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Compliance
Published:
January 12, 2026
Last updated:
January 12, 2026
China represents the world's second-largest economy with a massive consumer market, advanced manufacturing capabilities, and growing technology sectors across major cities like Beijing, Shanghai, Shenzhen, and Guangzhou. However, employment regulations are among the most complex in APAC, with significant provincial and municipal variations creating compliance challenges for organizations without in-country expertise.
Considering adding China to your regional footprint? Unlike more standardized markets (Singapore's unified CPF system, Malaysia's national EPF framework), China's employment compliance requires navigating provincial-level minimum wage differences, municipal social insurance rate variations, local labor bureau relationships, and increasingly stringent enforcement through social credit systems.
This guide provides mid-market perspective on China's employment laws and how organizations without dedicated in-country HR and legal teams can maintain compliance while scaling operations.
China's employment landscape is governed by multiple interconnected laws:
Labor Law of the People's Republic of China (1995): Establishes fundamental labor rights including working hours, rest periods, wages, occupational safety, and social insurance obligations.
Labor Contract Law (2008, amended 2012): Governs employment contract formation, performance, modification, and termination. Significantly strengthened employee protections.
Social Insurance Law (2011): Mandates employer and employee participation in five social insurance schemes (pension, medical, unemployment, work injury, maternity).
Provincial and municipal implementing regulations: Each province and major city issues specific regulations establishing local standards (minimum wages, social insurance contribution bases, overtime approval procedures).
Ministry of Human Resources and Social Security (MOHRSS): National-level authority establishing employment policy, issuing regulatory guidance, and coordinating social insurance administration.
Provincial and Municipal HRSS Bureaus: Local labor bureaus conducting day-to-day enforcement including labor contract registration, social insurance monitoring, working hours verification, work permit processing, labor dispute mediation, and workplace safety inspections.
Social Credit System implications: Non-compliance increasingly affects corporate social credit scores, potentially restricting business operations, government procurement eligibility, financing access, and executive travel.
For organizations expanding into China, understanding that enforcement happens primarily at provincial and municipal levels becomes critical for operational compliance.
All employment relationships in China require written contracts within one month of hiring. Failure to execute written contracts creates legal presumption of open-ended employment relationship and triggers double salary penalty (employee receives double monthly salary for period without written contract, up to 11 months maximum).
Fixed-Term Contracts: Specify definite start and end dates. Common for initial employment periods (typically 3 years first contract, 3-5 years second contract).
Open-Ended (Indefinite) Contracts: No specified end date, providing greatest employee security. Employers must offer open-ended contracts when:
Open-ended contracts significantly limit employer's termination flexibility.
Project-Based Contracts: Tied to completion of specific projects or work tasks. Less common than fixed-term or open-ended contracts.
Some municipalities require employers to file employment contracts with local labor bureaus within specified timeframes (typically 30 days). Filing requirements vary by location.
For organizations hiring in China, using contract templates reviewed by local labor counsel and ensuring proper execution timing prevents compliance issues that trigger penalties during inspections.
China enforces strict working time limits with significant penalties for violations, though enforcement intensity varies across provinces and industries.
Standard working hours: Maximum 8 hours per day and 44 hours per week for most industries. China operates 5-day or 5.5-day workweeks depending on industry.
Rest periods: Employees entitled to at least one rest day per week. Consecutive work exceeding six days generally requires labor bureau approval.
Overtime limitations: Maximum 36 overtime hours per month (3 hours daily cap). Exceeding these limits violates Labor Law.
Overtime authorization: Overtime requires employee consent except in emergency situations (natural disasters, equipment failures, health emergencies).
Example: Employee earning RMB 10,000 monthly (approximately RMB 57.47/hour) works 5 hours weekday overtime, 8 hours rest day, 8 hours public holiday:
China observes 11 statutory public holidays annually including New Year's Day, Spring Festival (3 days), Qingming Festival, Labor Day, Dragon Boat Festival, Mid-Autumn Festival, and National Day (3 days).
Working hours compliance challenges: Technology companies, manufacturing, and e-commerce sectors face scrutiny over "996" culture (9am-9pm, 6 days weekly) that violates statutory limits. Recent enforcement campaigns targeting overtime violations have resulted in significant penalties.
For organizations managing China operations, implementing time tracking systems that accurately capture daily hours, calculate overtime premiums correctly, and ensure monthly overtime caps aren't exceeded becomes operationally critical.
Unlike most APAC markets with national minimum wages, China establishes minimum wages at provincial and municipal levels, creating significant variation.
2025 minimum wage ranges: Approximately RMB 1,420 to RMB 2,690 monthly:
Tier 1 cities (highest):
Tier 2-3 cities: RMB 1,800-2,200/month
Less developed regions: RMB 1,420-1,700/month
Minimum wages typically adjust annually or biannually based on local economic conditions.
Payment frequency: Wages must be paid monthly (common practice: payment by 10th-15th of following month).
Currency requirement: Wages must be paid in Renminbi (RMB/CNY).
Payslip requirements: Detailed payslips showing base salary and allowances, overtime hours and premium payments, bonuses, pre-tax total, deductions (social insurance, Housing Provident Fund, individual income tax), and net salary.
13th month salary: Not statutorily required (unlike Philippines), but common market practice particularly for foreign enterprises.
Immediate penalties: Labor bureaus can order immediate payment with additional economic compensation (25% of arrears amount).
Blacklisting: Serious wage arrears result in employer being added to labor violation blacklist, affecting social credit score, government procurement eligibility, bank financing access, business registration renewals, and executive personal credit.
