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China

Employer of Record China

Global Expansion's Employer of Record services provide the ability to quickly grow, manage, and pay international teams, without the need for a local entity. Our award-winning tech platform plus integrated support services make hiring, managing and paying your global workforce a breeze.

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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.

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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 working time—not just the length of service with the current employer. The amount of days ranges from 5 to 15 and is segmented as follows:

  • 5 days of leave for 1 to 10 years of service
  • 10 days of leave for 10 to 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.

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New Year’s Day 1st January
Chinese New Year 24th January to 2nd February
Qingming Festival 4th, 5th or 6th April
Labor Day 1st to 5th May
Dragon Boat Festival 5th day of the 5th month (Chinese calendar)
Mid-Autumn Festival 15th day of the 8th month (Chinese  calendar)
National Day of the
People's Republic of China
1st to 3rd October
Golden Week 1st to 7th October

 

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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. Instead, the availability of paternity leave varies across jurisdictions and is typically premised on obtaining a One Child Card. Fathers with a One Child Card can take 10-30 days of paternity leave.

The specific amount of time that a male employee can take as paternity mostly relies on where the individual is registered for social security. In general, China’s paternity leave rarely exceeds two 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:

Years of Service

Length of Medical Treatment/
Paid Sick Leave

less than 5 years 6 months
more than 5 years 9 months
more than 10 years 12 months
more than 15 years 18 months
20 years or longer 24 months

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

According to Chapter 4 of the Employment Contract Law, the notice period is 30 days after giving the notice in writing.

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.

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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.

Income Tax in China

In general, China residents are taxed on their China-source and non-China-source income. Nonresidents are only taxed on income derived from China. In addition, nonresidents engaged in business activities with a substantial economic presence in China are taxed on the income attributable to their permanent establishment (PE) inside the country.

Effective from 1 January 2019, China residents include the following persons:

  • Individuals who have their domicile in China
  • Individuals who do not have their domicile in China, but reside in China for 183 days or more in a tax year

China's tax law system says that the income of any natural person who lives in China is taxed, unless otherwise specified. Employment income, labor services income, copyright income, and royalties should be consolidated as annual income for China residents. The China IIT law includes, but is not limited to, the following types of taxable compensation:

  • wages and salaries
  • foreign service or hardship allowances
  • cost of living and automobile allowances
  • tax reimbursements
  • bonuses
  • equity compensation.

Individual income can take any form, including cash, physical objects, securities, and economic interests. Included in taxable income are compensation for independent personal services rendered in China, bonus payments, and income designated by the Ministry of Finance as taxable.

Residents' income tax is computed on a monthly basis using the progressive annual tax rates shown below, applied to their employment income using the cumulative withholding method.

Effective 1 January 2019, employment income is accumulated for the purpose of calculating China residents' monthly tax liability.

Annual taxable income (CNY)

Tax rate (%) 

Quick deduction (CNY)

0 to 36,000  3 0
36,000 to 144,000 10 2,520
144,000 to 300,000 20 16,920
300,000 to 420,000 25 31,920
420,000 to 660,000 30 52,920
660,000 to 960,000 35 85,920
Over 960,000 45 181,920
  • The tax rates in China for nonresidents are given below: -

Annual taxable income (CNY)

Tax rate (%) 

Quick deduction (CNY)

0 to 3,000  3 0
3,000 to 12,000 10 210
12,000 to 25,000 20 1,410
25,000 to 35,000 25 2,660
35,000 to 55,000 30 4,410
55,000 to 80,000 35 7,160
Over 80,000 45 15,160
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Social Security in China

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:

City

Shanghai

Beijing

Guangzhou

Social
insurance
items

EeP*

ErP**

EeP*

ErP**

EeP*

ErP**

Pension 8% 16% 8% 16% 8% 14%
Medical 2% 10.5% 2% 9.8% 2% 6.35%
Unemploy
ment
0.5% 0.5% 0.5% 0.5% 0.2% 0.32% to 0.8%
Work-related injury 0% 0.16% to 1.52% 0% 0.2% to 1.9% 0% 0.1% to 0.7%
Total 10.5% 27.16% to 28.52% 10.5% 26.5% to 28.2% 10.2% 21.77% to 21.85%
*Employee’s Portion
**Employer’s Portion
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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:

Deductible item

Deductible amount (CNY)

Child education 1,000 per child per month
Continued education 400 per month or 3,600 per year depending on the type of qualified continued education
Mortgage interest 1,000 per month
Rental expense 800, 1,100, or 1,500 per month depending on the location
Elderly care Up to 2,000 per month depending on the status of the taxpayer
Major medical expense Qualified self-paid portion above 15,000 and capped at 80,000 per year for each eligible individual
Care expense for children under the age of 3 1,000 per child per month

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.

