Cross-Border Payroll: How to Manage Hong Kong and China Teams with HR Outsourcing

Reading Time: 11 minutes

“Wait, she’s based in Shenzhen but working for our Hong Kong entity. Do we pay her in RMB or HKD? Do we need to register with Chinese tax authorities?” Well, this is something we get all the time from our clients. The correct answer to both questions is yes — plus a bunch of other things. Welcome to cross-border payroll, where everything is double the fun (and double the paperwork).

Managing teams across Hong Kong and mainland China isn’t just about processing two separate payrolls. It’s about being familiar with different tax systems, handling dual employment documentation, and managing currency conversions — all while staying compliant in two jurisdictions that have their own rules about everything.

This guide walks through what actually happens when you employ people on both sides of the border. We’ll cover some compliance requirements we wouldn’t recommend skipping, the documentation you need, the systems that make it manageable, and why so many Hong Kong businesses work with specialists for this. Spoiler: it’s because doing it alone is like trying to pat your head and rub your tummy whilst juggling. Possible? Maybe. Advisable? Probably not.

Why Hong Kong Businesses Hire Across the Border

The Talent Reality (AKA “Why Everyone’s Looking North”)

Hong Kong’s labour market is expensive and competitive. Key roles in tech, engineering, operations, or specialised functions can be 40-50% more costly than hiring equivalent talent in Shenzhen, Guangzhou, or other GBA cities. For startups and SMEs watching budgets, this isn’t just about saving money — it’s often about survival.

But it’s not just about cost. Some specialised skills are simply easier to find in mainland cities. Manufacturing expertise in Dongguan, tech talent in Shenzhen, supply chain specialists in Guangzhou — sometimes the best person for the role happens to be across the border. And in 2026, with remote work being normalised, why limit your talent pool to one side of the boundary?

The Proximity Advantage (So Close, Yet So Regulatory Different)

The Greater Bay Area initiative makes cross-border teams increasingly practical. Shenzhen is 30 minutes from Hong Kong by train. Guangzhou is under an hour. Teams can meet in person regularly without the complications of truly international operations. It’s almost like having colleagues in different districts of the same city — except those “districts” have completely different employment laws, tax systems, and compliance requirements. No big deal, right?

I know of a company that has developers in Shenzhen, their marketing team in Hong Kong, and sales across both. They told us, “It’s like having one team spread across two offices, except the two offices have completely different rule books and neither office will accept the other’s rules.” Actually, Talenox is pretty much like this as well. We’ve got employees working remotely across the globe. 

The Compliance Framework: Two Jurisdictions, Different Playbooks

Hong Kong Employment Requirements

Employees working in Hong Kong (regardless of where your company is registered) need these things:

• MPF enrolment within 60 days of employment,
• Salaries tax obligations (handled through employer)
• Employment Ordinance protections applied
• IR56 forms submitted for commencement and cessation

Your Hong Kong entity handles these through standard processes. If you’ve been following our previous articles on MPF and IR56B, this should feel familiar. 

Mainland China Requirements (Where It Gets Spicy)

Employees working in mainland China (even for Hong Kong companies) require the following:

• Social insurance registration covering pension
• Individual income tax withholding based on mainland tax rules
• Employment contracts complying with PRC Labour Contract Law
• Housing fund contributions 
• Work injury schemes
• Other statutory leave entitlements (e.g. maternity)

This is where it gets properly complex. You can’t just “add someone to payroll” in China the way you might in Hong Kong. There are entity requirements, registration processes, and ongoing compliance obligations that make Hong Kong’s system look like child’s play.

The Entity Question: Can You Even Employ Directly?

Operating Without a Mainland Entity (Spoiler: It’s Tricky)

Here’s what trips people up: to legally employ people in mainland China, you generally need a registered entity there.

A Hong Kong company without mainland registration can’t typically hire employees directly in China under Chinese employment law. It’s like trying to drive a car without a licence — technically you can operate the vehicle, but legally? That’s a different story.

Some businesses try workarounds — contractor relationships, service agreements, and offshore arrangements. However, bear in mind that these create significant risks including employment law violations if authorities determine true employment exists (and they’re getting quite good at spotting this).

In addition, there may be tax compliance issues affecting both employer and employee, unmet social insurance obligations, and potential penalties during labour disputes that make you wish you’d just done it properly in the first place.

It’s really really important to properly structure cross-border employment by understanding both Hong Kong and Greater Bay Area employment guidelines. 

