategies for employee recruitment in China in 2024

In the dynamic landscape of the world's second-largest economy, China continues to extend invitations to foreign enterprises, urging them to establish a footprint within its borders. The expansive Chinese economic landscape offers a wealth of opportunities for international companies, not only to boost their revenues but also to expand their market presence. With 2024 in full swing, China's business landscape is in the midst of a profound transformative shift, fuelled by technological breakthroughs, evolving consumer preferences, and global shifts. Here we outline three effective methods of hiring in China in 2024.

Incorporating an entity: Wholly foreign-owned enterprises or joint ventures

Opting to establish an entity as either a wholly foreign-owned enterprise (WFOE) or a joint venture (JV) are the preferred and most common methods for hiring employees in China. Both WFOEs and JVs operate as LLCs in China, offering a straightforward method for companies who wish to carry out consulting, manufacturing, trade, or other services. 

By eliminating the need to work with third-party agencies, investors maintain complete control over corporate decisions, giving them a higher degree of flexibility. Moreover, these entities can employ both local and foreign personnel, allowing for a diverse and skilled workforce.

Representative offices

For companies seeking a short-term option, a representative office (RO) offers a solution. This entity serves as an extension of the foreign company in China, primarily focusing on non-profit-generating activities such as market research and liaison work.

However, when it comes employment, ROs in China are unable to hire Chinese staff directly, and are limited to hiring up to four foreign individuals. Instead, Chinese personnel must be seconded by an agency, which assumes the role of official employer. This arrangement is necessitated by the fact that an RO, lacking capitalisation as a legal entity in China, cannot serve as a proper employer against which an employee can file claims.

Dispatch or PEO services

Outsourced dispatch or professional employer organizations (PEOs) serve as an alternative employment approach. Differing from direct hiring, these forms of recruitment provide a more triangular employment structure, where a host company engages dispatched workers through a third-party agency. Despite working for and being supervised by the host company, the dispatch agency, which typically possesses substantial expertise in hiring local personnel, functions as the de facto legal entity responsible for the administrative management of the employees. 

Such third-party services provide flexibility for companies with short-term projects or limited-scale operations. By engaging a third-party provider, companies can reduce risk and maintain agility. However, for companies with a long-term strategy in mind, this may not be the most suitable option. 

---

With nearly a decade of experience in accounting, Dream is a Partner at MSA. Her expertise lies in tax and HR, where she plays a key role in helping clients navigate complex challenges. She also assists in other areas such as payroll compliance, corporate tax, and social security contributions.