What is a hukou? How does it affect my Chinese staff?
Photo by Atlaslin
Oh boy, this is going to get complicated! Put simply, every Chinese mainland citizen has a hukou that determines how they access some public services. If you plan to hire Chinese staff, you need to know what a hukou is and how it affects your business.
The hukou system
The hukou is a household registration system that, among other purposes, apportions government services to Chinese citizens. It mostly provides access to medical insurance and public schooling, but only in the area in which the hukou is located. So if someone with a hukou in Harbin is injured in Guangzhou, they cannot use their medical insurance unless they go to a hospital back home. Likewise, if they move to Beijing but leave their hukou in Harbin, their children cannot get public schooling anywhere but Harbin, and the grade requirements for their children to enter Beijing universities will be much higher. Of course, if they have money then they can pay for private education and treatment.
When a child is born, it is placed on its parents’ hukou account. When it’s time to go to university, the child can transfer over to the university’s collective hukou account, or leave it with their parents (although transferring to the university’s collective account will make it easier for them to get a job in the same city as that university later). When they get their first job, they can transfer to their new company’s collective hukou account, and continue to transfer it over to other companies’ collective hukou accounts with each new job.
It is possible to get an individual hukou account that is not tied to a larger organization, but this can only be done once the person owns their own home (apartment or house) and has paid five years of social insurance. The hukou is then registered in the location where their home is. If one’s spouse has a hukou then it is also possible to register oneself on one’s spouse’s hukou.
Do you need to help your employee get a local hukou?
If your Chinese employees have just graduated, it is expected that you will help them transfer their hukou from either their educational establishment or their birthplace’s police station, depending on where it is registered, to your company. This is not compulsory, but not having a hukou in the city in which the employee lives and works will make their lives very difficult.
If they are coming to work for you from another job then there is less expectation that you will transfer the hukou across (indeed, some companies will only hire people from within their own hukou area, as transferring someone within a hukou area is easier than transferring them across a long distance), but you may still want to do so to keep your employee happy. Refusing them is not illegal, but not encouraged. If the employee can’t get the hukou transferred to their city of employment then they can transfer it back to the PSB in their birthplace, though obviously this may result in problems down the line, if they want to raise children or they fall ill.
If an employee wishes to create an individual hukou because they meet the requirements of a home and five years of social insurance, they must go to the police station they want to transfer the hukou to and talk to the officers there to find out the requirements and procedures.
How to set up a collective hukou account
Before you can transfer your employees’ hukou to your company, you need to set up a collective hukou account; this will act as the harbor for their registrations.
In order to set one up you will need the following:
- Property; you or your company must legally own property that is used for employee accommodation or working spaces (or both)
- At least 10 Chinese employees
- A personnel specialist from your local talent center who will handle adding and removing employees from the collective hukou (you must go to your local talent center – see bottom of article for first-tier-city addresses – and sign an agreement with one of the specialists because you can continue)
If your company meets the above requirements, you can bring the following documents to the main PSB in the city or area where your company is registered in order to apply; it will take around 30 working days to process:
- Your property ownership certificate (it can be in the company’s name or your name)
- Labor contracts between the company and its employees
- Proof that the company is paying social insurance to the employees (you can get this from the Social Insurance Management Center)
- Employees’ ID cards and photocopies
- A photocopy of the ID card of the personnel specialist that was assigned to your company by the local talent center, and a photocopy of the agreement between your company and the specialist.
Once the collective hukou account is set up, the company should take an “employment-proof paper” (a statement that the employee works for your company, with your company’s stamp, or “chop”, on it), as well as a copy of the stamped company license, to the main PSB of the district where the company is registered. There they will be given a hukou transfer letter. The employee will take this letter to the school or the police station at their birthplace to get the hukou transferred.
If your company does not meet the requirements (eg. does not have property or has less then 10 staff) you will have to sign a service contract with a local talent center; your employees will then transfer their hukou to the collective hukou account of the talent center. Your company should pay a service fee to the center annually.
Using a third-party labor-sourcing company
Whether you use your own hiring methods or get a third party to help is your decision (unless, as explained above, your company does not meet the necessary requirements to host its own collective hukou). If your company hires the employees directly, you will need to perform the above procedures yourself. If you hire through a third-party labor outsourcing company you can leave all personnel matters to them, although you will obviously need to pay the company a service fee to do its job.
Some local governments have brought in tax breaks and other preferential policies to encourage investment in these labor-sourcing agencies, which can mean that it will be cheaper for you to use such companies to hire employees than to directly hire them yourself. This may mean that such employees are paid less than they would be usually if they worked directly for you – despite the existence of laws that demand the same pay for the same work, this is a common practice in some parts of China.
Signing up an employee while they are still at university
It is possible to sign up a university student at a campus recruitment campaign before they are finished with their studies. In this case, a tri-party labor contract will be signed between the university, the company and the student. This agreement lays out an understanding that the hukou will remain with the university until the student graduates, at which point the hukou will be transferred to your company.
In the event that your company needs to use a third-party company (as explained above) to transfer the hukou, the tri-party labor contract will be between the student, the university and the third-party hukou transfer/employment-scouting company. There will be a second contract between your company and the third-party company to ensure that you do not renege on the agreement.
Social Insurance Management Center addresses
There are multiple centers in each city – usually one per district. Below you’ll find the addresses for each of the first-tier cities (Mandarin only).
For Beijing click here.
For Shanghai click here.
For Guangzhou click here.
For Shenzhen click here.
Useful Chinese words and phrases
|户口||hùkǒu||Hukou; household registration|
|集体户口||jítǐ hùkǒu||Collective hukou account|
|劳力外包||láolì wàibāo||Labor outsourcing|
|人才中心||réncái zhōngxīn||Talent Center|
|户籍迁入证明||hùjí qiānrù zhèngmíng||Hukou Transfer Proof Letter|