EOR vs. Direct Hiring in China: Which is Right for Your Business?

Over 5.5 billion people are now connected to the internet and able to work remotely, meaning businesses of all sizes can expand internationally and hire global talent from countries such as China.

Businesses in the United States may want to hire top talent from China to gain access to unique skills and bilingual employees, save on labor costs, and expand in the Chinese market. In addition, a remote international workforce is 35-40% more productive.

However, hiring and managing employees who are halfway across the world can be complicated as regulations and laws about annual leave, minimum wage, overtime, sick pay, healthcare benefits, and taxation differ so much.

This article will explore EOR and direct hiring and which is right for US businesses that want to hire talent from China.

What Is EOR Hiring?

Employer of Record (EoR) hiring is when a business goes through a third-party company, known as an EoR provider, to act as the legal and local employer for their international employees. 

The EoR provider will handle hiring and onboarding tasks, payroll, employee benefits, and tax compliance for the country you are hiring from. This ensures your business is safe from the compliance risks of international hiring. 

However, EoR providers come with costly fees, such as: 

An upfront fee for each international employee they hire for your business.

A deposit for each employee, which your business will receive back when the employee terminates their contract. 

A monthly fee to the EoR provider for membership. 

While the EoR provider handles legal and administrative hiring tasks, your business is responsible for building a relationship with the employees and ensuring they complete their job requirements and daily tasks. 

What Is Direct Hiring?

Direct hiring is when a business directly hires employees in foreign countries and is responsible for all legal and administrative tasks. 

For US businesses to be able to directly hire international employees, they must establish a local entity or foreign subsidiary and remain in compliance with local labor laws. This can be a time-consuming process with a significant amount of administrative overhead.

Which Is Right For Businesses In China?

To decide which hiring model is right for your business, we have explored the pros of both EoR hiring and direct hiring. 

Pros of EoR hiring 

You can hire international employees quickly. EoR providers are established and able to begin hiring processes instantly and seamlessly. This is ideal for businesses looking to hire international employees quickly. In contrast, setting up local entities and navigating legal requirements can lead to delays in hiring.

More time to focus on business operations. EoR providers handle legal and administrative tasks, giving businesses more time to focus on their daily operations. In contrast, when businesses hire directly, it is more resource-intensive and time-consuming.

Ensures you remain compliant. EoR providers ensure your business complies with local labor laws and tax regulations. In contrast, independently managing this can be challenging and put businesses at risk of legal disputes and penalties.

Budgeting is easy. EOR providers like Remote People have predictable fees and costs, making budgeting more straightforward. In contrast, setting up and maintaining local entities can be expensive, with potential hidden costs.

The services extend beyond administrative support. The local expertise of EoR providers can help US businesses seamlessly integrate into the Chinese market.

Pros of direct hiring

You have more control. Direct hiring gives you more control over your employees. In contrast, EoR hiring limits certain aspects of control over employees, such as specific compensation structures.

Aligns better with long-term expansion strategies. Direct hiring aligns better with long-term expansion strategies. In contrast, EoR hiring is better suited for short-term or project-based international ventures.

Do You Know Which Hiring Model Is Right For Your Business?

The benefits of hiring international employees include access to a broader talent pool with highly specialized skills, an enriched workplace culture, insights into new markets, enhanced branding, and more. So, it's essential in a competitive landscape. 

Choosing between EoR hiring and direct hiring is a strategic decision that should align with your growth objectives, resources, and risk tolerance. While EoR providers ensure compliance and hiring efficiency, direct hiring provides you with maximum control.