New companies expanding their operations into China often find that its unique and complex regulations daunting. Businesses often lack the local experience and foresight to circumvent common road blocks. Many businesses benefit tremendously from outsourcing their accounting, payroll and HR administration work.
One of the biggest risks employers face in executing China payroll is not fully complying with the nation’s employment guidelines. China has different laws and regulations concerning treatment of employees, but the basic principles of China’s labor laws are the fair and equal treatment of employees regardless of race or sex, no employment for children under the age of 16, and the right for workers to organize.
Compensation & Severance
Minimum wages are set by local government agencies across China, and the country’s labor bureaus set standard minimum wages for certain types of jobs. Though many employers flout the standardized national guidelines, China has an eight-hour work day with an average working week no more than 44 hours long and (generally) two days off per week. Salaries are generally paid monthly.
An employee may terminate employment with 30 days’ written notice. Employers must provide 30-day advance notice to an employee to part ways with mutual consent, and must pay severance unless the employee failed to satisfy the conditions of his or her employment contract and/or violated any laws or company policies. Severance is calculated as one month's salary for every year of service. (The employer can pay one extra month’s salary beyond the severance pay requirement in the event that they do not want to comply with the 30-day advance notice period.)
Taxes, Benefits & Withholdings
Required tax deductions vary from region to region (and even city to city) across China, but they usually total around 40 percent of an employee’s salary. Since all employees pay income tax, China mandates that employers withhold around 15 percent of employees’ wages for individual income taxes and pay, paying them to China’s tax bureau before the 15th of each month. Employers are also required to withhold and pay a shares tax, bonus tax, or severance tax when applicable.
The amount of social insurance and Housing Fund contributions are adjusted each year for every city or region, with the amount determined using the average salary in each city. Respective government officials often implement the changes at different times, placing an important administrative burden on employers to stay abreast of all required payroll compliance guidelines. The required withholdings must be paid to the Bureau of Labor Insurance, National Health Insurance Council, and the Employee Pension Board before the 15th of the following month.
Leave, Vacations & Holidays
As in most other Asian countries, workers in China receive about 10 paid holidays per year. These generally include the first three days of the traditional Chinese lunar calendar, three days for International Labor Day on May 1-3, and three days for National Day from October 1-3. They also receive a paid holiday for January First on the Western calendar and China’s government occasionally establishes special holidays on short notice.
Employees are entitled to between 5 and 15 days of paid annual leave at a sliding scale based on their length of service to the employer. Employees can also apply for sick leave, marriage leave, and funeral leave, when applicable.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143512, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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