The Client is a leading vendor of financial management software based in the USA.
The Client had sold their software to one of the largest financial institutions in China. The Chinese customer ordered a proof-of-concept which required support from local resources. If the POC proved successful the customer required long term on-site support and account management. The Client needed to quickly hire 3 local staff in China.
The Client was not incorporated in China and did not want to establish a Chinese entity until the project moved beyond proof-of-concept stage. Their policy was to operate from regional hubs and only establish permanent presences when there was a sufficient volume of business to justify it. Their recruitment agency recommended Contractor Taxation’s services to help them hire the 3 workers in Beijing.
From our discussion with the Client it was clear they wanted to use a professional employer organization. A PEO would hire the local staff on behalf of the Client as well as handle in-country payroll and filing of taxes and social security. The Client wanted to keep the administration to a miminum. It was also important that they could easily transition the employees if they decided to setup a company in China.
We worked with our local partner to provide quotes on net earnings and total employment cost at a range of salary rates for the prospective employees. Total employment cost included labour cost, employers social security, business tax and management fee. The Client used these to get budget approval and make offers of employment to their preferred candidates.
We worked with the Client and local partner to draft a framework agreement which ensured compliance with local labour laws as well as the requirements placed on the Client as a US based company. The employees signed an offer sheet with the Client and then signed employment contracts with our local partner. Letters of Assignment which corresponded with the individual employment contracts were appended to the framework agreement for each new starter.
The Client was invoiced in advance on a monthly basis. With one monthly payment they ensured the local partner received funds in time to run payroll for the employees. The employees received a detailed payslip and annual tax report. The Client also received copies of the statutory taxes filed on their behalf at the end of every reporting period.
The Client was able to hire the employees and commence their employment with sufficient time to train them before the project commenced. Because of the speed of our local partner in setting them up, the on-boarding time for the employees was actually significantly shorter than if they had joined the US parent company.
The trial project was a huge success and the client committed to a full implementation. Today the volume of business in China hasn’t grown sufficiently to justify establishing an entity, but the time is fast approaching. The Client has saved a huge amount of administrative overhead and money by not overcommitting to a local office at the beginning of the project.
Their reputation has blossomed in Asia leading to their first hire in Hong Kong. The Client is also using our local partner as a PEO for that employee.
Products and services your company used
- Local Payroll
- Calculation of net earnings and total employment cost
- Reporting and payment of taxes
- Payment and Expense Processing for Employees
Services provided by other groups or companies
Contractor Taxation used the services of one of our specialist local partners in China to act as the PEO and run the local payroll for the employees.