The China Experts: Kristina Koehler-Coluccia on Employer of Record Hiring in China
- 4 hours ago
- 7 min read
This is the second episode in The China Experts series where the questions come from inside Woodburn rather than from an outside guest. Claire, Woodburn's marketing lead, puts the questions clients ask most often about employer-of-record hiring to Kristina Koehler-Coluccia, who has been on the provider side of the arrangement for years and is unusually frank about what it costs, where it goes wrong and when you should stop using it.
Who is Kristina Koehler-Coluccia?
Kristina Koehler-Coluccia hosts the Thrive in China podcast and The China Experts series. She is a Hong Kong born European with more than twenty years of experience helping foreign investors enter the China and Hong Kong markets, and Woodburn runs its own employer-of-record service out of its Shanghai entity. That means this episode is not a general explainer but an account from someone who signs the employment contracts, carries the legal liability and has sat through Labour Bureau mediations.
What this episode covers
What an employer of record actually is, and what the client still has to do
Why boards reach for it, and the honest trade-offs when recruiting candidates
Why paying staff directly from head office is riskier than it looks
What it costs, why providers ask for deposits, and who pays for a termination
How to move people in-house once your own entity exists
The social insurance geography problem that narrows your candidate pool
Hiring foreigners, work permits and the points system
When the model stops making financial sense
What an employer of record actually is
The mechanics are simpler than the name suggests. A company that is already registered in China and licensed to employ people becomes the legal employer of the staff you choose. You sign a fairly basic service agreement with that provider from your home office, and the provider takes on the employment relationship, the payroll and the compliance that goes with it. You keep the people, the work and the management; you do not need an entity of your own.
Kristina's framing is that it lets a company move without fully committing. Most of the clients who ask about it are not sure yet how much capital China will need, who from headquarters will be involved, or whether the board can agree on anything at all, and this gives them a way to make progress while that argument continues.
Why companies reach for it
Three reasons come up repeatedly. The first is presence. The closed border years made it obvious that a company needs someone physically in the market to represent it, particularly when working with e-commerce or marketing partners who expect to meet a person rather than a screen.
The second is speed. China company registration takes at least three to six months, while an employee under an employer-of-record arrangement signs a standard employment contract and starts. Woodburn runs the service alongside a headhunting partner, so recruitment in China and the hiring itself can be handled end to end.
The third is the exit. If the testing phase shows China is not the right market, you stop the service. If you had incorporated, you would be liquidating a company instead, which is slow and bureaucratic.
The trade-off nobody mentions in the brochure
The hardest part is convincing the candidate. Someone interviewed by your company but employed by a third party quite reasonably asks what they are joining, how they are supposed to grow a business that does not formally exist, and what happens to them if head office loses interest. Kristina is direct that this creates a sense of instability, and that the honest answer during recruitment is a conditional one: hit these targets, or let us see this happen in the market, and the entity follows.
Why paying people from head office is not the alternative
The informal route, paying a salary from the parent company into an individual's Chinese bank account, is more fragile than it appears. Foreign exchange controls mean there are annual quotas on how much foreign currency an individual can convert, and Kristina has clients with ten people in China hitting those quotas. Renminbi cannot be remitted into a personal account from abroad at all; it moves corporate account to corporate account.
Underneath that sits the compliance gap. Nobody is paying individual income tax, social insurance or the housing fund. Often there is not even a freelance agreement putting that liability on the individual, and a chain of emails is not a contract you can rely on. If the relationship sours after two or three months, the person can take you to labour arbitration, and Kristina's worst case is being blacklisted.
Her historical example is memorable and not that old. A client with a Hong Kong company and staff in Shenzhen used to withdraw cash in Hong Kong at the end of each month, carry it across in a briefcase and hand out salaries. As the office grew towards twenty people it became two briefcases. Under an employer-of-record arrangement, none of this arises: the provider pays the salary, contributes to social insurance and the housing fund, remits income tax and reimburses expenses, which is what cloud payroll services do for companies that already have their own entity.
