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Contractor of Record in China
Engage and pay Chinese contractors at arm's length — where the work is genuinely independent
China draws one line before any other: a 劳动关系 (employment relationship) and a 劳务关系 (service relationship) are different legal animals, and which one you have is decided by the facts of the engagement, not by the heading on the document. A Contractor of Record only works on the second side of that line. Where it applies, Aniday's partner entity in China holds the agreement, the withholding and the records at arm's length, so your contractor is engaged by a licensed Chinese counterparty instead of by a foreign company with nothing on the ground. Where it does not apply, we say so before anything is signed — because no contractual wording repairs a relationship that is employment in substance.
Working out which side you are on? The tests are set out below, and if the answer is employment, see hiring employees in China or the China work permit guide for foreign hires.
China contractor snapshot
劳动关系 or 劳务关系 — which one have you actually created?
Chinese courts apply the three-factor test in the MOHRSS Circular on the Establishment of Employment Relationship: both parties are legally qualified; the employer's rules apply to the worker, who performs paid work under the employer's direction; and the work forms part of the employer's business. Where all three exist at once, an employment relationship exists — regardless of what the document is called.
A Contractor of Record is the vehicle for the other case. Aniday's partner entity in China signs the service agreement with the contractor, applies the labour-remuneration withholding, and keeps the records, so the engagement sits with a licensed Chinese counterparty. That is worth doing when the work is genuinely independent — and worth nothing at all when it is not. We run the test before the contract, not after the audit.
Aniday in China
Aniday holds no Chinese entity. The China-side agreement is signed by Aniday's partner entity in China.
(contracting party, payer, withholding agent)
What Aniday's Contractor of Record covers in China
The relationship test first, then the agreement, the withholding and the paper trail behind it.
The 劳动关系 test, run before you sign
We put the engagement against the three MOHRSS factors — legal capacity, subjection to the employer's rules and direction, and whether the work forms part of the business — and against the Beijing High People's Court's 2024 markers of a genuine contractor. If all three factors are present, we tell you it is employment.
A 劳务合同 under the Civil Code, signed locally
A service relationship in China is governed by the Civil Code on ordinary freedom-of-contract principles, not by the Labour Contract Law. Aniday's partner entity in China is the contracting party: scope, deliverables, fees, confidentiality, non-exclusivity and a written IP assignment that flows the rights to you.
Labour-remuneration withholding, applied correctly
劳务报酬 is withheld at 20% on the amount above RMB 4,000 after a 20% expense deduction; on smaller payments, at 20% on the balance after an RMB 800 deduction. It is then reconciled into the contractor's comprehensive income at year end. We apply it from the first payment rather than discovering it later.
One invoice to you, RMB to the contractor
Approved deliverables or invoices roll into a single Aniday invoice to your entity, wherever it sits. The contractor is paid in RMB by the Chinese party on the agreed cycle, and the payment records and withholding certificates stay with the engagement.
What reclassification actually costs
If a service relationship is found to be employment, the client owes a written employment contract, minimum wage and statutory rest and holidays, social insurance and housing fund contributions, statutory annual, maternity and sick leave, statutory termination procedure and severance, and work-injury liability. Unpaid social insurance carries penalties of 1–3× the arrears plus interest.
And when the answer is employment
China does not allow the ordinary entity-free employment arrangement used elsewhere in Asia. The compliant routes are labour dispatch through a licensed agency — capped at 10% of headcount and limited to temporary, auxiliary and substitute roles — or a Chinese entity of your own. We will point you at the right one rather than dress employment up as a contract.
