How to pay your foreign employees outside of China: Travel ban due to COVID-19

Through Vivian MaoDezan Shira & Associates, Shanghai Office

Publisher: Dorcas Wong

From March 28, 2020, China suspended the entry of most foreign nationals, citing the temporary measure as a response to the rapid spread of COVID-19[female[feminine worldwide.

This means that foreigners with the following visas are currently not allowed to enter the country:

  • Chinese visa;
  • Residency permit;
  • APEC Business Travel Card; and or
  • Port visa.

Due to these travel restrictions, which so far have had no expiration date, many foreign nationals with residence permits in China for work purposes are stuck outside China during this period.

Many companies are now grappling with new HR, legal and tax uncertainties that have arisen in their overseas working relationship under these new travel restrictions.

To see the other articles in the series, click below:

(Although the situation is fluid, China is in communication with the rest of the world, allowing certain cross-border movements to manage personnel exchanges under special circumstances. This includes special movements of businessmen, experts and the return of foreign workers to their China- We cover this in our article, China Travel Restrictions – Special Visa Requirements.)

Pay your foreign employees outside of China

Some foreign employees may wish to receive their Chinese salary in their overseas bank accounts in foreign currencies, providing them with enough money to support their international expenses and offering them more financial security during this particular time.

For a Chinese employer, in practice, the payment of an employee’s salary abroad will first require confirmation from the respective bank and accountant in China.

For salary payments less than USD 50,000, no special process is required from the bank and remittance of the overseas payment can follow as usual. However, for amounts over USD 50,000, the bank will require an employment contract and a tax declaration form, along with other information.

Also, if the settlement currency differs from the remittance currency, an additional contract is required.

Chinese employers can enlist the help of a foreign company to make the payment to the employee, on their behalf. In such a case, an inter-company agreement must be concluded between the foreign company and the Chinese company to determine the conditions and labor costs.

In addition, some companies may decide to relocate their foreign employees to overseas headquarters. To do this, the employer must first terminate the Chinese employment contract and sign a new employment contract with the employee of the foreign company.

Exceptions to this rule are if the foreign employee originally held a dual position at both the foreign company and the Chinese company. In this case, the employer can simply adjust the overseas employment contract and the foreign employee can be paid outside of China.

Reassess the salary package as a whole

If an employee currently resides and works outside of their usual country, there may be many terms of the contract that cannot be met without further negotiation.

In such a situation, it is important to take the time to reassess and adjust the salary package taking into consideration the different forms of income, social benefits, social insurance, working hours and mode of payment.

The employer and the employee can consider the different types of compensation which are no longer applicable or have to be recalculated when working abroad. This may include, for example, performance pay, bonuses, social insurance, business insurance, housing allowance or other forms of subsistence allowance.

Social compensation can be a good starting point for renegotiating the salary package, as many of the benefits offered may no longer be applicable or useful (for example, commercial insurance that only covers Chinese territory, or a housing allowance that no longer necessary because the employee resides elsewhere). However, mutual agreement is required for this to take effect.

Additionally, the company’s operational capacity may be limited at this time, which means that employees may also need to reduce or adjust the amount, time and style of work.

In such circumstances, each company’s situation and response will be unique. If the company can set up a teleworking system, the employer can pay the employees by the hour, according to the actual time that the employees devote to their work.

When the company wishes to reduce the working hours of employees, this must be done through negotiation. For example, by reducing working days from 5 days a week to 3 days a week and reducing the employee’s salary accordingly. Alternatively, the company can organize shifts for employees who occupy the same or similar positions and reduce their salary accordingly.

In China, employers should keep in mind the minimum compliance requirements. So, for example, if a company in Shanghai decides to suspend operations, the principle of a full month’s salary followed by a standard local minimum wage will apply.

If the standard working hours system is not applicable to the employee, it is suggested that companies ask the local human resources and social security office to adopt other working hours systems, such as the global working hours system or non-fixed working hours systemto meet their specific employment needs.

Employers and employees are encouraged to reassess and discuss their salary package in light of their adjusted situation and reach mutual agreement on changes to all key terms of the employment contract.

Identify your legal risks

For companies that have foreign employees stranded outside of China, it is necessary to look at the situation from different angles, including legal, HR, and tax.

From a legal point of view, it is important that the employer and the employee carefully examine the employment contract during this period to highlight the elements that are no longer applicable, must be adjusted or must be newly accounted for.

Businesses should consult their local Professional Services Advisor for advice on statutory legal and HR procedures in each situation.

Your professional services advisor can help you prepare your legal documents, such as suspension agreement, termination agreement, resignation letter, restructuring/salary adjustment agreement or other changes to the employment contract , depending on the option chosen by the customer.

For more information, please contact [email protected]

About Us

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors in China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen and Hong Kong. Please contact the company for assistance in China at [email protected]

We also maintain offices helping foreign investors to Vietnam, Indonesia, Singapore, The Philippines, Malaysia, Thailand, United Statesand Italyin addition to our practices in India and Russia and our commercial research facilities along the Belt and Road Initiative.

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