Learning from Experience: The Hows and Whens of Hiring Interns in China

0215_business_01SHANGHAI – Just like in any other country, companies in China often offer internships to young people looking to enter the job market. Typically, this is a win-win situation: the intern gets valuable work experience and the company is able to shift the work-load of its permanent staff to lower paid interns. But in actuality, the laws governing internships in China can make it difficult for companies to legally offer such arrangements. In this article, we detail how and when China-based companies can take on local and foreign interns.

Hiring local interns

Employers seeking to hire Chinese interns should note that only students who have not yet obtained their graduation certificate or diploma can enter into an internship agreement with a company. According to the “Opinions on the Implementation of the Labor Law (Lao Bu Fa [1995] No.309),” a part-time work-study arrangement is not considered employment.

In the case of an internship, no employment relationship is constituted, nor does the Labor Contract Law apply; thus it is unnecessary for an employer to sign a labor contract with the student. However, employers are advised to sign an agreement with their Chinese interns to clarify issues such as confidentiality, the intern’s obligations and terms of payment.

Based on the opinions, the company is not to be regarded as an employer, meaning that they do not have to assume relevant liabilities such as social welfare contributions or severance payment at the termination of the agreement. However, it may be wise to purchase commercial insurance for interns, given that the company shall assume full liability for their work-related injuries.

As the Labor Contract Law does not apply, minimum wage standards are not applicable to interns. Employers are suggested to explicitly clarify that payments to interns are an allowance and not a salary.

If the employer fails to sign a written labor agreement within a month, the employee may claim double salary for each month without a written contract.

These exceptions cease to apply after the intern graduates. After graduation, the relationship will be considered an employment relationship and covered by the Labor Contract Law. If the employer fails to sign a written labor agreement within a month, the employee may claim double salary for each month without a written contract. As the contract is now deemed a labor contract, the employer will have to comply with social insurance and minimum wage requirements.

If the employer does not want to hire the former intern on a full-time basis, he or she has the option of offering a part-time contract (i.e., no more than 4 hours of work per day). Employers are not allowed to set a probation period for part-time workers, but they may terminate a part-time employment arrangement at any time with prior notice. An official agreement is not necessary in this case.

However, the hourly wage paid to part-time workers must be higher than the hourly minimum wage set by the relevant local government. For example, in Beijing, the minimum hourly wage is RMB 16.9, as of April, 1, 2014. Employers must also pay work-related injury insurance for part-time workers in Beijing.

The law is unclear as to the treatment of students who have graduated but have not yet received their diploma. Employers are thus advised to be cautious in offering internships under these conditions, as the agreement could be deemed an employment relationship and be subject to the Labor Contract Law.

Hiring foreign interns

Comparatively, the laws governing the hiring of foreign interns in China are much stricter. Basically, employers are only allowed to hire foreign students who are studying at universities in China (i.e., foreigners with a foreign student residence permit) as interns. Foreign students seeking to work as interns shall apply to both the college and the exit and entry administration bureau of the Ministry of Public Security (MPS) for approval.

Employers are also required to report to the MPS if their foreign interns graduate or quit their studies for personal reasons. Notably, foreign interns in China are not permitted to earn a salary during their internship; thus employers are advised to ensure that any payments are made in the form of intern stipends.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email prd@deashira.com or visit www.dezshira.com.