China

Facts & figures

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)

GDP Per Capita: 9,771 USD (2018)

Main Business sectors:

Manufacturing: 46.8%

Mining: 21.2%

Energy: 3.6%

Employment Rate: 93%

Higher Education Rate: approximately 20%

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 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

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.

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

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.

 BeijingShanghai

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).

 BeijingShanghai

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%
Taxable incomeTax
Up to 36K CNY3%
36-144K CNY10%
144-300K CNY20%
300-420K CNY25%
420-660K CNY30%
660-960K CNY35%
960K CNY or more45%

Additional deductions and adjustments can apply.

Mandatory Employee benefits

Up to 1 year of employment0
1-10 years5 days
10-20 years10 days
20 years or more15 days

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 leaveOver 6 months sick leave

Up to 1 year

60% of regular salary40% of regular salary

2-4 years

70% of regular salary50% of regular salary

4-6 years

80% of regular salary60% 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.

  • 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.

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.

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

Specific Employee Benefits and Industry Benchmarks

Benefit Status (mandatory/optional/optional-common)

Provided by

(social security/an allowance/3rd party/employer etc)
Private PensionPrivate 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 coverOptional

Provided by ER as allowance

subject to Income Tax

Meal vouchers/allowanceOptional

Provided by ER as allowance
subject to Income Tax

Commuter benefitsOptional –common

Provided by ER as allowance
subject to Income Tax

Internet allowanceOptional

Provided by ER as allowance
subject to Income Tax

Car allowance /parking allowanceOptional

Provided by ER as allowance
subject to Income Tax
Usually RMB 1.5-2 /km gross

Phone allowanceOptional –common

Provided by ER as allowance
subject to Income Tax

  

 

Additional Medical Insurance (US$50-100+ /month)Optional –common

Provided by 3rd party, purchased by ER
subject to Income Tax

Annual Medical Check (on-boarding medical check)Optional –common

Provided by 3rd party, purchased by ER
subject to Income Tax

13th month salary bonusOptional –common

13th (sometimes 14th) salary bonuses paid to the EEs around the Chinese New Year

Additional Annual LeaveOptional –common

5-15 days of extra days off in addition to minimum required by the Chinese Labor Law

Annual 100% paid sick leaveOptional –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

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