The number of foreign businesses seeking to set up operations in China is still fairly large. This is despite the fact that many such businesses do not possess the resources or the funds to set up a big operational base in the country. This lack of resources leads many such organizations to hire the services of the so called “independent contractors” in China. Hiring such contractors seems to be the best way to cut down the operational costs of the business set up in China. Key Facts About Independent Contractors In China The first and the most important thing that foreign business organizations need to understand is that hiring independent contractors in China is illegal. Sadly, rather than opting to believe the professionals from the best executive search firms in China, most overseas business organizations take the advice of their Chinese lawyers on the issue. In fact over the past several years, China has adapted an increasingly aggressive approach towards establishments that are following such practices. What Drives Foreign Businesses To Hiring Independent Contractors One of the reasons that drive foreign businesses to consider hiring independent contractors is that it cuts down their operational costs considerably. Most importantly small organization do not have to go through the formalities of forming a WFOE in China, which is mandatory for every legal business set up. Risks Associated With Hiring Independent Contractors As any professional executive search firm in China informs its clients, the risks of hiring independent contractors are far greater than any benefits that may be obtained. The most obvious risk of hiring independent contractors is that it makes the business operation totally illegal. Opting for this method of recruitment also puts the China IP assets of the business at a huge risk.

1. Learning The Fact About Hiring
Independent Contractors In China

2. Learning The Fact About Hiring
Independent Contractors In China
The number of foreign businesses seeking to set up
operations in China is still fairly large. This is despite the
fact that many such businesses do not possess the
resources or the funds to set up a big operational base
in the country.
This lack of resources leads many such organizations to
hire the services of the so called “independent
contractors” in China. Hiring such contractors seems to
be the best way to cut down the operational costs of
the business set up in China.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

3. Learning The Fact About Hiring
Independent Contractors In China
Sadly, most organizations opting for this solution are
ignorant of the fact that it makes their China
operations completely illegal and exposes them to
the risk of losing their assets.
Key Facts About Independent Contractors In China
The first and the most important thing that foreign
business organizations need to understand is that
hiring independent contractors in China is illegal.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

4. Learning The Fact About Hiring
Independent Contractors In China
Sadly, rather than opting to believe the professionals
from the best executive search firms in China, most
overseas business organizations take the advice of
their Chinese lawyers on the issue.
Hence, it is not surprising that such companies often
end up unwittingly breaking the law as Chinese labour
law does not support any form of employment where
the employer can avoid paying minimum benefits.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

5. Learning The Fact About Hiring
Independent Contractors In China
In fact over the past several years, China has adapted
an increasingly aggressive approach towards
establishments that are following such practices.
What Drives Foreign Businesses To Hiring
Independent Contractors
One of the reasons that drive foreign businesses to
consider hiring independent contractors is that it cuts
down their operational costs considerably.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

6. Learning The Fact About Hiring
Independent Contractors In China
For a small organization with 12-15 employees, this can
prove to be a major boost.
Such organizations do not register themselves and
they do not have to pay the usual employment
benefits to the local people working for them.
They also get to save a considerable amount of
money in taxes as well as the rent for setting up a
formal office for the business.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

7. Learning The Fact About Hiring
Independent Contractors In China
Most importantly they do not have to go through the
formalities of forming a WFOE in China, which is
mandatory for every legal business set up.
Risks Associated With Hiring Independent
Contractors
As any professional executive search firm in China
informs its clients, the risks of hiring independent
contractors are far greater than any benefits that may
be obtained.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

8. Learning The Fact About Hiring
Independent Contractors In China
The most obvious risk of hiring independent
contractors is that it makes the business operation
totally illegal.
Opting for this method of recruitment also puts the
China IP assets of the business at a huge risk.
This is because contrary to what their belief, the
business organizations do not actually own these
assets and they can be seized by the government in
case of a crackdown.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA

9. Learning The Fact About Hiring
Independent Contractors In China
They face the constant threat and stress of being shut
down any time and losing all their investment and
credibility.
The businesses might also have to pay a huge penalty
in lieu of the taxes that were evaded by the business
during its operation.
In addition, the businesses operating in this manner
are not able to carry out their day to day operations in
a free and fearless manner, which can affect their
profitability and growth in a significant manner.
Tel : +86-21-6474-7064 | simon-wan@cornerstone-group.com
Executive Search CHINA – ASIA