- How China EOR (labour dispatch) actually works
- What an employee costs: the city factor
- Visas for foreign staff: the Z-visa chain
- Exit and transition planning
- Summary — key takeaways
- FAQ: hiring and EOR in China
An Employer of Record in China hires your staff through a licensed local entity — typically under the labour-dispatch (FESCO-style) framework — running city-specific payroll, social insurance and housing fund contributions that add 30–40% to gross salary, and sponsoring Z work visas for foreign hires. It replaces WFOE incorporation, which takes 3–6 months, for teams under the 10-person dispatch ceiling.
Hiring in China confronts foreign companies with a triple layer: employment law that is strongly employee-protective, social contributions that vary by city, and an immigration system where the employer’s standing decides the visa. An employer of record china structure — built on the licensed dispatch model pioneered by FESCOs — is how companies hire PRC staff without a WFOE. Here is how it works in 2026, including the limits Chinese law places on it.
How China EOR (labour dispatch) actually works
China regulates third-party employment through labour dispatch: a licensed dispatch company (the historical FESCOs and their successors) employs the worker and seconds them to your operation. Law caps dispatched workers at 10% of a host’s workforce and frames dispatch as temporary/auxiliary — so EOR in China is a market-entry and small-team tool, not a permanent structure for a core local workforce.
That legal frame is the key difference from EOR elsewhere: in Germany or the UK the constraint is licensing; in China it is also proportion and purpose. Serious providers are open about the ceiling and plan the entity transition with you rather than pretending the model scales indefinitely.
What an employee costs: the city factor
| Component (employer side) | Typical range (city-dependent) |
| Pension | ≈14–16% |
| Medical | ≈5–10% |
| Unemployment / injury / maternity | ≈1–3% combined |
| Housing fund | 5–12% |
| Total employer on-cost | ≈30–40% of gross (capped bases) |
Shanghai, Beijing and Shenzhen apply different bases and caps, adjusted each July — a quote that does not name the city is not a quote. Payroll china also means 13th-month salary as widespread custom, individual income tax withholding through the employer, and annual bonus tax treatment that changes the timing calculus.
Visas for foreign staff: the Z-visa chain
A foreign hire needs the chain run in order: work permit notification letter (points-based A/B/C classification) → Z china work visa at a consulate → residence permit within 30 days of arrival. The sponsoring employer’s registration and quota drive approval, which is why EOR sponsorship works for qualified (A/B category) candidates but cannot rescue borderline C-category profiles. Timelines run 6–12 weeks end-to-end; degree legalisation and clean criminal-record certificates are the two documents that most often stall files.
Exit and transition planning
Two Chinese specifics deserve planning from day one. Severance: statutory economic compensation of one month’s pay per service year applies to most terminations — employment is easy to start and structured to end. Transition: when the team approaches the dispatch ceiling or roles become plainly core, move to a WFOE and migrate staff with continuity of service — a step our Shanghai partner desk has run since 2007 in both directions. If you are testing China with 1–5 hires, EOR is the right instrument; ask for a city-specific cost sheet and a Z-visa eligibility pre-check before committing to candidates.
Summary — key takeaways
- China EOR runs on the licensed labour-dispatch framework — capped at 10% of workforce and framed as temporary/auxiliary.
- Employer on-costs are 30–40% and city-specific; no city named = no real quote.
- Foreign hires ride the notification-letter → Z visa → residence permit chain, 6–12 weeks, sponsor-dependent.
- Plan severance (1 month/year) and the WFOE transition from the start.
FAQ: hiring and EOR in China
What is a FESCO in China?
A FESCO (Foreign Enterprise Service Company) is the original class of licensed Chinese HR companies that employ and dispatch staff to foreign businesses — the domestic ancestor of the EOR model. Modern China EOR services run on the same labour-dispatch licence: the FESCO/EOR is the legal employer handling contracts, payroll, social insurance and filings while staff work under your direction.
What are China work visa requirements in 2026?
China work visa requirements centre on the points-based work permit system: category A (high-end talent) and B (professionals — typically degree plus two years’ experience) are approvable; category C is quota-restricted. The employer obtains a work-permit notification letter, the candidate converts it to a Z visa abroad, then swaps it for a residence permit within 30 days of arrival. Legalised degrees and criminal-record certificates are mandatory.
How much does an employee cost an employer in China?
Employer costs in China add roughly 30–40% to gross salary: pension around 14–16%, medical 5–10%, minor funds 1–3% and housing fund 5–12% — all on city-specific contribution bases and caps revised annually. Add customary 13th-month salary and statutory severance accrual of one month per year of service for realistic budgeting.
Related reading: Country guide: China · China immigration & work visa services · Public holidays in China (employer guide) · Employer of Record (service page)