Contractor rules in China at a glance
The facts that decide whether a contractor engagement in China survives scrutiny. All figures are the current rules as of September 2026; sources are listed below the table.
| Topic | China rule |
|---|---|
| The two relationships | A 劳动关系 is an employment relationship; a 劳务关系 is a service relationship between a client and an independent provider. The label on the document does not decide which one exists — the facts of the engagement do. |
| The test | The MOHRSS Circular on the Establishment of Employment Relationship sets three factors: (1) both parties are legally qualified; (2) the employer's rules apply to the worker, who performs paid work under the employer's direction; (3) the work forms part of the employer's business. Where all three exist at once, an employment relationship exists. |
| What a genuine contractor looks like | Beijing High People's Court guidance issued in 2024 describes a genuine independent contractor as someone who provides services using their own skills, bears business risk, is not in a subordinate relationship and is not subject to the client's management or control. |
| Which law applies | Employment relationships fall under the Labour Law, the Labour Contract Law, the Social Insurance Law and the Trade Union Law. Service relationships fall under the Civil Code, on ordinary freedom-of-contract principles. |
| Tax on a contractor | 劳务报酬 (labour remuneration) is subject to interim withholding at 20% on the amount above RMB 4,000 after a 20% expense deduction; for smaller payments, 20% on the balance after an RMB 800 deduction. It is reconciled into comprehensive income at year end. |
| Tax on an employee | Cumulative monthly withholding at progressive rates of 3%–45%, with an annual standard deduction of RMB 60,000. |
| Social insurance and housing fund | Not payable on a genuine service relationship; unavoidable on employment, and set city by city — never a single national number. Shanghai employer contributions run 30.7%–34.4% and employee contributions 15.5%–17.5%, on a base ceiling of RMB 37,302 with a social insurance floor of RMB 7,460 and a housing fund floor of RMB 2,690 through June 2026. Beijing employer contributions run 31.5%–40.2%, on a base set from the prior calendar year's average monthly wage with a municipal floor and ceiling. |
| Foreign nationals | Social insurance contributions are mandatory for foreign employees. Pension and unemployment can be exempted only where a bilateral social security (totalisation) agreement applies and a certificate of coverage has been filed; medical, work injury and maternity generally remain payable. Housing fund eligibility varies by city. |
| If it goes wrong | On reclassification the client becomes liable for a written employment contract, minimum wage and statutory rest and holidays, social insurance and housing fund contributions, statutory annual, maternity and sick leave, statutory termination procedure and severance, and work-injury liability. Penalties for unpaid social insurance run to 1–3× the arrears plus interest. |
| If the answer is employment | The entity-free route is labour dispatch (劳务派遣) through an agency holding a 劳务派遣经营许可证, under the Interim Provisions on Labour Dispatch effective 1 March 2013. Dispatched workers may only fill temporary (临时性, no more than 6 months), auxiliary (辅助性) or substitute (替代性) positions; dispatched headcount must not exceed 10% of the total workforce; and the agency's labour contract with the worker must run at least 2 years. A representative office cannot hire staff directly at all. |
| Foreign hires on the ground | Only a legal entity that directly employs the person, holds a Chinese business licence and has the role inside its registered business scope can sponsor a foreigner's work permit; labour dispatch cannot be used to sponsor core foreign hires. See the China work permit guide for the Category A / B / C points scale and the Notification Letter, Z visa, work permit and residence permit sequence. |
Sources. The three-factor test from the Circular on the Establishment of Employment Relationship and the Interim Provisions on Labour Dispatch (adopted at the 21st executive meeting, effective 1 March 2013), published by the Ministry of Human Resources and Social Security; labour-remuneration and comprehensive-income withholding from the State Taxation Administration; contractor markers from Beijing High People's Court guidance issued in 2024; social insurance and housing fund rates, bases and floors from the Shanghai and Beijing municipal schedules. Last verified 2026-09.
How Contractor of Record works in China
Three steps, and the first one can end the conversation.
Relationship test
We put the scope, the hours, the reporting line, the tools and the exclusivity against the three MOHRSS factors and the Beijing High People's Court markers. If the worker is subject to your rules and direction and the work forms part of your business, it is a 劳动关系 and we route you to dispatch or to your own entity instead.
Agreement and onboarding
Aniday's partner entity in China signs the 劳务合同 under the Civil Code, covering deliverables, fees, confidentiality, IP assignment, data handling and termination. We collect identity, tax and bank details and set the withholding up before the first invoice.
