Introduction

China remains a top destination for international businesses, with Beijing at the heart of economic and tech innovation. But employing staff in Beijing isn’t without its legal intricacies. With China’s labour laws evolving rapidly - and enforcement becoming stricter - understanding your obligations as an employer is crucial. The penalties for non-compliance can include hefty fines, reputational damage, or even operational restrictions.

Whether you’re entering the Chinese market for the first time or expanding operations in Beijing, getting your people strategy right from day one can prevent costly missteps. Labour law compliance in China is not just a box-ticking exercise - it’s a core part of running a sustainable, people-focused business.

Quick Tips

• Employment contracts must be written and signed within one month of hire.

• Social insurance contributions are mandatory for all local employees.

• Fixed-term contracts typically convert to open-ended after two renewals.

• Severance pay is required for most terminations - even at the end of fixed-term contracts.

• Trade unions and employee representation are increasingly active, especially in Beijing.

Contractual Clarity Is Non-Negotiable

In Beijing, employers must provide a written employment contract within 30 days of the employee starting work. Failing to do so can trigger penalties and require compensation payments to the employee. Contracts must outline job role, remuneration, working hours, social insurance details, and termination procedures.

A common mistake we see is assuming an offer letter is enough - it isn’t. The contract must be in Mandarin, and aligned with national and municipal labour regulations. In one case, a European tech company engaged us after an audit found dozens of undocumented roles in their Beijing office. By revisiting their contract processes and partnering with a local payroll provider, we helped them regularise employment and avoid formal sanctions.

Social Insurance and Tax: No Room for Error

Employers in Beijing must contribute to five types of social insurance: pension, medical, work-related injury, unemployment, and maternity, along with housing fund contributions. Contributions vary by region and employee type but are strictly enforced in Beijing.

China’s local tax authorities have stepped up enforcement through real-time reporting systems. Payroll errors or underreporting can lead to steep penalties. According to the OECD, China’s compliance inspections have increased by over 20% in major cities since 2022.

We recently worked with a UK client whose contractor arrangement in China was flagged during a routine inspection. Although well-intentioned, their model didn’t meet local employment classification standards. We helped them shift to a compliant employer-of-record model, allowing for proper tax handling, insurance coverage, and worker protections.

Termination in China Is Structured - And Costly If Mishandled

Ending employment in China requires strict adherence to local procedures. Even at the end of a fixed-term contract, severance pay is usually owed unless otherwise agreed in writing. Dismissal must be for a legally recognised cause, and documented clearly.

Beijing courts tend to side with employees in the event of disputes, particularly where procedures weren’t properly followed. Severance pay is calculated based on years of service and average monthly salary, up to a statutory cap.

For one client, a mismanaged termination resulted in a labour arbitration case that delayed a critical restructure. We supported them through the resolution process and built a new termination policy aligned with PRC law to prevent recurrence.

A Real Example: Setting Up Safely in Beijing

A fast-growing SaaS firm from Europe approached us to support their Beijing expansion. They were eager to get started but unsure how to structure employment in a compliant and culturally appropriate way. We worked with them to:

• Draft Mandarin-compliant contracts.

• Set up payroll and benefits via a local partner.

• Train HR leads on probation, working hours, and overtime rules.

• Develop an exit policy with proper severance calculations.

With everything in place before the first hire, they scaled quickly and safely - without a single compliance breach.

Final Thoughts

China’s employment landscape is governed by clear rules - but navigating them requires local insight and proactive planning. In cities like Beijing, where enforcement is particularly rigorous, there’s no margin for error. Labour law compliance is not just about staying out of trouble - it’s about building trust, credibility, and long-term operational success.

What’s next for your global people strategy?

Book a free compliance check-in or HR audit with ThinkGlobal HR. Whether you’re hiring your first employee in China or scaling a regional hub, we’ll help you stay compliant, culturally aligned, and confident every step of the way.