How To Hire And Pay Employees In China

Emerald Technology's guide to hiring employees in China

CURRENCY

Chinese Yuan is the official currency of China. Its currency symbol is ¥, CNY.

CAPITAL CITY

Beijing, formerly known as Peking is China's political, educational and cultural centre.

LANGUAGE

Mandarin is the official dialect of China. More than 70% of the population speak it. There are other major dialects and languages.

POPULATION The current population of China is  1.412 Billion in 2021 based on World bank numbers.
PAYROLL FREQUENCY The payroll frequency in China is monthly, with workers being paid on the last working day of every month. China also has a 13th or 14th month salary on occasions.
PUBLIC HOLIDAYS China has 7 public holidays for all citizens.

GROW YOUR TEAM IN CHINA

NO ENTITY, NO PROBLEM

To start growing your team in China, you must establish a local entity- including an account with a local bank, a local office and an address registered as a subsidiary. This allows you to manage payroll, tax, benefits and compliance for your employees, but can take several months. 

Emerald can hire and payroll your workers, quickly and compliantly with their ready to go entity. Make growing your team simple with Emerald as a global partner.

PROS AND CONS OF HIRING IN CHINA

China is developing at an incredibly fast rate, along with heavy investment in the country. Salaries are competitive within industries, many Chinese are typically well educated, highly motivated, and ambitious. However, there can often be culture clashes with other countries. Companies need to ensure they are complying with strict local laws when considering employing a Chinese national.   

WHY CHINA IS GOOD FOR REMOTE WORKERS

China has a relatively low cost of living compared with other developed countries. However, compared with other countries China is still catching up with the global trend of remote working and if Chinese work culture is ready to adapt.

START GROWING YOUR REMOTE WORKFORCE NOW

WORKING TIME AND OVERTIME IN CHINA

The Chinese government stipulates a 5-day work week, typically worked Monday through Friday, which is regulated to no more than 8 hours per day and no more than 44 hours per week. Any work that exceeds 8 hours per day must be paid at 1.5x the employee’s normal salary for a normal work day. Employees who are asked to work at the weekend must be paid 2x salary, and 3x salary on a Chinese national holiday. Overtime is limited to 3 hours on a given day and 36 hours per month.  

ANNUAL LEAVE AND CHINA'S PUBLIC HOLIDAYS

Employees who have worked at a company for one continuous year are entitled to five days’ annual leave. Where an employee has not taken all of their paid annual leave in a given year, they are permitted to carry over the untaken leave to the next year. If they decline to do this, the employer must compensate this employee with 200% of the employee’s average daily wage for each day of unused annual leave, in addition to their regular daily wage. 

January 1st: New Year's Day 
February 1st: Spring Festival 
April 5th: Qingming Festival 
May 1st: Labor Day 
June 3rd: Dragon Boat Festival 
September 10th: Mid-Autumn Festival 
October 1st: National Day

PROBATION PERIOD IN CHINA

The maximum probation period is dependent on the term of the employment contract, as follows: 

  • Fixed term employment contract up to 1 year: 1 month 
  • Fixed term employment contract of 1-3 years: 2 months
  • Fixed term employment contract of 3+ years, or indefinite contract: 6 months

RESIGNATION AND DISMISSAL IN CHINA

The amount of notice for termination varies with length of service, according to the following schedule: 

  • 1 month-2 years' service: 1 week's notice
  • 2+ years' service: 1 week per year of completed service, up to a maximum of 12 weeks' notice

In China, severance pay amounts to 1 month's pay per year of service. Employees who have worked for less than 6 months are entitled to half a month's pay. If an employee’s monthly salary exceeds 3x the average monthly wages of employees in the municipality where the employer is located, severance will be paid at the rate of 3x the local average monthly wages and cannot be for more than 12 years of work. 

RESTRICTIVE COVENANTS

Reasonable restrictive covenants that protect the employer's legitimate business interests are allowed. Non-compete clauses should last no longer than 2 years and compensation is required in accordance with local rules. Customer and employee non-solicitation agreements are permissible by law but relatively difficult to enforce in practice. 

READY TO HIRE YOUR EMPLOYEES IN CHINA?

CONTRACT OF EMPLOYMENT IN CHINA

In China, it is a legal requirement to implement a strong employment contract which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in China should always state the salary and any compensation amounts in Chinese Yuan Renminbi rather than a foreign currency. 

CHINA'S MATERNITY LEAVE

Pregnant employees are entitled to 98 days of maternity leave, including 15 days of prenatal leave. For multiple births, 15 days' additional maternity leave will be granted for each additional child. Extended maternity leave is subject to local regulations, but an additional 30 days can usually be granted. Statutory paternity leave in China is 14 days. 