Who is responsible for what
This is the distinction clients most often get wrong. The provider onboards the employee for payroll and HR compliance. It does not onboard them into the job. Responsibilities, targets and day-to-day management stay entirely with the client, and so does the duty to look after the person. In practice, a question about social insurance, housing fund or income tax goes to the provider, and a question about the work goes to you.
What the provider does carry is the legal risk, and Kristina is candid that this is the least enjoyable part of offering the service. If an employee files a complaint it goes to the Labour Bureau, and the first stage is mediation, where an officer works through the dispute between employer and employee and tries to reach a settlement. She has been through that process a number of times, and it is the provider's name on the contract.
What it costs
Fees generally run from around 500 US dollars a month per employee up to about a thousand, depending on the provider. Kristina's argument for the price is the risk transfer rather than the administration. Providers also ask for a deposit equivalent to a number of monthly salaries, precisely because termination costs can land on them before a client reimburses them.
Termination, and bringing people in-house
Her view is that the client should lead a termination, because it follows from the client's business strategy, ideally with everyone on the same call so the employee hears the reasoning directly. Statutory compensation rules set the floor. What has changed recently is the negotiation: with hiring slower, employees have been pushing for more than the standard, and some clients choose to pay it because of how they want the relationship to end.
Moving people in-house once you have incorporated is entirely possible. The employee resigns from the provider and signs a new contract with your entity, and Kristina's warning is that this is a renegotiation, not an administrative transfer; expect requests for a few per cent more. Her fairness point is worth repeating: record the original start date in the new contract, so the person does not lose the service they have already given. At that stage the entity also takes on its own cloud accounting and financial reporting and its annual tax and audit obligations, including the payroll scrutiny that comes with them.
Full-time only, and hiring foreigners
Woodburn's own policy is full-time contracts only, with no part-time arrangements. Foreign nationals can be hired, but they need a work permit and a residence visa, and neither is guaranteed. Applicants are scored against a criteria list and sorted into talent categories, with most people landing in the middle band, and a higher score makes the permit easier. It takes longer and costs more, which is one reason the trend is towards hiring mainland Chinese staff. Where a foreign hire is the right answer, China visa application support is what makes the timeline manageable.
The social insurance geography problem
This is the constraint most likely to surprise you during recruitment. Woodburn's entity is in Shanghai, so anyone it employs is on Shanghai social insurance and housing fund rates, wherever they physically live. It can hire people in Beijing, Chengdu or Chongqing, but those people are still on Shanghai rates.
Candidates care about this for concrete reasons: a housing fund in Beijing that contributes to a mortgage, or medical cover in the right city for a sick parent. That narrows the pool. Larger employer-of-record firms with offices in multiple cities can localise the contributions, and Woodburn partners with them where that is what a client needs. Either way it is a point to raise during negotiation rather than after an offer.
When to stop using it
Kristina treats employer-of-record hiring as an interim solution, and her rule of thumb is that by the second or third employee you should know whether you are committing to the market. Nothing in law stops you continuing indefinitely, and she has a client with six people on the model because the board still cannot reach a decision, but the monthly fees eventually exceed the cost of running your own entity with payroll.
It can also be used tactically. She describes a Scottish client that has its own China entity but deliberately left one employee on the employer-of-record arrangement, using a full financial year to decide whether he stays, precisely so the termination risk sits with the provider rather than with them.
Her headhunting partner supplies the final argument for the model. His recurring problem is companies who want someone on the ground before they have an entity and have not registered that incorporation takes three to six months, so he ends up telling a senior candidate their start date is June when the client has not begun the process by March. An interim employment structure is what stops that conversation happening.
Watch the full interview
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Woodburn Accountants & Advisors helps international companies enter and operate in China and Hong Kong, from company registration and trademark protection through to recruitment, employer-of-record hiring, payroll, accounting, tax and audit.