Definitive Guide to Hiring in China

Hiring in China

For companies that want to hire employees and run payroll in China without first establishing a business entity or subsidiary, Global Expansion provides Employer of Record services (EOR China).

Our EOR services streamline and simplify the global hiring process. We handle the core global HR tasks - compliance, contracts, payroll, global benefits, and more - so that you forgo hours of ongoing admin, human error, and risky compliance.

In China, companies would historically establish a subsidiary or branch office to legally hire in that country. With Global Expansion, this step is no longer necessary. We have subsidiaries all over the world and therefore can legally hire on your behalf. The employees are ours only on paper and report directly to managers within your company.

Labor Laws in China

China’s employment laws are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Chinese policies here.

Labor laws in China apply to organizations maintaining local and international relations within its territory.

• Workers qualify for a minimum wage in China, an official employment contract, a 40-hour week with fixed overtime rates, social security, a housing fund, and annual leave.
• Businesses must comply with workplace safety laws in regards to China's policies, this includes providing employees with a clean and safe work environment in compliance with workplace safety laws and regulations.
• The only labor union recognized by the Chinese government is the All-China Federation of Trade Unions (ACTFU.)

Employment Contracts

Article 12 of the 2008 Labor Contract Law specifies three types of employment contracts:

1. Fixed-term labor contract: This standard contract sets a specific term limit on full-time or part-time employment.
2. Open-ended or indefinite contract: The contract has no selected termination date and can only end through mutual agreement.
3. Project-based contract: This contract is based on a specific task or project and ends with the project delivery.

Employee Probation Period

This law establishes that the maximum length of the probationary period cannot last more than:

• 1 month in the case of an employment contract of 1 year or less.
• 2 months if the contract length is more than 1 year but less than 3 years
• 6 months if the contract’s term is more than 3 years

Annual Leave in China

The length of annual leave depends on the employee's cumulative employment time, not just the length of service with the current employer. Length of annual leave (5–15 days) depends on the cumulative length of service as follows:

• 5 days of leave for 1–10 years of service
• 10 days of leave for 10–20 years of service
• 15 days of leave for 20 or more years of service

Holidays in China

Here is the full list of public holidays in China.

Maternity Leave China

• Female employees are entitled to 98 days of maternity leave, including 15 days of prenatal leave.
• For multiple births, 15 days' additional maternity leave will be granted for each additional child.
• Female employees may also be entitled to extended maternity leave—usually 30 more days, subject to local regulations.

Paternity Leave China

• There is no national labor regulation requiring employers to provide paternity leave.
• Availability of paternity leave varies across jurisdictions and is typically premised on obtaining a One Child Card.
• In general, China’s statutory paternity leave does not exceed 2 weeks (14 days).

Sick Leave in China

In China, employees are entitled to a period of medical treatment that can vary from 3 to 24 months on account of illness or non-work related injuries. The period varies depending on cumulative working years since the employees started to work and the length of their service in their current company.

The specific provisions for paid sick leave are as follows:

Working Hours in China

The Labor Law of the People's Republic of China limits business hours to no more than 8 hours per day and 44 hours per week. The Chinese government mandates a 5 day workweek.

Overtime in China

Under PRC Labor Law and regulations, overtime pay is clearly specified:

• Any work that exceeds 8 hours per normal work day must be paid at 1.5 times of the employee's contractually agreed to hourly wage.
• The law also requires that any overtime on a given day be limited to 3 hours.
• Total amount of overtime is limited to 36 hours per month
• Any overtime hours that are worked on a weekend must be compensated at 2 times the employee’s normal working wage.
• If an employee in China is required to work on a Chinese national holiday, he or she must be paid 3 times the employee’s normal working wage.

Termination of Employment in China

The Employment Contract Law requires written termination notice before terminating services of a worker. An employment contract terminates if:

• Its terms expire
• The worker has started receiving basic old age insurance pension in accordance with the law
• The laborer dies, or is declared dead or missing by a People’s Court
• The Unit is declared bankrupt according to law
• The Unit has its business license revoked, is ordered to close down or decides to dissolve ahead of schedule
• Other circumstances, specified in laws or administrative laws and regulations, arise.

The valid grounds for dismissal include worker's conduct, worker's capacity (incompetence and inability to work due to some injury) and economic reasons.

Either party can terminate an indefinite term employment contract by serving a notice or paying in lieu thereof. According to Chapter 4 of the Employment Contract Law, either party may terminate the employment contract after giving 30 days’ written notice.

Notice Period in China

• Either party can terminate an indefinite-term employment contract by serving a notice or paying in lieu thereof.
• According to Chapter 4 of the Employment Contract Law, either party may terminate the employment contract after giving 30 days’ written notice.

Severance in China

In China, severance pay amounts to one month's pay per year of service.

For the purpose of calculating severance pay, an employment period ranging from 6 months to 1 year is to be counted as one year. If the employee has worked for less than 6 months, he/her is entitled to half a month's pay.

If the monthly wage of a worker exceeds three times the average monthly wages of employees in the municipality where the employer is located, severance pay is to be paid to him/her at the rate of three times the local average monthly wages and cannot be for more than 12 years of work.

China Salary and Wages

Accurately estimate your costs when employing in China in 2023. Includes base salary, dependents, benefits, taxes, social contributions, and payroll costs. Monthly or yearly calculation period.

China minimum wage

China’s minimum wage ranges from RMB 13 to RMB 23 per hour, depending on the region. Labor laws in China require local governments to update their minimum wage every few years. Salaries depend on how well-developed an area is and its cost of living.

