Do I Need a Local Entity to Hire in China?

In China, a "local entity" typically refers to a business structure like a wholly foreign-owned enterprise (WFOE), joint venture, or representative office that allows foreign companies to operate legally within the country. This setup is essential for being recognized as an employer and fulfilling local payroll and employment obligations.

Without establishing a local entity, you cannot legally manage payroll, register as an employer, or issue compliant employment contracts. An alternative is using an Employer of Record (EOR), which allows you to hire employees without the complexities of setting up a local entity.

What is Required to Employ Someone in China?

• Local employing entity required to directly employ? Yes (a local entity is necessary for direct employment)
• Payroll registration required? Yes (must register with the State Administration of Taxation)
• Withholding/tax remittance required? Yes (employers must withhold individual income tax)
• Social contributions required? Yes (mandatory contributions to social insurance funds)
• Local employment agreement required? Yes (written contracts are mandatory under Chinese law)
• Mandatory benefits to budget? Yes (includes social insurance and housing fund contributions)
• Works council/collective agreements considerations? Usually (applicable in certain sectors and regions)

Best Options If You're Hiring in China

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it comes with risks of misclassification.

While hiring contractors doesn't require a local entity, China has strict labor laws that protect workers. If your contractors are effectively working as employees, you might face legal repercussions.

• Ensure contractors operate independently without significant oversight.
• Be cautious if the work is core to your business or if you control their work environment.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 3–6 months to establish an entity in China, depending on the type and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated ¥3,000–¥10,000 per month ($420–$1,400)
• Payroll provider: Estimated ¥500–¥1,500 per employee per month ($70–$210)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated ¥10,000–¥30,000 per year ($1,400–$4,200)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social insurance contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in China

Hiring in China can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in China quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.