Work, invoicing and payment
The contractor delivers to your team. Approved invoices roll into a single Aniday invoice to you; the contractor is paid in RMB with 劳务报酬 withholding applied, and the records support the year-end reconciliation into comprehensive income.
COR, labour dispatch or your own entity — which one in China?
| Contractor of Record | Labour dispatch (劳务派遣) | Your own Chinese entity | |
|---|---|---|---|
| Who is the counterparty | Aniday's partner entity in China signs a service agreement with the contractor | A licensed agency employs the worker and assigns them to you | Your Chinese company employs the person directly |
| Relationship created | 劳务关系, governed by the Civil Code | 劳动关系 with the agency, governed by the Labour Contract Law | 劳动关系 with you |
| Best for | Genuinely independent, project-scoped work with no subordination | Temporary, auxiliary and substitute roles; a pilot team or a bridge to a WFOE | Core, permanent, full-headcount operations |
| Hard limits | Only where the three MOHRSS factors are not all present | 10% of total headcount; temporary roles capped at 6 months; agency needs a licence and a 2-year contract with the worker; a representative office cannot hire directly at all | Entity set-up, registered business scope and ongoing filings are yours |
| Social insurance and housing fund | Not payable on a genuine service relationship | Payable by the agency, at city-specific rates and bases | Payable by you, at city-specific rates and bases |
| Work permit for a foreign hire | No | No — dispatch cannot sponsor core foreign hires | Yes, where the role sits inside the registered business scope |
🇨🇳 FAQs about Contractor of Record in China
Can I engage a contractor in China without a Chinese entity?
Yes, where the engagement is genuinely a 劳务关系 — a service relationship rather than employment. Under Aniday's Contractor of Record, Aniday's partner entity in China is the contracting party, applies the labour-remuneration withholding and keeps the records, so you need no Chinese entity of your own. What you cannot do is use the same route for work that is employment in substance.
What decides whether this is 劳动关系 or 劳务关系?
The facts, not the title of the document. Courts apply the three-factor test in the MOHRSS Circular on the Establishment of Employment Relationship: both parties legally qualified; the employer's rules applying to the worker, who performs paid work under the employer's direction; and the work forming part of the employer's business. Where all three exist at once, it is employment whatever the contract is called.
What does a genuine independent contractor look like to a Chinese court?
Beijing High People's Court guidance issued in 2024 describes one as a person who provides services using their own skills, bears business risk, is not in a subordinate relationship and is not subject to the client's management or control. If your engagement fails those markers, rewriting the contract will not fix it.
How much tax is withheld when paying a Chinese contractor?
Labour remuneration (劳务报酬) is withheld at 20% on the amount above RMB 4,000 after a 20% expense deduction; on smaller payments, at 20% on the balance after an RMB 800 deduction. It is reconciled into the individual's comprehensive income at year end. Employment income is different — cumulative monthly withholding at 3% to 45% with an annual standard deduction of RMB 60,000.
What happens if the contractor is found to be an employee?
The client becomes liable for a written employment contract, minimum wage and statutory rest and holidays, social insurance and housing fund contributions, statutory annual, maternity and sick leave, statutory termination procedure and severance, and work-injury liability. Penalties for unpaid social insurance run to 1 to 3 times the arrears plus interest. That is the exposure our relationship test exists to keep off the table.
Can I build a full-time team in China this way?
No, and anyone who tells you otherwise is selling you a reclassification. Full-time, supervised, core work is employment. The entity-free route to employment in China is labour dispatch through a licensed agency, and it is capped at 10% of headcount and limited to temporary, auxiliary and substitute roles, with temporary positions running no more than 6 months. For a core, permanent operation the answer is a Chinese entity of your own.
Can a foreign national work for me as a contractor in China?
Not through a Contractor of Record. A work permit can only be sponsored by a legal entity that directly employs the person, holds a Chinese business licence and has the role inside its registered business scope — and labour dispatch cannot be used to sponsor core foreign hires either. Putting a foreign national on the ground in China needs an employing entity.
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