Generally, minimum wage standards are either monthly—applicable to full-time employees—or hourly for non-full-time employees. As of July 15, 2022, Shanghai has the highest monthly minimum wage at RMB 2,590/US$400. Beijing has the highest hourly minimum salary at RMB 25.3/US$3.9.

China employee benefits

As the minimum wage rises, minimum standards for employee benefits in China also increase:

• The minimum contribution base of the housing fund is the same as the local minimum wage standard in an area.
• Article 20 of the Labor Contract Law says that the wage of probationary employees on regular attendance shall not be lower than the wage standard.
• The sick leave wage shall not be lower than 80% of the local minimum wage, as stated in the Opinions on Several Issues concerning the Implementation of the Labor Law of the People’s Republic of China (Lao Bu Fa [1995] No.309.)
• Severance pay shall not be less than the local minimum wage standard, according to Article 27 of the Implementation Regulations for the Labor Contract Law of the People’s Republic of China.
• The labor dispatch agency should compensate employees who have no assigned work duties with monthly remuneration according to the local minimum wage standard.
• Under the Guiding Opinions of the Ministry of Human Resources and Social Security and the Ministry of Finance on Adjusting the Criteria for Unemployment Insurance Benefits (Ren She Bu Fa [2017] No. 71, all provinces must increase their unemployment insurance benefit to 90% of the local minimum wage standard.

13th Month Salary in China

There is no legal requirement to pay the 13th or the 14th month salary.

However, it is customary in many companies for employees to get the 13th month payment at the end of the year. This bonus has been standardized by the government to people in senior positions.

Social security contributions to pension funds, medical funds, etc. are mandatory for Chinese employees.

As of 15 October 2011, foreign individuals who hold a China work permit for working in China are required to make social security contributions in relation to pension, medical, unemployment, maternity, and work-related injury according to the China Social Security Law.

Monthly employer and employee social security contribution rates, applicable caps, etc. are governed by local rules, which may vary among the local jurisdictions. For example, contribution rates and caps applicable to local Chinese in Shanghai, Beijing, and Guangzhou are as follows:

Deductible Expenses in China

When calculating taxable comprehensive income for residents, IIT law allows the following personal deductions (non-refundable and no carryback/forward provisions). As of 1 January 2019, the amount of the standard basic deduction is CNY 60,000 per annum (i.e. CNY 5,000 for monthly tax withholding purpose).

Chinese social security contributions made in accordance with the Social Security Law and contributions made to the mandatory Housing Fund are deductible for IIT purposes. Residents deriving comprehensive income, if eligible, can claim the following specific additional deductions when calculating the annual taxable income:

When calculating taxable employment income for non-residents, IIT law only allows the standard basic deduction of CNY 5,000 per month.

If an individual makes charitable contributions to qualified domestic non-profit organizations, such contributions are deductible to the extent of 30% of one's taxable income reported. This deduction is applicable to all categories of income.

A deduction equal to 20% of the gross receipt is allowed when determining the income from labor services, author's remuneration, and royalties. A further deduction of 30% is allowable for author’s remuneration.

The following deductions are provided for rental income:

• If the amount received in a month is not more than CNY 4,000, a deduction of CNY 800 is allowed.
• If the amount received in a month exceeds CNY 4,000, a deduction equal to 20% of the gross receipt is allowed.

Immigration China

Before relocating your employees, ensure that you understand the visa requirements in China. One thing to note is that all foreign nationals entering, leaving, passing through or residing in China must obtain the relevant visas from the relevant Chinese authorities, which include the Chinese diplomatic missions, consulates and other representatives in foreign countries and the Ministry of Public Security, the Ministry of Foreign Affairs or local designated authorities within China.

Depending on the status and type of passport held by a foreign national, a diplomatic, courtesy, business or ordinary visa may be issued.

Ordinary Visas

Ordinary visas are designated by letters that correspond to the purposes of the individuals’ visits.

Visa requirements China overview

Learn about the visa policy in China and all the ways to obtain a regular or a work visa for China.

Value Added Tax (VAT) in China

China’s VAT regime is one of the most progressive and broadest consumption tax regimes in the world.

The standard rate of VAT is 13%. The other rates are as follows:

More information on the reduced rates is available on the Chinese’ government’s official website.

Withholding Tax in China

Mandatory Benefits in China

It’s important to understand the legal requirements of hiring employees in China (whether it’s remote or in-office) so that your business remains compliant. As part of Global Expansion’s International PEO and Employer of Record (EOR) China solution, we guarantee employees are registered with the appropriate government agency, and that they receive mandatory benefits such as minimum wage, workers’ compensation and paid time off (PTO).

Payroll In China

China's tax year runs from 1 January to 31 December, but tax filing is generally administered on a monthly basis. For employment income, the employer is obligated to file the provisional or final withholding IIT returns with its tax authority on a monthly basis. For other categories of income, the tax return, either provisional or final, has to be filed on a monthly, annual, or transaction basis, depending on the specific circumstances.

Generally, the withholding IIT return should be filed and IIT payable should be settled by the 15th day of the month following the income receiving month. For employment income, the employer is obligated to withhold and settle the IIT payable generally within 15 days after the end of each month.

Certain types of residents must file an annual reconciliation tax return on comprehensive income. The filing period for the annual reconciliation tax return is between 1 March and 30 June of the following year. There is no joint tax return in China. Husbands and wives are assessed and taxed separately. Tax returns must be filed on a timely basis. Extensions to file may be granted under 'special circumstances' only.

Payroll Accrual in China

Country Accruals Additional Information

Payroll Accruals Additional information

Accrued Benefits in China

Why use Global Expansion to hire in China

Establishing a branch office or subsidiary in China can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Chinese labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Chinese law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into China. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Global Employer of Record solution provides you with peace of mind to focus on running your company and the security to enter new markets.