Criminal liability: Persistent wage arrears can trigger criminal prosecution of responsible managers.
For organizations managing payroll in China, understanding provincial minimum wage variations, ensuring timely monthly payment, and maintaining detailed payroll records becomes essential.
Explore payroll compliance across APAC markets.
China's social insurance system is among the most comprehensive in APAC, with five mandatory schemes plus Housing Provident Fund creating significant employer cost implications.
Pension Insurance: Employer 16% + Employee 8%
Medical Insurance: Employer 6-10% (varies by municipality) + Employee 2% plus additional for serious illness insurance
Unemployment Insurance: Employer 0.5% + Employee 0.5%
Work Injury Insurance: Employer 0.2-1.9% (varies by industry risk) + Employee 0% (entirely employer-funded)
Maternity Insurance: Employer contribution varies by location + Employee 0% (entirely employer-funded)
Mandatory savings program for housing-related expenses:
Contributions calculated on monthly salary base, subject to minimum and maximum thresholds set annually by each municipality:
Minimum base: Usually 60% of previous year's municipal average wage
Maximum base (ceiling): Usually 300% of previous year's municipal average wage
Example - Beijing 2025: Minimum approximately RMB 6,326/month; Maximum approximately RMB 33,891/month
Combined employer social insurance and Housing Fund contributions: Approximately 30-37% of employee's monthly salary depending on municipality and industry.
Example - Shanghai employee earning RMB 10,000/month:
This significantly exceeds many APAC markets (Singapore CPF 17%, Malaysia EPF 12-13%, Philippines SSS ~4%).
Foreign employees working in China are generally included in social insurance schemes unless bilateral social security agreements provide exemptions:
Countries with bilateral agreements (partial or full exemption): Germany, South Korea, Denmark, Finland, Canada, Switzerland, Netherlands, France, Spain, Luxembourg, Japan, Serbia, Belgium.
Countries without bilateral agreements: Foreign employees from US, UK, Australia, Singapore, Malaysia, India, and most other countries must participate in China's full social insurance system.
Foreign employees in China require proper work authorization through a comprehensive application process.
Category A (High-End Foreign Talent): Nobel laureates, renowned scholars, Fortune 500 senior executives, professionals with high salaries, doctoral degree holders from top universities. Benefits include streamlined approval, extended permit validity (up to 5 years), and reduced documentation requirements.
Category B (Professional Foreign Talent): Professionals with bachelor's degrees and 2+ years relevant work experience, those earning above local average wages. Standard approval process with permit validity typically 1-2 years.
Category C (Other Foreign Personnel): Restricted category for jobs that cannot be filled by Chinese or Category A/B foreigners. Limited permit validity with stringent documentation.
Illegal employment of foreigners:
For organizations establishing China operations with expatriate staff, budgeting adequate time (3-4 months) for work permit processing and maintaining meticulous documentation prevents operational disruptions.
China's Labor Contract Law provides strong employee protections making termination operationally complex compared to more employer-flexible markets.
Employee-initiated resignation: 30 days advance notice (3 days during probation). No severance required unless resignation due to employer fault.
Employer-initiated termination with statutory grounds:
Serious misconduct (no notice or severance):
Performance or capability issues (30-day notice and severance required):
Economic reasons (30-day notice, severance, and often labor bureau approval required):
Protected periods when termination prohibited:
Formula: One month's salary per year of service (partial years rounded; service exceeding 6 months counts as one year, less than 6 months counts as half year).
Salary base: Average monthly wage from previous 12 months including base salary, bonuses, allowances.
Severance cap: Maximum base is three times municipal average wage, maximum payment is 12 months (applies only to high earners).
Example: Employee with 5.5 years service earning average RMB 15,000/month:
Workforce reductions affecting 20+ employees or 10%+ of workforce require labor bureau notification (30 days advance), labor union consultation, public announcement of layoff plan, and priority retention for certain employees.
Double compensation: If termination found unlawful, employer must either reinstate employee with back pay or pay double severance.
Learn more about employee termination challenges across APAC.
Local labor bureaus verify employment contract compliance, working hours and overtime records, wage payment timing, social insurance contributions, occupational safety standards, and foreign employee work authorization.
Record retention requirements: Employment contracts, payroll records, attendance records, social insurance payment proofs must be maintained for minimum periods (typically 2-5 years).
Mediation (optional): Parties may attempt resolution through enterprise mediation committees or HRSS bureau mediation.
Labor Arbitration (mandatory before litigation): Employee must file arbitration within one year. Awards issued typically within 45-60 days.
Court Litigation (if arbitration unsatisfactory): Party dissatisfied may file lawsuit within 15 days.
Non-compliant employers face inclusion in labor violation blacklists (publicly searchable), restricted government procurement access, difficulty obtaining business licenses, banking restrictions, and executive personal credit impacts.
Explore AYP's EOR services across APAC markets, or learn about compliance challenges when hiring across Asia.
Generally yes. Employment contracts should specify applicable location for wage standards.
Yes, with limitations. Probation capped at: 1 month for contracts under 1 year, 2 months for 1-3 year contracts, 6 months for 3+ year or open-ended contracts. Wages during probation cannot be less than 80% of contracted salary or local minimum wage.
After two consecutive fixed-term contracts or 10 years continuous service, employer must offer open-ended contract when renewal occurs unless statutory grounds for non-renewal exist.
Double salary penalty: employer pays double monthly salary for period without written contract (up to 11 months maximum).
Serious or repeated violations result in blacklisting impacting government procurement, financing access, business registration, executive travel, and reputation. Rectifying violations and maintaining sustained compliance for 1-3 years typically required for removal.
