Source: Shutterstock
Overview
China boasts the largest population of any country in the world, with over 1.4 billion people. Also, it is home to a highly talented and educated workforce. The education system in China is strong, with many universities and technical schools.
Employment laws in China are designed to protect Chinese workers' rights, but there are also strict regulations on hiring and firing employees. The business climate in China is generally favourable for foreign investment, but there are still some challenges, such as intellectual property rights protection and regulatory compliance.
The top industries in China include manufacturing, retail, technology, and services, but the country is also rapidly developing high-tech and green industries.
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Capital |
Beijing |
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Languages spoken |
Official: Standard Mandarin, Cantonese, Portuguese, English, Mongolian, Korean, Tibetan, Uyghur, Zhuang, Kazakh, Yi National: Standard Mandarin |
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Population size |
1.453 billion as of January 25, 2023 |
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Payroll frequency |
Monthly |
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Currency |
Renminbi (RMB) |
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VAT |
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Payroll and taxes in China
In China, payroll and taxes are regulated by the State Administration of Taxation (SAT) and the Ministry of Human Resources and Social Security (MOHRSS). Employers are responsible for withholding and paying taxes on their employees’ behalf and making social security contributions.
Employer contributions in China
Social insurance contributions
Employers are required to contribute to employee social insurance programs, including
- pension
- medical
- unemployment
- work-related injury
Depending on the employee's salary level and the location of employment, the contribution rate is generally as follows:
- pension - around 14-18% of the employee's salary
- medical insurance - around 5-10% of the employee's salary
- unemployment insurance - around 0.3-1% of the employee's salary
- work-related injury insurance - around 0.1-1.5% of the employee's salary
- maternity - up to 1% of the employee's salary
Housing provident fund contributions
Employers are also required to contribute to the housing provident fund on behalf of their employees. These contributions help employees save for housing expenses, and the local government sets the contribution rate (around 5-12% of the employee's salary).
Income tax withholding
Employers are responsible for withholding and remitting the income tax of their employees. The employer will calculate the income tax of the employee based on their salary, deduct it from his salary, and then remit it to the tax bureau.
Employee contributions in China
Income tax
Employees must pay income tax on their salaries and wages. The tax rate varies depending on the employee's salary level and the region where the company is located, with progressive rates up to 45%.
Following are the individual income tax rates for residents:
For residents, individual income tax rates are calculated after the standard, specific, and other allowable deductions are deducted.
For non-residents, individual income tax is calculated monthly. Following are the individual income tax rates for non-residents:
Social insurance contributions
Employees are also required to contribute to social insurance programs, but the contribution rate is generally lower than the employer's rate. The contribution rates for social insurance are as follows:
- Pension insurance - around 8-11% of the employee's salary
- Medical insurance - 2-3% of the employee's salary
- Unemployment insurance - around 0.5-1% of the employee's salary
- Work-related injury insurance - around 0.2-0.5% of the employee's salary
Housing provident fund contributions
Around 5-12% of the employee's salary is deducted for the housing provident fund.
Working hours in China
The working hours in China are regulated by the People’s Republic of China Labour Law. According to the law, the normal working hours are eight hours per day and 40 hours per week. Employers must also provide a minimum of one day off per week.
Overtime hours are defined as any hours worked beyond the normal working hours. The maximum overtime hours that can be worked per month is 36 hours, and overtime pay must be at least 150% of the employee's regular pay. However, for certain types of work, the overtime rate can be higher, up to 300%.
Irregular working hours are also regulated by the Labour Law, which states that employers must give employees at least 11 hours of rest between the end of one work shift and the beginning of the next and must provide appropriate rest breaks during the work shift.
Working hours and overtime regulations may vary depending on the specific industry and the region where the company is located. Employers must also keep accurate working hours and overtime records and provide employees with a written contract specifying their working hours.
Source: Shutterstock
Types of leave available in China
Annual leave
Work tenure in China refers to an employee's cumulative work years with all previous and current employers.
Following is the length of annual leave based on length of service:
Public holidays
Table 4: Public holidays in China
Sick leave
Employers generally have discretion over the number of paid sick days they provide to employees annually. However, the regulations surrounding the recuperation period are more stringent than those for paid sick days. This period is meant for employees suffering from non-occupational sickness or injury, and the employer is responsible, by law, for paying a portion of their salary. Local labour laws, collective bargaining agreements, or company policies may determine the exact amount and specifics of the payment.
Maternity/paternity leave
China has several laws and regulations regarding maternity leave for pregnant employees. The following are some key highlights of the maternity leave policy in China:
- Prenatal examination: Prenatal checkups for pregnant employees within healthcare institutions during working hours are considered working time.
- Pregnant employees are entitled to 98 days of maternity leave after their due date, 15 days before if needed. Difficult delivery allows for an extra 15 days of leave, with an additional 15 days allowed for each additional baby born. In case of a miscarriage, employees are given 15 days of leave within the first four months of pregnancy and 42 days if it occurs after four months.
- Pre-delivery leave: Pregnant employees, after the seventh month of pregnancy, can take 2.5 months of pre-delivery leave with approval from their employer.
- Lactation leave: Female employees may take 6.5 months of lactation leave if they face difficulties and their employer allows it.
- Feeding period: Female employees with a child under one year old can take two feeding periods of 30 minutes each (including artificial feeding) per day, which are considered working time. In case of multiple births, an additional hour is added for each additional newborn baby.
- Additional maternity leaves: Pregnant employees in Shanghai have 30 extra days of leave in addition to the 98 days, and fathers are given ten days. These extra leaves can be postponed for national holidays.
These regulations provide support and protection for pregnant employees in the workplace and help ensure their well-being during and after pregnancy.
Source: Shutterstock
Background checks in China
Background checks in China are mandatory for certain industries, including those in the financial, medical, and legal sectors. Employers in these industries are required by law to conduct background checks on new hires to ensure that the employees have a clean criminal record and have not engaged in any illegal activities. Other industries may also choose to conduct background checks on a discretionary basis.
Termination of employment in China
In China, the Labour Contract Law regulates employment termination, which outlines the rights and obligations of both the employer and the employee.
Severance Pay
In the case of termination, an employer must provide severance pay to the employee if the employee has worked for more than one year and the termination is not due to serious misconduct. The amount of severance pay is calculated based on the years worked, with the highest amount being one month's salary for each year worked. Employment of six months to one year is considered a year’s service, and thus entitled to a month’s salary as severance pay. Those terminated less than six months into their jobs are entitled to a half month’s pay.
Probationary Period
A probation period of up to six6 months may be included in the employment contract in China. During this period, the employer may terminate the employment contract without cause.
Notice Period
The notice period for termination of employment in China depends on the employee’s length of service:
Talent acquisition
Growing a business comes with its own set of challenges and risks. To minimise these risks, it is important to have a team of skilled and knowledgeable professionals. With Airswift, you get a local talent acquisition specialist to help find the right employees in a competitive market.
In addition to traditional hiring, we also offer temporary staffing options for short-term projects and flexible staffing solutions to meet your changing needs. You can rely on our database of highly qualified contractors to provide you with the talent you need when you need it.
For a more permanent staffing solution, our professional recruitment services can help you find the right talent from China who fits your specific requirements.
Employer of record
If you need to hire employees remotely and don't want to establish a physical office, an employer of record (EOR) service may be a good option.
An EOR service, provided by a third party, can relieve you of the burden of setting up a local office and allow you to focus on running your business. The service handles responsibilities such as paying employee salaries and offering statutory benefits.