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Ordinary Visas

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

Visa Z

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Business M Visa

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Residency Visas

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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.

Visa Z

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Visa M

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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:

VAT

Standard Rate

Group 1083

13%

Reduced Rate Group 1083 9%
Reduced Rate Group 1083 6%
Reduced Rate Group 1083 3%
Nil Rate Group 1083 0%

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

Withholding Tax in China

Dividends

  • A 10% withholding tax, which is lowered from a 20% mandatory rate, is imposed on dividends paid to a nonresident company unless the rate is reduced under a tax treaty
  • As a measure to further promote foreign investment in China, the government has issued rules to provide a deferral of withholding tax on dividends and profits distributed to foreign investors and reinvested into China, with effect from 1 January 2017

Interest

  • A 10% withholding tax, which is lowered from a 20% mandatory rate, generally applies to interest paid to a nonresident unless the rate is reduced under a tax treaty
  • A 6% VAT generally is imposed

Royalties

  • A 10% withholding tax, which is lowered from a 20% mandatory rate, applies to royalties paid to a nonresident unless the rate is reduced under a tax treaty
  • A 20% withholding tax is imposed on royalties paid to resident individuals (which is an advance tax payment).
  • Nonresident individuals are subject to withholding tax on royalties at progressive rates ranging from 3%-45% unless the rate is reduced under a tax treaty

Technical Service Fees

  • Technical service fees paid to a nonresident are subject to the mandatory enterprise income tax (i.e. 25%) on a net profit basis to the extent the services are rendered in China, unless the tax is reduced under a tax treaty.
  • A 20% withholding tax is imposed on royalties paid to resident individuals (which is an advance tax payment).
  • Nonresident individuals are subject to withholding tax on royalties at progressive rates ranging from 3%-45% unless the rate is reduced under a tax treaty

Withholding Tax

Dividends    
Resident Company Group 1083 0%
Resident Individual Group 1083 20%
Nonresident Company Group 1083 10%
Nonresident Company Group 1083 20%
Interest    
Resident Company Group 1083 0%
Resident Individual Group 1083 0% / 20%
Nonresident Company Group 1083 0% / 10%
Nonresident Company Group 1083 0% / 20%
Royalties    
Resident Company Group 1083 0%
Resident Individual Group 1083 20%
Nonresident Company Group 1083 10%
Nonresident Company Group 1083 3% - 45%
Fees for Technical Services    
Resident Company Group 1083 0%
Resident Individual Group 1083 20% - 40%
Nonresident Company Group 1083 25%
Nonresident Company Group 1083 3% - 45%

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).

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Mandatory Benefits overview

These are mandatory benefits as postulated by law:

  • Probationary period

  • Annual Leave

  • Public Holidays

  • Parental Leave

  • Sick Leave

  • Overtime Pay

  • Notice Period

  • Severance Pay

  • Social Security Benefits

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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

16

Pension

10

Medical

0.8

Unemployment

1

Maternity

1.9

Work related injury

12

Housing Fund

8.33

Christmas Bonus

7.12

Vacations

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Payroll Accruals Additional information

Annual Leave

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Maternity Leave

Vector 75

Paternity Leave

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Sick Leave

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Overtime

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Severance

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Social Security

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Accrued Benefits in China

Christmas Bonus %

It is based on 50% of the salary of December

4.16%

Christmas Bonus Over Vacations %

0%

Severance per Year%

After one year of service, 8% of an employee's gross salary is put in an Escrow that will contribute to their severance pay 

8%

Vacations %

Professionals in China are entitled to 30 calendar days of vacation per year after each 12 months of service (8.24% of annual salary)

 8.24% 

Of annual salary

Notice %

Employees are entitled to 30 days of notice period for one year of service or more 


8.24%

Christmas Bonus Over Notifications %

0%

Vacations Plus %

It is based on 50% of the salary of the month

4.16%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per annum

32.8%

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.

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