---
title: "China EOR vs Entity 2026 | Crossover + When to Switch"
description: "China EOR vs own entity. WFOE setup 3 to 6 months. Employer pension 16%. Entity overhead CNY 25,000 to 45,000/month. Crossover around 10 employees."
canonical: https://www.teamed.global/country-hiring-guides/china/eor-vs-entity
---

China · EOR vs entity child

Served by Teamed vetted partner-entity network in China

# When do you graduate from an *EOR to your own China entity*?

Setting up a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai or Beijing typically takes 3 to 6 months and costs CNY 80,000 to 300,000 before the first payroll runs. At low headcount, the EOR from $599 per employee per month is consistently cheaper. Past around 8 to 12 employees the entity overhead starts to amortise. That crossover shifts with the city you hire in and the salary band you are paying.

Last reviewed 13 June 2026 · China guide

![The Shanghai skyline at dusk, with the Huangpu River in the foreground and Pudong towers behind.](/images/country-guides/china-eor-vs-entity.webp)

Illustration · Shanghai, China

Answer.cite this

In China, EOR is faster and cheaper at low headcount. Setting up a WFOE typically takes 3 to 6 months. Formation typically costs CNY 80,000 to 300,000 all-in. Running it costs roughly CNY 25,000 to 45,000 per month for a small team.

Those are typical ranges, not law figures. Entity costs vary by city, share capital, professional fees, and whether you hire in-house HR or outsource. The crossover typically lands around 8 to 12 employees at Shanghai or Beijing tech salaries.

Employer pension is 16% on both sides of the comparison. Total employer social security rates vary by city. Shanghai runs around 27%, Beijing around 27%, Guangzhou around 23%. Those city-specific rates apply whether you use EOR or your own entity. The entity side also carries formation costs and ongoing compliance overhead.

![A stack of Chinese government registration documents on a Beijing desk, with a red company seal beside them.](/images/country-guides/china-eor-vs-entity-polaroid-1.webp)

Red seal required

## The crossover maths

EOR cost scales with headcount. One fee per employee per month. Entity cost has a fixed overhead. That fixed line and the EOR line cross at around 8 to 12 employees for average Shanghai or Beijing tech salaries.

Teamed charges from $599 per employee per month. Your own WFOE carries a typical fixed monthly overhead of CNY 25,000 to 45,000 for payroll bureau, bookkeeping, social security filings, and HR admin.

The calculation below uses CNY 4,300 as the illustrative CNY equivalent of the Teamed fee at approximately 7.2 CNY per USD. This is illustrative. The actual CNY amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, social security filings, and HR admin for a small WFOE. They are illustrative, not law figures. Actual costs vary with city, the complexity of your registered capital structure, and the benefits programme you run.

The crossover compresses faster at higher salaries. Total employer social security contributions in China are set at city level. Shanghai employers pay around 27% on top of salary. Beijing employers pay around 27%. Guangzhou employers pay around 23%. These rates include pension, medical, unemployment, work injury, and maternity insurance. The pension component alone is 16%, uniform nationally since 2019.

The crossover also shifts with the city mix of your hires. Shanghai social security bases run higher than inland cities. At CNY 30,000 average monthly salaries in Shanghai, the social security overhead is material on both sides. The entity starts winning faster at higher salary bands because the fixed overhead amortises. [Run the Crossover Calculator with your own headcount and salary band.](/tools/crossover-calculator/china)

1. Calculate the EOR cost Multiply the Teamed fee (from $599 USD) by your planned China headcount. This is the fixed variable cost. It grows linearly as you hire across any city.
2. Estimate the entity fixed overhead Typically CNY 25,000 to 45,000 per month for a small WFOE. This covers payroll bureau, bookkeeping, social security filings, the mandatory annual audit, and first-point HR. This cost does not grow much until headcount exceeds 15.
3. Find the crossover headcount The crossover is where EOR monthly cost equals entity monthly overhead. For most China tech salary bands in major cities, this is around 8 to 12 employees. Use the Crossover Calculator for your own numbers.
4. Factor in non-financial triggers The maths gives you a headcount threshold. Licence requirements, enterprise customer expectations, RMB settlement needs, and market-validation reversibility are separate questions that may override the cost crossover in either direction.
5. Plan the graduation date Allow 3 to 6 months for WFOE formation before the first payroll on your own entity. Start the GEMO process while EOR continues running, ideally 6 months before you expect to cross the headcount threshold.

