China payroll management is of great importance for foreign-invested enterprises, since they need to ensure that their entity is legally capable of running a payroll and meeting local regulations. Further, in order to run payroll in China, foreign enterprises must be appropriately registered and incorporated locally. Local payroll management in China can quickly become a challenging operation to conduct to most foreign managers.
Depending on the foreign-invested enterprise budget and time-frame, it might be efficient to outsource the payroll management to a local payroll provider and/or to ask advice on the actual management system. Tannet is capable of advising on payroll management to any enterprises willing to gain in term of efficiency.
China Payroll Management - Employment Considerations
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.
Under Chinese labor law, all employees are required to sign employment agreements with employers. Yet the stipulations multinational companies must adhere to depend on their business structures. For example, only limited companies (such as WFOEs) are eligible to sign employment contracts directly with Chinese workers. If the company is a Representative Office (RO), then it can only hire local employees through a licensed third party known as a “local service unit.”
China Payroll Management - Compensation & Severance Considerations
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.
Due to the many labor agreements affecting Chinese employers, overtime work may be required of employees only after consultation with any applicable trade unions (unless the situation is an emergency). Following any required consultations, overtime work is limited to one hour per day, or three hours per week, with a maximum of no more than 36 hours per month. Normal overtime pay is set at 150% of normal wages; overtime work performed on ‘rest days’ (weekends) must be paid at 200% of normal wages, and extra work performed on holidays must be paid at 300% of normal wages.
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China Payroll Management - 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.
Employers and employees are required to contribute to China’s mandatory social insurance schemes - pension insurance, medical insurance, industrial injury insurance, unemployment insurance, and maternity insurance - as well as to its ‘Housing Fund,’ which allows Chinese employees to save money towards purchasing their own home. (Note: Employee contributions may not be required for injury and maternity insurance.)
The advantages of outsourcing your payroll in China
Foreign companies often struggle with the documentation in China. The government bureaus for social insurance, income tax, residence permit, work permit, housing fund deal with a lot of documentation. Some documents have to be filled in the local language. The policies and procedures have to be strictly adhered to. The process of acquiring certain permits and licenses tends to become cumbersome and time-consuming. Outsourcing these administrative tasks to a local HR service provider like Tannet can therefore increase your company’s effectiveness.
Focusing the efforts of your company’s human resources on the core business activities can not only save time but also boost your company’s performance as outsourcing administrative tasks liberates your team from the time-consuming tasks.
Outsourcing the administrative tasks to a local HR service provider also reduces your dependency on your in-house HR team, which may otherwise adversely influence your employee’s monthly payroll and statutory benefits processing.
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 86-755-82143422, 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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