Everything You Need to Know About Employing in China

While the average monthly minimum wage in China ranges from CNY 2,480 (USD 388) to CNY 1,120 (USD 175), depending on the employee’s location, the average salary will depend on the nature of the job.

Here’s an approximation of the average monthly salary for six different positions:

China follows a progressive income tax model. For more information about income tax, you can visit this website here.

An article in the China Briefing states, “The demand for freelance services in China will be supported by both the private and corporate sectors of the economy. Key areas of demand in the long term will be areas, such as design and multimedia, IT, content and translation, finance, management, and HR… This will give rise to a new class of Chinese citizens appearing – the self-employed.”

‍While freelancing is quickly becoming a growing career trend in China, one risk of hiring freelancers or independent contractors is their compliance with local tax laws. Without a local registered company withholding income tax for them, freelancers may fail or forget to pay their income tax. (See the other risks of hiring an independent contractor here.)

You can help your Chinese employee comply with local taxation laws by using Professional Employer Organizations (PEOs) like Multiplier who will take care of payroll and taxes for you.

Chinese labor laws outline working hours in China to a standard 40 hours per week. This is usually broken down to 8 hours a day, working 5 days a week. A Chinese employee is also entitled to at least one rest day a week.

Take note that overtime work is only possible after consultation with any applicable trade union unless the situation is an emergency. Overtime is limited to 1 hour per day. However, in special circumstances, this can be extended up to 3 hours, but is limited to a total of 36 hours per month. Employees under flexible working hours are generally not entitled to overtime payment. However, if employers do decide to ask for overtime, this still requires approval from the labor bureau.

Following consultation, overtime pay can be calculated as follows:

13th month pay: Unlike countries such as the Philippines or Indonesia, a 13th month pay cycle is not mandatory in China. However, it is highly encouraged, with most employees expecting to receive this bonus before the Chinese New Year holiday (around the end of January or early February).

Annual Leaves: The number of paid annual leaves (exclusive of public holidays), a Chinese employee has, is dependent on the duration of employment.

‍Sick Leaves: Like annual leaves, sick leaves are also dependent on the duration of employment. Should an employee take a sick leave, the employee must usually provide a medical certificate to support their leave.

‍Family Leaves:

Maternity Leave: Every female employee is entitled to 98 days of maternity leave, with an additional 15 days leave in the case of difficult labor or multiple births. Some cities also offer additional maternity leave for women who give birth over the age of 23.

Maternity leave is paid by the Social Security Bureau and is based on the average monthly salary over the 12 month period before the birth. The Social Security Bureau will either pay this rate or 3 times the minimum wage, whichever is higher. Take note that in some areas such as Beijing and Shanghai, the employer usually supplements maternity pay with additional pay.

Paternity Leave: A male employee whose wife has given birth is entitled to take 10 days of paid leave. In some cities, additional paternity leave is given.

Other Leaves: Chinese employees are also entitled to other leaves at the discretion of the employee and employer, which include the following:

‍Insurance and social security: Chinese law requires both the employee and employer to make contributions to social welfare, which include pension, unemployment, and health insurance funds. Social insurance obligations vary considerably depending on the city in which the contributions are made, and generally have a limit. Here is the breakdown in both Beijing and Shanghai:

Beijing

Shanghai

While not mandated by law, it is quite common to provide non-taxable allowances for your remote employees, and it’s expected by the employees. These can include stipends for business and equipment expenses, internet and telecom allowances, and even transportation allowance – if your remote employee works from a co-working space. If you work with a PEO platform like Multiplier, they can arrange for other benefits and allowances for your Chinese employees for you.

To gain a competitive advantage, some Chinese companies will also provide their own supplemental health coverage for their employees. Alternatively, employers can also provide an insurance allowance or stipend for their employees.

Currently, China has a total of 7-11 public paid holidays (depending on the region). It is also common practice for the local government to combine national holidays with closed weekends. Take note that if a holiday falls on a weekend, most companies will provide one day off from the regular work week.

The two main holiday periods in China are during Chinese New Year (typically late January or early February) and Chinese National Day (typically early October). Usually companies will provide their employees with an additional one to two days of leave to allow their employees to visit family.

If you require your Chinese employee to work on a public holiday, refer to the table under FAQ #5 to calculate payment and overtime payment. For an updated list of Chinese holidays, click here.

If your business is registered in another country, the easiest way to hire a Chinese remote talent would be through a Professional Employer Organization. PEO platforms like Multiplier make it easy for you to hire remote talent, comply with local labor laws, and pay your employees in time. Instead of having to jump through the legal and financial hoops of setting up a business entity in another country, Multiplier will act as your representative and abide by all the necessary laws for you.

If you want more details on how to hire and set up your remote team, you can check out our article here.

While a probationary period is not mandatory in China, employers can choose to set a probationary period in the employment contract. The duration of the probation period will depend on the length of the contract.

China does not have a strict payment cycle, and employers can choose to pay their employees either bi-monthly or monthly on an agreed upon payday. Take note that the payment cycle should be agreed upon by both the employer and the employee beforehand.

The easiest way to pay your Chinese remote talent would be through PEO platforms like Multiplier. With a PEO platform, you won’t have to worry about payroll or compliance with local taxes and labor laws as they will be taking care of everything for you.

As a general rule, salaries paid to Chinese employees must be paid in Chinese Yuan

(CNY). Even transactions, labor contracts, and agreements should be referenced with Chinese Yuan and written in Chinese. This can be quite troublesome for foreign nationals looking to hire Chinese remote employees, which is why using PEO platforms like Multiplier can be extremely advantageous. Multiplier can help set up a contract, enable regular payment cycles in the local currency, and ensure labor law and taxation compliance for you.

By paying your Chinese remote employees in their local currency, you’ll be able to avoid fluctuations in conversion rates, which will help make tax calculations and contributions to benefits such as healthcare and social security easier.

While not particularly common due to its complexities and arduous processes, it is possible to unilaterally terminate a Chinese remote employee for the following reasons:

• Fails to satisfy the specified recruitment requirements
• Has substantially violated the labor discipline or internal rules of the employer
• Has committed an action of serious dereliction of duty
• Has additionally established an employment relationship with another employer
• Has invalidated the employment contract
• Is subject to criminal liability

In most other cases, bilateral termination (termination by mutual agreement) or the expiration of the employment contract is applied. The notice period for termination is 30 days for both the employee and employer. If the employee is on probation, a 3 days’ notice is usually given.

Severance pay depends on whether it is termination with cause or without cause. If with cause, no severance pay is required, otherwise severance pay is required. As per the Employment Contract Law, an employee is entitled to severance pay for any of the following reasons:

• The employee resigns as a result of the employer’s infringement of the employee’s labor rights.
• The employment contract expires (unless the employer proposes to renew the fixed-term employment contract by maintaining or raising the conditions provided in it, and the employee refuses the renewal).
• The dismissal is agreed to between the employer and employee, and the employer initiates the dismissal.
• The employer unilaterally terminates the employment (unless the termination is for one of the grounds stated above).
• The employment is terminated on the employer’s bankruptcy.
• The employment is terminated because the employer’s business licence has been revoked, or the employer has been ordered to close down/deregister or has opted for voluntary liquidation.

If severance pay is required, it is equivalent to one month’s salary for every year of service. If the employer does not comply with the 30-day advance notice period, the employer may have to pay an extra month’s salary beyond the severance pay requirement. This is capped at three times the average local wage and cannot exceed 12 months.

Learn more about how you can easily hire remote talent from China with the help of Multiplier. You can visit our website or contact us today.