## China entity setup: what it actually costs

Forming a WFOE in China typically costs CNY 80,000 to 300,000 all-in. The government filing fee is modest. The gap is professional fees, registered capital requirements, bank account setup, and the time your management team spends on approvals.

Allow roughly 3 to 6 months from the incorporation decision to your first payroll run. The bank account and capital injection are usually the gating steps.

These are typical ranges. They are not law figures. There is no single national schedule that sets what a WFOE costs to form. The range reflects real market rates for professional services in Shanghai and Beijing. It varies with the complexity of your business scope, registered capital, and how much you outsource.

| Cost item | Typical range | One-off or recurring |
| --- | --- | --- |
| SAMR (business licence) and ministry approvals | CNY 2,000 to 8,000 in fees (admin time) | One-off |
| Professional formation agent fees | CNY 20,000 to 80,000 | One-off |
| Registered capital (minimum varies by city and sector) | CNY 100,000 to 500,000+ (held in entity, not a cost) | One-off capital injection |
| Company seal set (required for all official documents) | CNY 500 to 2,000 | One-off |
| Registered address (if not leasing your own premises) | CNY 5,000 to 20,000 per year | Recurring |
| Social security registration and HR system setup | CNY 5,000 to 20,000 | One-off |
| Employment contract templates (Chinese law compliant) | CNY 8,000 to 30,000 | One-off |
| Employee handbook and policies (Chinese language) | CNY 10,000 to 40,000 | One-off |
| Bank account opening | CNY 0 to 5,000 in fees, plus time | One-off plus monthly |
| **Realistic total setup cost (excl. registered capital)** | **CNY 80,000 to 300,000** | **Mostly one-off** |

### Why the SAMR approval chain is the hidden bottleneck

China's WFOE registration passes through the State Administration for Market Regulation (SAMR) and, for certain business scopes, additional ministry or local government approvals. The process is sequential, not parallel. Each approval triggers the next. A two-week delay at one stage cascades through the rest. Allow 60 to 90 business days as a realistic planning horizon, not 30. The bank account capital injection is the final gate before the entity can run payroll.

## China entity ongoing cost: typically CNY 25,000 to 45,000 per month

Running a small WFOE in China typically costs CNY 25,000 to 45,000 per month. That covers outsourced payroll, social security filings, bookkeeping, annual audit, and first-point HR.

Below 5 employees, this fixed overhead dominates the per-head cost. Above 15 employees the overhead amortises and the entity starts to look cheaper.

These figures are typical market ranges for a small WFOE with 1 to 15 employees in a major Chinese city. They are illustrative. They are not law figures. Actual costs depend on whether you outsource or hire in-house, the city, and the complexity of your payroll and benefits programme. China requires a statutory annual audit for WFOEs, which adds a fixed annual cost without a UK or European equivalent.

| Monthly cost item | Typical range | What it covers |
| --- | --- | --- |
| Outsourced payroll and social security administration | CNY 3,000 to 8,000 | Monthly payroll runs, contribution filings, payslips |
| Bookkeeping and monthly management accounts | CNY 5,000 to 12,000 | Cash reconciliation, IIT withholding records, VAT |
| Statutory annual audit (amortised over 12 months) | CNY 3,000 to 8,000 | Required for all WFOEs; CNY 36,000 to 96,000 per year |
| Tax filings (IIT, VAT, CIT monthly or quarterly) | CNY 2,000 to 5,000 | Monthly IIT returns due by 15th of following month |
| HR administration and first-point HR advisory | CNY 5,000 to 8,000 | Onboarding, contract management, leave admin |
| Employment law advisory (Chinese labour code) | CNY 2,000 to 5,000 | Contract reviews, Labour Bureau queries |
| Registered address and company seal management | CNY 500 to 2,000 | Annual address service, seal custody |
| Software subscriptions (HRIS, payroll, accounting) | CNY 1,000 to 3,000 | Per-user SaaS tools configured for China |
| Annual inspection and SAMR reporting (amortised) | CNY 500 to 2,000 | Annual enterprise information publicity report |
| **Total ongoing monthly** | **CNY 25,000 to 45,000** | **1 to 15 employee WFOE** |

