Introduction
As foreign investment in China continues to grow, more and more companies are hiring foreign nationals to work in the country. But hiring a foreign employee is not as simple as hiring a local one — there are additional legal requirements that, if ignored, can lead to significant fines and even the loss of your business license.
The Two Permits You Need
Under Chinese law, a foreign national working in China must have two documents:
1. Foreigner's Work Permit — issued by the local science and technology bureau (or the designated work administration department). This is the official authorization for the foreigner to be employed in China.
2. Foreigner's Residence Permit — issued by the local exit and entry administration. This allows the foreigner to reside in China for the duration of their employment.
It's important to note that these are two separate processes, and both must be completed before the foreign employee starts working. Starting work without the proper permits is considered illegal employment.
Common Compliance Mistakes
Here are the most common mistakes we see companies make when hiring foreign employees:
1. Using a standard domestic employment contract
Many companies simply take their regular Chinese employment contract and give it to the foreign employee. But foreign-related employment has additional requirements that standard contracts don't cover — for example, provisions around work permit sponsorship, early termination if the permit is revoked, and repatriation.
2. Not enrolling the employee in social insurance
Foreign employees working in China are generally required to participate in the Chinese social insurance system. Some companies assume that foreign employees are exempt, or that their home country insurance is sufficient — but that's not the case.
3. Letting the foreign employee work before permits are approved
Companies sometimes ask the foreign employee to start working while the work permit and residence permit applications are being processed. This is illegal, even if the employee is just training or observing. The permits must be in hand before the employee begins any work.
4. Changing job positions without updating the permits
If a foreign employee changes job positions, employers, or locations within China, the work permit and residence permit must be updated. Many companies don't realize that a simple promotion or department transfer can trigger a permit renewal requirement.
5. Wrongful termination
Terminating a foreign employee is more complex than terminating a local employee. If the work permit is revoked due to termination, the employee may also lose their legal residence status. Employers need to handle terminations carefully to avoid legal disputes.
Which Law Applies?
Employment contracts for foreign employees working in China are generally governed by Chinese labor law. This includes the Labor Contract Law and the relevant regulations on foreign employment.
There's a common misconception that because the employee is foreign, the contract can be governed by foreign law. But in practice, if the employee is working in China, Chinese labor law will typically apply — regardless of what the contract says about choice of law.
Disclaimer
This article provides general information on foreign employment compliance in China as of September 2026. Immigration and labor rules change frequently, and each situation is unique. This is not legal advice.
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Shaobo Wu | License No. 14406201510064375 | Guangdong Xing Chuo (X&C) Law Firm