China

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Facts & figures

General Information

Government Type: Communist state

Capital: Beijing

Currency: Chinese New Yuan (Renminbi)

Main Languages: Standard Chinese or Mandarin (Putonghua), Cantonese (mainly in the South of China /Hong Kong)

Economic Indicators

GDP Per Capita: 9,771 USD (2018)

Main Business sectors:

Manufacturing: 46.8%

Mining: 21.2%

Energy: 3.6%

Workforce indicators

Employment Rate: 93%

Higher Education Rate: approximately 20%

China – the Red Empire

China is the largest economy in the world, thanks to a series of governmental and economic reforms that started in the late 1970s.

The Government’s 13th Five-Year Plan, unveiled in March 2016, emphasizes the need to increase innovation and boost domestic consumption to make the economy less dependent on government investment, exports, and heavy industry.

Since then, China has made more progress on subsidizing innovation than rebalancing the economy. Beijing has committed to giving the market a more decisive role in allocating resources, but the Chinese Government’s policies continue to favor state-owned enterprises and emphasize stability.

The Chinese market presents significant benefits and opportunities for international companies but is also known for fierce competition end very quickly evolving market situation. One of the most critical success factors is a dedicated and highly motivated local sales and management team on the ground in China, such as a favorable entrepreneurial environment, an abundance of skilled bilingual talents, and stable, clear Government policies.

Global People facilitates and accelerates its client’s business in China by providing top of the line global employment services, such as: Recruitment, PEO & EOR, HR management, and Employee Benefits.

Global people’s services include:

PEO and HR management.
Accurate cost simulations, including Gross-to-Net and total employer’s cost calculations.
Full management of payroll, insurance and employee benefits.
A designated point of contact for the client and the employees, available for any query or question that may rise.
Accessible consultation and professional opinions.
Local recruitment.

Employment Manual – China

The Chinese Labor Law

The Chinese Labor Law was adopted in 1994 and aims at protecting laborers’ rights and interests. The law has 13 chapters, that may differ according to practices used in other countries.

The Labor Law chapters include the following sections:

General Provisions
Promotion of Employment
Labor Contracts and Collective Contracts
Working Hours, Rests, and Leaves
Wages
Labor Safety and Sanitation
Special Protection for Female Staff and Workers and Juvenile Workers
Professional Training
Social Insurance and Welfare Treatment
Labor Disputes
Supervision and Inspection
Legal Responsibilities
Supplementary Provisions

Termination

Termination process

Unilateral termination by an employer in China may be difficult unless the employment contract expires or there is a mutual agreement between the employer and the employee.

Notice Period

The notice period is 30 days for both the employee and employer.

Severance Pay

The severance pay is calculated as 1-month average wage for each year, capped at 12 months.

Payroll Taxes

There are several mandatory Social Insurance taxes paid by both the employer and the employee in China. Please note that those taxes can add as much as additional 40% on top of the employee’s gross salary paid by the employer.

Employer Payroll Taxes

	Beijing	Shanghai
Maximum base	27,786 CNY (FY2020)	28,017 CNY
Pension	16%	16%
Unemployment Insurance	0.8%	0.5%
Medical insurance	10%	9.5%
Injury Insurance / Work Injury	0.2%	0.3%
Maternity insurance	0.8%	1%
Housing fund	12%	7%
Disability Fund		1.5%
Total employment cost	39.8%	35.8%
* Social Insurance tax rates and tax bases differ depending on the location in China and are often amended on annual basis (around July).

Employee Payroll Taxes

	Beijing	Shanghai
Pension	8%	8%
Unemployment Insurance	0.2%	0.5%
Medical insurance	2%	2%
Maternity Insurance	2%	2%
Housing fund	12%	7%
Total employment cost	24.2%	19.5%

Employee Income Tax*

Taxable income	Tax
Up to 36K CNY	3%
36-144K CNY	10%
144-300K CNY	20%
300-420K CNY	25%
420-660K CNY	30%
660-960K CNY	35%
960K CNY or more	45%
Additional deductions and adjustments can apply.

Mandatory Employee benefits

Paid leave

Up to 1 year of employment	0
1-10 years	5 days
10-20 years	10 days
20 years or more	15 days

Sick leave

The calculation of compensation for sick days depends on the city of employment in China (different cities may have different regulations on this subject), but in general is calculated according to the sick leave duration and employment period, as in the example below:

Employment Period	Up to 6 months sick leave	Over 6 months sick leave
Up to 1 year	60% of regular salary	40% of regular salary
2-4 years	70% of regular salary	50% of regular salary
4-6 years	80% of regular salary	60% of regular salary
6-8 years	90% of regular salary
More than 8 years	Full salary
In addition, in order to apply for a sick leave, the employee must provide a valid medical certificate from a doctor.

Public holidays

China has 11 public holidays which are given in addition to annual leave.
There are 2 “Golden Week” holidays in China: one in the Spring (Spring Festival) and one in Autumn (the National Holiday). These holidays are usually linked with weekends, to allow 7 days of leave in a row. The extra days off have to be exchanged for working on another weekend.

Maternity leave

In most Chinese cities the general guidelines regarding maternity leave, are as follows:

The newborn’s mother is entitled to 98 days of paid maternity leave.
Additional 15 days are given to women who had multiple babies or went through difficult labor.
Fathers are entitled to 10 days of parental leave.
Nursing mothers are entitled for an hour off per day for 12 months after giving birth.
Labor contracts cannot be terminated during the employee’s maternity leave and 12 months thereafter.

Marriage leave

Employees are intitled for a 3-10 days marriage leave.

Specific Employee Benefits and Industry Benchmarks

Specific Employee Benefits and Industry Benchmark

Benefit	Status (mandatory/optional/optional-common)	Provided by (social security/an allowance/3^rd party/employer etc)
Private Pension	Private Pension plans are optional (and rare)	Basic Pension Insurance is a part of statutory Social Insurance coverage in China paid by the ER and EE.
Fitness/wellness cover	Optional	Provided by ER as allowance subject to Income Tax
Meal vouchers/allowance	Optional	Provided by ER as allowance subject to Income Tax
Commuter benefits	Optional –common	Provided by ER as allowance subject to Income Tax
Internet allowance	Optional	Provided by ER as allowance subject to Income Tax
Car allowance /parking allowance	Optional	Provided by ER as allowance subject to Income Tax Usually RMB 1.5-2 /km gross
Phone allowance	Optional –common	Provided by ER as allowance subject to Income Tax

Additional Medical Insurance (US$50-100+ /month)	Optional –common	Provided by 3^rd party, purchased by ER subject to Income Tax
Annual Medical Check (on-boarding medical check)	Optional –common	Provided by 3^rd party, purchased by ER subject to Income Tax
13^th month salary bonus	Optional –common	13^th (sometimes 14^th) salary bonuses paid to the EEs around the Chinese New Year
Additional Annual Leave	Optional –common	5-15 days of extra days off in addition to minimum required by the Chinese Labor Law
Annual 100% paid sick leave	Optional –common	6-12 days /year NOT subject to providing sick certificate from hospital (as required for regular sick leave)
Mid-Autumn Festival and Chinese New Year ’Red Packet’ small cash bonus or equivalent gift;	Optional –common	RMB 500-1,000 /time provided by ER subject to Income Tax