Above 15 employees, dedicated China HR headcount and an in-house finance function typically become necessary. The audit requirement alone grows in complexity once payroll exceeds CNY 2 million per year. The cost band widens significantly at that point.

## The cost nobody quotes: legal representative liability

Every WFOE in China must have a Legal Representative. This is a named individual, not a role. They sign all official documents and carry personal liability for the entity's compliance failures.

EOR clients do not carry this liability. Teamed holds it as the legal employer.

Most cost comparisons skip the legal representative dimension because it is hard to put a number on. It is worth naming explicitly before you decide.

### The Legal Representative: personal, not delegable

Under the [PRC Company Law](https://english.www.gov.cn/policies/featured/202511/04/content_WS6909c915c6d00ca5f9a074f7.html), every Chinese company must designate a Legal Representative. That person's name appears on the business licence. They sign contracts, open bank accounts, and represent the company in legal proceedings. They can be held personally liable for the company's tax debts, social security failures, and regulatory violations if the company cannot pay.

### The compliance treadmill

- **Annual inspection**: all WFOEs must file an annual enterprise information publicity report with SAMR. Late or missed filings result in the entity being listed on the National Enterprise Credit Information Publicity System as non-compliant.
- **Social security registration**: employees must be registered for social security in the city of employment within 30 days of hire. Non-registration attracts penalties from the local Social Insurance Bureau.
- **IIT withholding**: the employer must file and remit IIT withheld by the 15th day of the following month. Late filings attract daily interest charges.
- **Labour dispute exposure**: China's Labour Arbitration Commission handles employment disputes before courts. The dispute window is one year from the date the employee knew of the infringement. A compliance failure discovered after departure can still generate a liability.
- **Exit formalities**: the Labour Contract Law requires the entity to complete exit settlement within 15 days of termination (Article 50). Failure to issue a Certificate of Resignation (likai zhengming) exposes the entity to damages claims.

Each obligation is individually manageable. Stacked across a year, they consume real management attention and require a Chinese-speaking compliance function. An EOR carries all of these on its own entity.

## When you should stay on EOR

Below 8 employees, with project-based hires, or while you are still testing the China market, the EOR is the right answer. The crossover is a maths threshold. It is not a strategic verdict.

Reversibility matters. WFOE setup is slow and sticky. Winding down a WFOE takes 3 to 12 months and requires a government-audited liquidation. EOR is not.

- **Under 8 China employees at major-city tech salaries**: EOR is cheaper and faster every month. The entity overhead has nothing to amortise against.
- **Market validation phase**: you are hiring 1 to 3 people to test commercial fit. WFOE registration commits 3 to 6 months of management time and CNY 80,000 to 300,000 before you know whether the China market will deliver.
- **Project-based hires**: 6 to 18 month engagements where the formation cost will not amortise before the project ends and the WFOE closure process begins.
- **City flexibility required**: you need to hire across multiple Chinese cities. An EOR can employ across cities without separate entity registrations. A WFOE is registered in one city; hiring in another typically requires a branch registration.
- **No immediate need for China-entity contracts**: customers and partners are comfortable contracting with your overseas parent or with a Chinese entity operated by your EOR provider.
- **Wind-down risk is real**: closing a WFOE requires a formal liquidation process, a government-supervised tax clearance, and often takes 3 to 12 months and CNY 30,000 to 100,000 in professional fees. EOR exit is straightforward by comparison.

