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Finding a good employee

I currently have one girl working directly for me. How do I find a good employee to source, follow up, and do my QC work on my payroll?

You mention that you have one girl in China working directly for you on your payroll. I am assuming this means you are paying the individual from Canada rather than via a China based entity. If you have set up a proper office in China, then the comments below may not be so relevant, but if you are paying this individual from overseas, I think you may find the following situation of great interest.

Many years ago, before I moved to China and set up a sourcing office, my associated in the USA hired a few people direct from his HQ back home. Later it turned into a nightmare for the following reasons.

Technically, as I understand it, only a China based entity can hire a Chinese individual. Yes, you can hire independent contractors IF they have set themselves up as a registered business. Very few do. Since they didn’t have a formal contract in place, there was no labor contract in place in China and thus no formal “legal” employer to handle mandatory benefits like insurance or arrange payment of individual income tax.

Doesn’t sound like a big deal as these are issues the “employee” should worry about. BUT, as in this case many years ago, and I hope this doesn’t happen to you, we had a falling out with the “employee” over some ethical issues (she was extorting funds from suppliers) and we terminated her contract. A few days later, a co-worker was in China on a business trip and the former “employee” caused all sorts of problems by turning the American in to the local labor bureau for breaking the law and hiring from abroad a Chinese individual. I know it sounds crazy as you would think the labor bureau would go after the Chinese individual instead. Anyway, the foreign buyer was given a slap on the wrist and luckily allowed to leave. But it was a very tense and scary situation.

Now the worst part. Later we learned that the so-called employee had set up her own hidden commission arrangements with the US buyer’s Chinese suppliers. Because the US company had no legally binding contract with “employee” their hands were tied despite clear evidence. The employee was blatantly skimming from the buyer, but there was nothing that could be done. Sad case.

Luckily, there are ways to avoid having a mess like this on your plate.

1. Consider setting up your own legal office in China. Much easier now than before. Keep in mind that setting up in HK doesn’t solve any of the problems above if your “employee” is based in mainland China as PRC looks at HK as a special region outside of PRC. If you need a hand with set up, I recommend www.Fiducia-China.com as they did a good job for me.

2. Consider working with a reputable legally registered agent/inspector in China to do your project work. If you have somebody that is on your team that is really good, the inspection agency may even be willing to hire them. This gives your employee a formal place to legally be employed, plus you have legal recourse in the event things go very bad like the case above.

You have no shortage of 3rd party service providers who would like to help with your QC and sourcing support. This is great. 10 years ago it was hard to find help, now everybody is knocking on the door. Simply doing a google search with yield a long list of options, and for your reference, know that the not-for-profit China Sourcing Information Center where I volunteer posts for the public a list of reputable “endorsed service providers”, including agents who can help arrange production, at http://chinasourcinginfo.org/endorsed-service-provider/. Speaking of CSIC, you may also enjoy the CSIC’s complimentary monthly e-mag on sourcing and check out their videos about finding and managing vendor/agents in China. www.SmartChinaSourcing.com is also an excellent source of information on China sourcing.

If you do go down the route of hiring a 3rd party rather than setting up your own office in China or exposing yourself to employing staff in China from your HQ back home, know that using a 3rd party can be an effective channel, or it can be a total waste of your time. Here are some tips from my book “The Essential Reference Guide to China Sourcing” about how to select the right vendor/agent:

Are they a legitimate company with proper business licensing?

Do they have a clear track record of performance? If they can’t give you some client references, run away. That is a very big red flag.

Do they have their own infrastructure or do they leverage another company’s staff, skills sets, office space, licensing.

Are they focused on a certain set of services or do they try to everything for everybody? Yes, even the 3rd party service providers have been known to outsource to others just like some factories outsource production without telling the buyer.

Is their pricing structure and service agreement well defined and transparent? It is a major pitfall to do business with a 3rd Party service provider without a clear contract in place that outlines the service, costs, time frame and other desired attributes of the partnership.

I would like to add that you need to be very concerned about the “double dip.” It is not uncommon for agents engaged in China sourcing to charge the client a commission only to also have a hidden payment from the supplier behind the scenes. The result is that the agent works for the supplier when you think they are working for you.

Sorry for the long post, but I really wanted to tell the group one of the horror stories I have witnessed in hopes readers can avoid them and have a more pleasant China sourcing experience.




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