Entity Setup Options (The Proper Route)

Setting up a mainland entity (e.g. WFOE, branch, or joint venture) gives you proper employment capability but requires substantial investment (minimum registered capital requirements).

The initial setup process can also be quite lengthy, averaging 3-6 months (hope you’re patient). Additionally, there are a lot of ongoing compliance obligations such as audits and filings throughout this process. It’s more paperwork than you thought possible.

For a small company hiring 2-3 people, this sounds resource-intensive (both time and capital), and it might not make sense. For building significant mainland operations, it might. It’s a bit like buying a whole bakery just because you fancy a croissant — economical only if you’re planning to eat a lot of croissants.

The EOR Alternative (The Sensible Middle Ground)

There is a good middle ground. Many Hong Kong businesses use Employer of Record services in China. The EOR becomes the legal employer in China, handles all employment compliance, payroll, and statutory requirements, whilst you manage the employee’s actual work and responsibilities.

This lets you hire in China without setting up an entity, typically at monthly fees per employee. It’s not free, but it’s way simpler than entity setup for small teams. Think of it as renting that croissant from the bakery instead of buying the whole shop.

Dual Employment: When Someone Works for Both (The Plot Thickens)

The Scenario

Sometimes employees split time between Hong Kong and mainland. A logistics manager spending 3 days in Hong Kong, 2 days in Shenzhen. A regional director overseeing operations in both locations. A consultant project-managing implementations across the border whilst probably living in airport lounges.

Where are they actually employed? Both places, potentially — which means dual compliance. Double the fun!

Tax Residency and the 183-Day Rule (The Magic Number)

According to mainland tax regulations for Hong Kong residents, individuals spending 183+ days in mainland China in a tax year become tax resident there, owing tax on worldwide income (with some exemptions).

This triggers comprehensive filing obligations, potential double taxation (though Hong Kong-China tax arrangement provides relief — thank goodness for small mercies), and complexity in determining taxable income allocation. What a headache. 

The 90-Day Threshold (The Sweet Spot)

For those spending less than 90 consecutive days in mainland, wages paid by Hong Kong employers for Hong Kong work may be exempt from mainland tax. This creates planning opportunities for cross-border roles with careful structuring.

Translation: if you can keep someone under 90 days mainland-side, life gets significantly easier. It’s like a tax planning limbo — how low can you go?

Documenting Dual Employment (Paper Trail Paradise)

When someone genuinely works in both jurisdictions, documentation needs to show employment contracts specifying work locations and time allocation (because “they work wherever they feel like it” isn’t legally sufficient), payroll records matching actual work location (not aspirational work location), tax filings in both jurisdictions as appropriate, and social insurance/MPF contributions properly split or allocated.

Missing this documentation makes disputes messy and audits problematic. And by “problematic,” we mean “potentially very expensive.” We really don’t want to make this mistake. Not wise lah.

Payroll Processing: The Practical Mechanics (Where Theory Meets Reality)

Currency Management (The Exchange Rate Dance)

While this might be an assumption, Hong Kong employees expect HKD salaries and Mainland employees expect RMB. That is unless of course one currency presides the other in strength, or perhaps the employee is paid in their “HQ” (where the company resides in) currency rather than their “home” (where the employee originally resides in) currency.

Common approaches include base salary in primary work location currency with allowances for time in other jurisdiction, or split salary agreements allocating portions to each location.

Some companies pay everything in RMB and convert for Hong Kong portions, others reverse it. There’s no “right” answer, just “whatever you can execute consistently without going mad.”

Exchange rate fluctuations affect take-home pay, creating employee relations issues if not handled carefully. Nobody enjoys discovering their salary is worth 5% less this month because the exchange rate had a mood swing.

Payment Methods (Banking Gymnastics)

Traditionally, Hong Kong salaries typically process via Hong Kong bank accounts through standard payment systems. Mainland salaries require mainland bank accounts with payments through Chinese banking systems. The two systems don’t talk to each other particularly well. 

An employee working both places might need accounts in both jurisdictions to receive split payments, or arrangements where employer handles conversion and consolidation (did I mention Talenox?). Your finance team will usually have a part to play in this.

Social Insurance vs MPF: Navigating Dual Systems (Choose Your Own Adventure)

Hong Kong MPF Requirements

Employees working primarily in Hong Kong need standard MPF enrolment at 5% employee + 5% employer (capped at HK$1,500 monthly), with contributions regardless of nationality or whether they also work elsewhere.