## When you should switch to your own entity

Above 10 to 12 employees consistently, with a multi-year China plan, or with specific commercial needs that require a Chinese legal entity, your own WFOE beats EOR on cost. It also unlocks capabilities the EOR structure cannot provide.

The single biggest structural pull is the ability to hold China-specific licences, including an internet content provider licence (ICP), a value-added telecom licence, or sector-specific approvals that require a locally registered entity.

- **Sustained headcount above 10 to 12 China employees** at major-city salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
- **Licence requirements**: internet, fintech, healthcare, education, and other regulated sectors in China require a locally licensed entity. An ICP licence (internet content provider) cannot be held by an EOR employer. If your product requires a China-registered domain or a China-hosted platform, you need your own entity.
- **Enterprise customer requirements**: large Chinese state-owned enterprises and government bodies typically require a Chinese-registered counterparty. If enterprise sales are core to your China strategy, your own entity becomes a commercial necessity ahead of the cost crossover.
- **RMB settlement**: if you are collecting revenue in CNY and want to repatriate profits, a WFOE with proper profit repatriation approval is the correct structure. An EOR employer relationship does not support this.
- **Equity incentive programmes**: if you want to grant equity or phantom options to China-based employees tied to the China business, your own entity is the correct structure for the underlying documentation.

## How Teamed's Graduation Model handles the transition

Teamed graduates customers from EOR to their own WFOE on the same platform. Same China specialist. Same employment contracts, novated to the new entity. No break in employee tenure or annual leave accrual.

Most providers treat graduation as a re-onboarding event. Employees re-sign, sometimes lose continuous service accrual, and face a gap in social security coverage. Teamed treats it as a stage of the employment lifecycle.

The technical mechanic is **contract novation**: the employment contract transfers from the Teamed partner entity to your new WFOE on a specified date. All terms carry across. Salary, annual leave entitlement, continuous service date, and social security registration all remain uninterrupted. The employee sees a different employer name on their payslip. Nothing else changes.

What we do operationally:

- Stand up your China WFOE through [GEMO](/entity-management), allowing 3 to 6 months, while EOR continues running in parallel.
- Register the new entity for social security in every city where you have employees.
- Novate every active employment contract on a single effective date, with new contracts issued in Chinese and compliant with the Labour Contract Law.
- Migrate ongoing social security registrations without any lapse in coverage.
- File the final EOR-period IIT returns and open the WFOE's IIT withholding registration from the novation date.
- Provide the same People Ops specialist as the post-graduation primary contact.

The WFOE setup timeline (3 to 6 months) means the graduation process should start well before the cost crossover is reached. We recommend starting GEMO when you are confident you will cross 8 employees within 6 months, not after you have already crossed 12.

## How does Teamed handle China employment for you?

Teamed becomes your legal [employer of record](/lp/employer-of-record) in China for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

Payroll, social security filings, and the full China employment law stack run on **one platform**.

**Real HR and legal experts** handle your China hires from the first bilingual offer letter through every monthly IIT return and social security contribution. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**. Every employer cost **passes through at cost, itemised** on every invoice. You see the pension line at 16%, the city-specific social security total, and the leave accrual for 5 days of annual leave in the first service tier. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on **one platform**. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see the month the model flips. Start from the China hiring overview. Key sources: [Labour Contract Law of the PRC (Supreme People's Court)](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) and [PwC China social security rates](https://taxsummaries.pwc.com/peoples-republic-of-china/individual/other-taxes).

## Frequently asked questions

At what headcount does an EOR stop being cheaper than a China WFOE?

The crossover typically lands at 8 to 12 China employees at major-city tech salaries. Below that, the EOR fee (from $599 per employee per month) is cheaper than the typical WFOE overhead of CNY 25,000 to 45,000 per month. Above it, the entity overhead amortises and per-employee cost falls below the EOR fee. The crossover shifts with city, salary band, and whether you need a registered address or branch registrations in multiple cities. Use the Crossover Calculator to run your own numbers.

