Requirements for Foreign Employees to Work
Under PRC law, expatriates working in China must be in possession of a work permit and a residence permit (for employment purposes) otherwise their employment may be considered illegal. In cases of illegal employment, the employer and the foreign employee may be penalized by the authorities, and their relationship will not be protected by labor law. Work permits usually have a term of one year and never exceed five years even if certain conditions are satisfied. Residence permits usually have the same term as work permits. If the employer intends to continue to employ the foreigner after the expiration of the work permit and the residence permit, the employer must apply for a renewal of the permits 30 days before their expiration. The employment relationship is automatically terminated if the work permit becomes invalid or is cancelled. In addition, foreigners who come to China to perform special tasks in the areas of technology, scientific research, management or guidance with Chinese business partners or other reasons and stay in China less than 90 days (the “Short-term Work”) must apply to the relevant authorities for their employment licenses, approval letters, certificates of employment, invitation letters or confirmations of invitation and work visas.
Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?
The PRC labor laws and regulations will not be applicable to the employment relationship established between a foreign-registered employer and its employees. But, if the foreign company plans to recruit and have employees work in China, in order to avoid the risk of permanent establishment, foreign companies are usually required to incorporate subsidiary company or representative office in China. The subsidiary company incorporated in China can directly hire employees or retain employees seconded from foreign parent companies. A representative office established by foreigner employer is only allowed to hire employees through local HR agent in China.
Limitations on Background Checks
According to PRC Labor Contract Law, the employer is entitled to know an employee’s basic information, which directly relates to the employment contract and the employee is obligated to inform the employer of the said information truthfully. However, the background checks or application/interview questions shall not infringe employees’ privacy rights or equal employment rights; otherwise the employer could be litigated pursuant to PRC Tort Law and other applicable laws. In addition, according to the Decision of the Standing Committee of the National People’s Congress on Strengthening Network Information Protection (the “Decision”), when collecting or using employees’ personal electronic information obtained via background checks or application/interview questions, the employer shall follow the principle of lawfulness, properness and necessity, and explicitly disclose the purposes, methods and scopes for collection and use of the information.