Mainland Social Insurance (The Five-Plus-One System)

Employees working in mainland need coverage under five insurance types plus housing fund:

Insurance Type	Coverage	Your Reaction
Pension	Old age security	Sensible
Medical	Healthcare costs	Also sensible
Unemployment	Job loss support	Makes sense
Work Injury	Workplace accidents	Still tracking
Maternity	Maternity/paternity benefits	Getting complex
Housing Fund	Not insurance but mandatory anyway	Wait, what?

Contribution rates vary by city and salary levels. In Shenzhen, total employer contributions can reach 13-14% of salary, with employee contributions around 10-11%. That’s… significantly more than Hong Kong’s 5%.

Avoiding Double Contributions (The Certificate Dance)

The HK-China social security agreement allows exemption from one jurisdiction’s requirements if contributing in the other, but requires proper documentation including certificates of coverage from primary jurisdiction and correct application procedures.

Without this, employees might pay both MPF and mainland social insurance, neither of which they can easily recover. That’s like paying for two gym memberships and only being able to use the equipment at one. Sigh.

Tax Compliance: Meeting Obligations in Both Places (Fun Times Ahead)

Hong Kong Salaries Tax (The Simpler One)

Income earned from Hong Kong employment gets taxed under Hong Kong’s salaries tax system at progressive rates up to 17% or standard rate of 15% (whichever is lower). Employers handle this through standard PAYE systems, submit IR56 forms, and provide employees with tax documentation.

If you’ve read our compliance guide, you know this drill.

Mainland Individual Income Tax (The Spicier One)

China uses progressive tax rates from 3% to 45%, significantly higher than Hong Kong for higher earners. The tax is calculated on comprehensive income, with deductions and allowances different from Hong Kong’s system.

For someone earning HK$50,000 monthly, Hong Kong tax might be around HK$6,500 (13%). If that same income were subject to mainland tax, it could reach HK$12,000+ (24%+). The difference matters. A lot.

Tax Equalisation Policies (Keeping Employees Happy)

Many companies with cross-border employees use tax equalisation — guaranteeing employees specific after-tax income regardless of where taxes are actually paid. The company absorbs tax differences.

This protects employees but requires careful calculation of actual tax obligations in each jurisdiction and company willingness to cover excess costs. It’s generous, but not cheap.

The Avoidance of Double Taxation Arrangement (Thank Goodness This Exists)

Hong Kong and mainland China have a Comprehensive Double Taxation Agreement preventing the same income from being taxed twice. Employees can claim foreign tax credits for taxes paid in one jurisdiction against obligations in the other.

But claiming these credits requires proper documentation, understanding of which jurisdiction has primary taxing rights, and accurate allocation of income sources. Simple in theory, fiddly in practice.

Documentation That Actually Matters (Paper Trail or Bust)

Employment Contracts (Get This Right)

Cross-border roles need contracts specifying work will be performed in Hong Kong, mainland, or both, how time will be allocated between locations (be specific — “sometimes in both places” won’t cut it), which entity employs (important for labour disputes), base location for employment law purposes, and how compensation handles multi-jurisdiction work.

Vague contracts create problems when disputes arise or authorities question employment structure. And vague contracts are, unfortunately, quite popular because they’re easier to write. 

Work Permits and Visas (The Legal Basics)

Hong Kong residents working in mainland need mainland work permits or talent visas if staying extended periods. Mainland residents working in Hong Kong need appropriate Hong Kong work visas.

Tourist visas don’t permit work. We shouldn’t have to say this, but based on stories we’ve heard, apparently we do. Even short trips for meetings can create grey areas, and remote work across the border has murky legal status that authorities are still figuring out.

One company had a Shenzhen-based developer “temporarily” working remotely for their Hong Kong team. After 8 months, mainland authorities questioned why he was doing Hong Kong work without proper employment structure. Messy situation involving backpay, penalties, and probably some very stressed HR people.

Payroll Records (Your Audit Survival Kit)

Maintaining separate records for each jurisdiction showing days worked in each location, income earned per jurisdiction, tax withheld by jurisdiction, and statutory contributions per location creates audit trails that protect both employer and employee.

When authorities come knocking (and eventually, they will), you really want to produce organised documentation within hours. If you have scattered spreadsheets or paper records everywhere, you’re in for a rolling good time. 

