A Cost-Effective Way to Enter the Chinese Market
Doing business in China is something that every enterprise would like to enjoy due to the large range of opportunities available. However, in practice it is more complex than it initially looks Limitations, regulations and restrictions found in China make this nation quite a challenge for foreign enterprises to freely operate in according to their own plans. Effective administration is required from the very beginning in order to avoid future issues that could harm your company’s performance and integrity.
If you are planning to enter the mainland, firstly you should keep in mind that bureaucratic procedures in China tend to be more difficult and take longer than in your home country. For example, if your idea is to enter with your own business, the first step is to open a WFOE (Wholly Foreign Owned Enterprise). This can take up to 1 or 2 years…and do not forget about the problems posed by cultural and linguistic barriers.
A new way foreign companies have found to enter the Chinese market is via labor dispatch. This is a cost-effective solution provided by PEOs(Professional Employment Organization), the leading PEO in China, that helps foreign enterprises lacking a local or legal structure to establish themselves in China.
How Does Labor Dispatch Work?
Labor dispatch is a service based on outsourcing the human resources management of your company’s representatives, therefore benefiting from the PEO’s local structure. This allows the representatives to freely pursue commercial activities without limitations.
Within a labor dispatch contract there are three parties involved:
1. PEO company
2. Company wishing to establish itself in China
3. Company’s representative
In other words, the PEO or human resources consultancy company, will handle all the procedures involved in the process of sending employees abroad. This includes: visas (for family members if needed), payroll administration, tax compliance, medical insurance, expenses management, and office rental.
The contractual agreements behind labor dispatch are quite simple. Firstly, the foreign company will sign a contract with the PEO establishing its employee’s contract details and conditions, such as: salary, allowances, bonuses, expenses, etc… And secondly, the PEO will sign another contract under the conditions accorded by the foreign company with the representative sent abroad.
Labor dispatch suits businesses of any size and industry that are planning to enter a foreign country with a staff below 15 employees. Why 15 employees? Because companies entering a new market with over this number, usually multinationals, will find it is more profitable to create their own legal structure. However, for small to medium sized enterprises wishing to delegate less than 15 employees, it will always be cheaper, less risky, and less time-consuming to outsource their employee’s contract via a PEO.
So… What Are the Advantages?
The main advantage is that labor dispatch allows your company to enter highly-regulated markets such as China, for a period of up to 1 month, at a very economic cost. It will relieve your company of all the complex procedures encountered in such markets, these being managed by the local PEO which is already experienced in handling such processes.