Representative Offices, also known Permanent Representative Offices or Resident Representative Offices, cannot employ Chinese staff directly. Chinese staff can only be employed through local foreign service companies or other entities designated by the local government. These foreign service companies will enter into employment contracts with Chinese individuals and should be responsible for paying salaries to the Chinese employees and making contributions to social securities and housing provident fund on a monthly basis.
A foreign service company will enter into a service contract with the Representative Office, whereby the foreign service company seconds these Chinese employees to the Representative Office. Therefore, from the legal perspective, Representative Offices and their Chinese staff do not have a direct employment relationship. The Chinese staff are only service providers. The relationship between the Chinese staff and the foreign service companies is an employment relationship.
Since Representative Offices are not employers of the Chinese staff, Representative Offices are therefore not obligated to abide by the Chinese labour law directly. In practice, Representative Offices usually deem themselves to be employers of the Chinese staff and hence abide by the PRC labour law in dealing with the Chinese staff. However, due to the special status of the Representative Offices, they do not have the ability or capacity to provide some compulsory obligations of employers. For example, Representative Offices cannot purchase social securities and housing provident fund for their Chinese employees. On the other hand, foreign service companies are able to provide all such services. And they are required to directly settle the labour disputes arising from the Chinese staff of the Representative Offices in accordance with the PRC labour law. Foreign service companies may require the Representative Offices to reimburse the statutory amount payable to the Chinese staff in accordance with their service contract with the Representative Offices.
The service contract signed between the foreign service companies and Representative Offices normally will include the following provisions:
Rights and obligations of both parties;
Use and return of dispatched employee;
Contract fees and settlement;
Liabilities for breach of contract;
Termination of contract;
Settlement of disputes.
Disclaimer
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
A Permanent Representative office of a foreign enterprise is a non-legal entity operating in China representing its parent company. A representative office is not allowed to engage itself in business activities, issue invoices on its own, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.
The business scope of a Permanent Representative Office (RO, also known as Resident Representative Office) should be clearly stated in the application document prepared by the applying foreign enterprise. After approval by the relevant authority and registration with the AIC, the business scope will be stated in the Registration Certificate of the Permanent Representative Office (RO).
Permanent Representative Offices (ROs, also known as Resident Representative Offices) registered in China are non-legal entity and therefore not considered to be separate and independent from the foreign enterprises. Chinese laws do not expressly provide that ROs should bear liabilities independently with their own assets (i.e. limited liability), ROs may be deemed to be part of the foreign enterprise.
The Chief Representative of a China Representative Office is the person who is responsible for the daily operation of the Representative Office (RO). However, Chinese laws do not clearly specify the limitation of the authorities of a Chief Representative or a Representative. In the absence of express statutory provisions, it is not clear whether or not documents signed by a Chief Representative