Pay your employees reliably, on time, and in line with local payroll rules, and you’re more likely to attract and retain top talent in China.

Payoneer Workforce Management can help you pay employees in China with ease.

Here, we look at how to pay employees in China, covering the various contributions and entitlements you need to know.

Payroll in China: wages and other payments

To successfully run a China payroll process, you need to understand the China payroll cycle, benefits, bonuses, the minimum wage, and more. Let’s take a look.

Payroll cycle

The fiscal year in China runs from January 1st to December 31st. Employees are typically paid monthly, on the last working day of the month. 

However, employers may set their own internal payroll cycle if they choose.

Minimum wage

Knowing the legal minimum wage is an important part of running payroll. China’s minimum wage varies from region to region. 

In China, the minimum wage is set at CNY 2,540 per month, though this rate is subject to regional variations.

State governments are responsible for periodically reviewing and adjusting the minimum wage. These adjustments are typically made to keep pace with inflation and the rising cost of living. Employers must therefore keep track of the most current rates to stay compliant with local labor laws.

Overtime

An employer can ask an employee to work 1 hour of overtime per day. In special circumstances, 3 hours of overtime per day is permitted. An employee can work a maximum of 36 overtime hours per month.

Employees are entitled to 150% their usual pay for overtime hours. They are entitled to 200% of their usual pay when they work overtime and miss a day of rest, which can’t be rearranged. If they work on a legal holiday, employees are entitled to at least 300% their usual pay.

Sick pay

Employees in China are entitled to paid sick leave. The amount of sick leave they can take depends on their total years of work experience.

For example, employees who have been working for less than 5 years are entitled to a maximum of 3 months’ sick leave, while employees who have been working for 20+ years are entitled to a maximum of 24 months’ sick leave.  

Typically, an employer pays 60% to 100% of an employee’s regular salary during sick leave. However, some regions’ sick pay rates are based on the local minimum wage.

Maternity pay

China’s national law states that workers are entitled to 98 days of paid maternity leave. However, all local governments choose to extend this entitlement.

So, depending on the region, maternity leave ranges from 158 days to up to 1 year. It’s worth noting that foreign workers in China only receive the base 98 days.

Women on maternity leave receive a maternity allowance. If the employee has maternity insurance, the local government pays the maternity allowance. This is paid at a rate of either the employee’s average monthly wage or three times the minimum wage, whichever is higher.

If the employee doesn’t have insurance, their employer pays. Payments are based on the employee’s wage before maternity leave. It is the employer’s responsibility to enrol employees in maternity insurance.  

Severance packages

If an employer ends an employment contract at no fault of the employee, they have to pay a severance package. Employees are entitled to roughly 1 month’s salary for every year working with the company.

Severance for partial years is usually prorated.

Bonus payments

A bonus payment is customary, but not legally mandated, in China. Employers can choose their own terms, but the bonus is usually equivalent to 1 month’s salary and is given before or around Chinese New Year (also called Spring Festival). This bonus is subject to individual income tax (IIT).

Employer payroll taxes in China

When you pay employees in China, you need to be aware of the taxes, contributions, and deductions you need to make.

Income tax

When managing payroll taxes in China, it’s up to employers to withhold income tax from employee income. The employer is then responsible for submitting payments to the local tax bureau on a monthly basis, by the 15^th of the following month.

Income tax in China is charged at a progressive rate according to the following tax bands:

Annual income (in CNY)	Tax rate
0 to 36,000	3%
36,000 to 144,000	10%
144,000 to 300,000	20%
300,000 to 420,000	25%
420,000 to 660,000	30%
660,000 to 960,000	35%
960,000+	45%

Social security contributions

In China, employers contribute to a social security system that has five different components:

• Pension insurance
• Medical insurance
• Unemployment insurance
• Occupational insurance
• Maternity insurance

All employees must be enrolled in the system, including foreign employees working in China. Both employers and employees make contributions, and rates vary by region.

Housing funds

Another important consideration when managing payroll in China is the locally-administered housing fund, designed to provide employees with financial assistance for housing-related expenses. Both employer and employee must contribute to this fund, which (again) varies from region to region. 

China payroll compliance best practices

When you pay employees in China, you need to stay compliant with local laws. Here are some best practices that will help you manage your China payroll process in line with regulations:  

• Monitor tax law changes, labor laws, and statutory requirements
• Maintain accurate and detailed payroll reports
• Perform occasional payroll audits to identify any errors
• Provide ongoing payroll training to staff

Putting these best practices into action may require the specialist knowledge of a Chinese payroll team. Alternatively, you can use Payoneer Workforce Management to run payroll.

For assistance with payroll services in China, Payoneer Workforce Management facilitates and helps simplify the payroll process. You can manage the payroll cycle while getting support with other global hiring tasks, including onboarding, employment contracts, and benefits packages.

Your options for payroll services in China

There are three main ways to pay employees in China:

• Set up a legal entity: This allows you to hire Chinese employees directly and run China payroll internally, but it’s a complex, expensive, and time-consuming process. 
• Pay workers as contractors: This option doesn’t require you to set up a legal entity, but you do have to ensure you aren’t misclassifying employees as contractors to avoid fines and penalties.
• Pay employees through a workforce management platform: Partnering with Payoneer Workforce Management helps simplify the China payroll process. With a comprehensive platform and specialist support, you can pay employees without setting up a legal entity.

With Payoneer Workforce Management, you can pay in 70 currencies. You can also manage a global workforce with ease.

Book a demo today!

FAQs

1) How does payroll in China work?

According to the standard China payroll process, employees are paid once per month. Employers are required to withhold an employee’s income tax and social security contributions. Employers also have to make social security and housing fund contributions on behalf of employees.

2) How often is salary paid in China?

Typically, employees in China are paid once a month, on the last day of the month. 

3) Are there payroll taxes in China?

Yes. In China, an employee has to pay income tax at a progressive rate of 3% to 45%, which is deducted from their salary and withheld by their employer. Both employees and employers have to make social security contributions, which vary from region to region.