When Outsourcing Makes Sense (Spoiler: Probably Now)

Managing one or two cross-border employees might be doable internally with good software and careful attention. Managing five or more across both jurisdictions, with different pay structures, varying time allocations, and complex tax situations? That’s when outsourcing starts making serious sense. Here are some types of outsourcing (for different budgets and needs):

What Professional Support Provides

Specialists handling Hong Kong-China payroll offer some of the following (but not limited to):

• Entity structuring advice (do you need mainland entity, EOR, or other setup?)
• Dual payroll processing complying with both jurisdictions
• Tax optimisation ensuring employees aren’t overtaxed
• Documentation maintaining proper records for audits, and
• Regulatory monitoring staying current with both jurisdictions’ changes

We work with Payroll Experts who specialise in cross-border Hong Kong-China arrangements. They handle the complex stuff — entity compliance, dual tax filings, social insurance coordination — whilst our Talenox platform manages day-to-day HR operations such as cross-border payroll processing and leave-management.

The Hybrid Model (Best of Both Worlds)

Many businesses use Talenox software for Hong Kong-side payroll and basic operations, engage Payroll Experts or similar specialists for mainland compliance and complex cross-border situations, and work with EOR providers when hiring mainland employees without entity setup.

You keep visibility and control through Talenox whilst having expert backup for the complicated cross-border pieces. It’s like having training wheels, except the training wheels are actually compliance experts who know what they’re doing.

Real Scenarios and How They’re Handled (Theory Meets Practice)

Scenario 1: Hong Kong Company Hiring Shenzhen Developer

A fintech startup wants to hire a developer based in Shenzhen to work remotely for their Hong Kong team.

Solution: Use an EOR service in Shenzhen to legally employ the developer under Chinese law. EOR handles mainland payroll, social insurance, and tax compliance. Talenox manages integration with the Hong Kong team systems (our system is fully localised for Hong Kong statutory requirements).

Employee gets proper employment protections and social benefits. Company avoids entity setup but stays compliant. Everyone wins, except maybe the EOR provider who has to deal with all the paperwork. But at least it’s not you.

Scenario 2: Regional Manager Splitting Time

A logistics company’s operations manager works 3 days weekly in Hong Kong, 2 days in Guangzhou. He’s basically living on the train at this point.

Solution: Primary employment through Hong Kong entity with proper visa for mainland work. Payroll allocated based on actual days worked in each location. Tax filings in both jurisdictions using time-allocation method. MPF contributions in Hong Kong with social insurance exemption certificate.

Requires detailed time tracking and careful documentation but provides clean compliance in both places. Also requires a manager who doesn’t mind travelling. A lot.

Technology and Systems for Cross-Border Management

What Good Platforms Handle

Modern HR systems may not process payroll in both jurisdictions (that still requires jurisdiction-specific setup), but they do maintain unified employee databases showing entire organisation, track time allocation across locations for dual-employment scenarios, and generate reports consolidating data from both jurisdictions.

Talenox provides Hong Kong payroll processing with full compliance and possible integration capability with mainland payroll systems. Cross-border currency payments are also made easy with our multi-currency payroll feature (forex conversion). 

What Still Needs Specialist Support

However, in some cases, even with good software, cross-border operations typically need experts for mainland entity setup and registration (unless you enjoy complex bureaucracy as a hobby), Chinese social insurance navigation (it’s an adventure), dual tax filing and optimisation, regulatory interpretation as rules change (and they will), and dispute resolution when employment issues arise. Choosing a good outsourcing partner (like Talenox or its Payroll Experts) can help you with all these. 

Making Cross-Border Work (Yes, It’s Possible)

Managing cross-border payroll in Hong Kong and China teams doesn’t have to be overwhelming. It requires understanding the compliance framework in both places, proper entity structure or EOR arrangements, systematic documentation and record-keeping (we cannot stress this enough), and expert support for complex situations.

But here’s the good news: thousands of companies are already doing this successfully. You’re not pioneering uncharted territory — you’re following a well-trodden path that just happens to have some regulatory potholes along the way.

Want to figure out cross-border payroll for your business? Reach out to us and we’ll help you understand your options — whether that’s Talenox software for Hong Kong operations with connections to mainland specialists, partnerships with Payroll Experts for comprehensive cross-border support, or EOR arrangements for mainland hiring without entity setup.

Because running teams across Hong Kong and China should expand your capabilities and access to talent, not create compliance headaches that keep you awake at night wondering if you’ve accidentally committed some obscure regulatory violation.

Life’s too short for that kind of stress.