Question: Dear Sun, We are a US company and would like to employ a clerk in Xiamen, but we do not have any office in mainland China, how can we do it legally please?

If you do not have an office in China or only have one representative office in China, then you can not employ the Chinese clerk directly, but must employ them via some HR agents. Because generally a RO do not have any big property in China.

In China, traditionally, for guys who were/are highly-educated or public officers or staff of national owned enterprises, etc, they will have a file called "personnel working relationship archive", so if they work in some government department, the department will keep their archives, and if they move to another government department or national owned enterprise, the archive will go there with them. In the archive we have files of our before records like ever been awarded or punished, etc. But foreign enterprises and most private owned enterprises are not entitled to keep these archives, so when these Chinese citizens above mentioned would go to work in some foreign enterprises including RO, or private owned companies, they will have to give their archives to an agency and they will keep it for them, generally the national owned or approved Human Resources Agents will do this job, and they can also pay for the RO and foreign enterprises who do not have an office in China their employee's social security insurance fees. These Human Resources Agents include local Human Resources Market which is generally a subsidary department of local government's Municipal Social Security and Labor Bureau, and some other Human Resources Agents approved by local government.

So if your US company would like to hire a Chinese clerk, you can only hire them via these Human Resources Agents. The Human Resources Agents will sign one standard working agreement with employee, and then Dispatch him to work for you under one HR Dispatch agreement, and the Human Resources Agents will pay for you the employee's social security insurance fees, of course you will shoulder these fees. At same time you can sign another employment agreement directly with the employee as well.

Regarding the employee's social security insurance fees, generally it includes five insurances fees and one public accumulation fund, percentage of these insurances and fund shall be as follows, please be noted it's the percentage of month salary monthly;

Five Insurance fees:

1. endowment (under maintenance when the employee be aged) insurance, employer 20%, employee 8%;

2. medical insurance, employer 6%, employee 2%;

3. unemployment insurance, employer 2%, employee 1%;

4. procreation (lady employees only) insurance, employer 1%, employee no duty;

5. compo (body injured while in work) insurance, employer 0.8%, employee no duty;

One Public Accumulation Fund:

Residency Public Accumulation Fund, generally not less than 10% of employee's salary, and employer and employee shoulder half and half.

Among the five insurances three of them are compulsive which are 1, 2 and 3, so you must pay them for the employee, other two insurance and the Residency Public Accumulation Fund are not compulsive so it's welfare and could be encouragements to the employee.

For five insurances, employee's part is 28.08% or 29.08% while employee's part is 11%.

Suppose your employee is one gentleman, and you will not pay Residency Public Accumulation Fund but will pay the five insurance fees for him and his salary is CNY5,000/Month, then each month you need pay insurance fee 5,000*28.08%=CNY1404, at same deduct his part CNY5,000*11%=CNY550 from his salary. It means each month you will pay insurance fees 1,404+550=1,954CNY for him, at same time his salary before tax is actually CNY4,450.