How much does it cost to set up a WFOE in China?

Typically CNY 80,000 to 300,000 all-in, excluding the registered capital that must be injected into the entity. The government filing fees are modest. The bulk is professional formation agent fees, legal documentation in Chinese, social security registration, and bank account setup. The registered capital itself (typically CNY 100,000 to 500,000+ depending on city and sector) is held in the entity and is not a fee, but it is capital you must commit.

How long does it take to set up a China WFOE and run the first payroll?

Typically 3 to 6 months from the formation decision to first payroll. The process is sequential: SAMR business licence, then tax registration, then social security registration, then bank account, then capital injection. Each step gates the next. The bank account is typically the final bottleneck. Allow 60 to 90 business days as a realistic planning horizon.

Can an EOR hold a China internet content provider (ICP) licence or sector-specific approval?

No. An ICP licence, value-added telecom licence, and most other regulated sector approvals in China require a locally registered Chinese entity as the licence holder. The employment relationship through an EOR does not satisfy this requirement. If your product requires a China-registered domain, a China-hosted platform, or a regulated sector licence, you need your own WFOE regardless of headcount.

What is Teamed's Graduation Model for China?

Teamed graduates customers from EOR to their own China WFOE on the same platform. Employment contracts are novated to the new entity on a single date. Salary, annual leave entitlement, continuous service date, and social security registration all carry over without interruption. The employee sees a different employer name on their payslip. Teamed handles the WFOE formation through GEMO, registers the entity for social security in every hire city, and migrates benefits without any lapse. The transition takes 3 to 6 months, so the process should start well before the cost crossover is reached.

What employer social security and pension rates apply on both sides of the comparison?

China sets social security rates at city level. Total employer rates (excluding housing provident fund) run around 27% in Shanghai and Beijing, around 23% in Guangzhou. These rates cover pension, medical, unemployment, work injury, and maternity insurance. The employer pension component is 16%, uniform nationally since 2019. These rates apply whether you employ via EOR or your own entity. Verify the exact rate with your local Social Insurance Bureau before budgeting.

Teamed Legal Operations

The WFOE setup window in China is not 4 weeks. It is 3 to 6 months, and the bank account capital injection is the last gate before you can run a single payroll. Companies that wait until the cost crossover to start the process are already 6 months behind.

A note from Tom Price-Daniel

In Shanghai, the employer social security stack runs around 27% on top of salary. The WFOE to absorb it takes 3 to 6 months to set up.  
EOR is the right answer until the maths tips. Around 8 to 12 employees at major-city tech salaries.  
When the lines cross, we tell you and move you across. That is the only honest version of this.

Tom Price-Daniel · Co-founder, Teamed

## Related China guides

- Hiring in China, overviewparent
- [China employer cost breakdown](/country-hiring-guides/china/cost-breakdown)sibling
- [China tax and payroll guide](/country-hiring-guides/china/tax-and-payroll)sibling
- [China termination and severance](/country-hiring-guides/china/termination-and-severance)sibling
- [Employer of Record overview](/lp/employer-of-record)core
- The Graduation Modelcore
- [Entity Management (GEMO)](/entity-management)core
- [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator/china)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the State Administration for Market Regulation (SAMR), the Ministry of Human Resources and Social Security (MHRSS), and your local Social Insurance Bureau before relying on any specific framework. Entity setup cost ranges and ongoing cost ranges in this guide are typical market figures based on professional services pricing in China. They are illustrative only and not law figures. Social security rates cited are city-level indicative figures (Shanghai and Beijing approximately 27%, Guangzhou approximately 23%) sourced from PwC Worldwide Tax Summaries (2026). Employers must verify the applicable rate with their local social insurance bureau. Pension rate of 16% is the national employer component (uniform since 2019). Annual leave of 5 days is the minimum for employees with 1 to 10 years of service under State Council Decree No. 514 (2008).