SICKNESS LEAVE IN CHINA

Employees are entitled to a period of medical treatment for illness or non-work related injuries that can vary from 3 to 24 months, depending on cumulative working years and length of service with their current employer. Employees are usually paid 60-100% of their normal wage during their sick leave period, depending on their seniority. 

HEALTHCARE AND INSURANCE

Basic health and pension insurance is provided through the national system; however, supplementary health insurance is often supplied by the employer. 

Employment of

FOREIGN NATIONALS IN CHINA

All foreign nationals entering, leaving and passing through or residing in China must obtain the relevant visas from the relevant Chinese authorities. 

Visas in China

Depending on the status and type of passport held by a foreign national, a diplomatic, courtesy, business or ordinary visa may be issued. Ordinary visas are designated by letters that correspond to the purposes of the individuals’ visits - ordinary visa Z is issued to a person who will work in China and is valid for three months (one entry). Business visa M is issued to those who intend to go to China for commercial and trade activities – it can be single, double or multiple entry and can be issued for up to 10 days, with the duration of each visit typically being 30-60 days. Foreign nationals may obtain residence permits from the local Public Security Bureau for terms of between 3 months and 5 years, depending on the purpose of residence.  

Salary Taxes

MINIMUM WAGE IN CHINA

Minimum wages are determined by provincial governments, factoring in elements such as the minimum living costs of local employees and their dependents, the urban residents’ consumption price index, the social insurance premiums and the housing funds paid by the employees themselves, the average salary of the employees, the level of local economic development, and the local employment status. Minimum wages in China vary greatly between different provinces, and even between different cities and areas within each province. The highest rates are in Shanghai at 2480 yuan per month / 22 yuan per hour. The lowest are less than half of the highest: the minimum rate in the Huludao and Tieling areas of Liaoning province is 1120 yuan per month / 10.6 yuan per hour. These figures can vary on a monthly basis.

CHINA'S INCOME TAX

The U.S tax year runs from January to December. It is the employer’s responsibility to ensure taxes are paid from salaries before payments are made to employees. There are state taxes to pay which vary in each state as well as federal tax. Federal tax varies depending on the employee’s personal situation, such as if they are single, married or jointly filing with a partner, or if they are head of their household. 

Tax rates for residents:

Taxable Income Tax Rate (%)
Up to 36,000 83%
Next 108,000 10%
Next 156,000 20%
Next 120,000 25%
Next 240,000 30%
Next 300,000 35%
960,000+ 45%

 

Tax rates for non-residents

Taxable Income Tax Rate (%)
Up to 3,000 3%
Next 9,000 10%
Next 13,000 20%
Next 10,000 25%
Next 20,000 30%
Next 25,000 35%
80,000+ 45%

 

SALARY PAYMENTS IN CHINA

Though not mandatory, in many parts of China, it is customary to pay the salary on a 13-month basis, by incorporating an additional final month that is paid just prior to the Chinese New Year (typically in early February). Many employees expect to receive it and problems may arise if it isn’t offered. This extra month is taxed in the same way as regular earnings. Some companies also provide 14th- and 15th-month bonuses, adjusted according to performance reviews. 

SOCIAL SECURITY CONTRIBUTIONS IN CHINA

Social security contributions to pension funds, medical funds, etc. are mandatory for Chinese employees. Foreign individuals who hold a China work permit are also required to make social security contributions in relation to pension, medical, unemployment, maternity, and work-related injury. Monthly employer and employee social security contribution rates, and applicable caps, are governed by local jurisdictions and vary quite broadly. For example, contribution rates and caps applicable to Chinese employees in Shanghai and Beijing are as follows: 

 

City Shanghai Beijing
Social Insurance Item Employee Employer Employee Employer
Pension 8% 16% 8% 16%
Medical 2% 9.5% 2%+CNY 3 10%
Unemployment 0.5% 0.5% 0.2% 0.8%
Maternity 0% 1% 0% 0.8%
Work-related injury 0% 0.16- 1.52% 0% 0.2-1.9%
Total 10.5% 27.16- 28.52% 10.2% + CYN3 27.8 - 29.5%

 

WORKER MISCLASSIFICATION IN CHINA

Similar to other countries, China has strict rules on classifying individual contractors and full-time employees differently. Misclassifying your workers can put your business at risk of fines.

ENQUIRE ABOUT OUR GLOBAL HIRING SOLUTIONS

Start a conversation on how we can assist you to grow your remote team.