China

China

China’s social security system constitutes five different types of insurance and contributions to the mandatory housing fund. China Briefing explains how social security in China is calculated, what are employer obligations, and how it impacts foreign workers and migrants.

Currency
CNY
Payroll Frequency
Monthly
Employer Taxes
39.50% - 41.20%

Overview

Capital
Beijing
Currency
Chinese Yuan (CNY)
Date format
yyyy/mm/dd

Contributions

Employer

Social security contributions

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 (including maternity), unemployment, 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 Employee’s portion Employee’s portion Employee’s portion Employee’s portion Employee’s portion Employee’s portion
Pension 8% 16% 8% 16% 8% 14%
Medical (including maternity) 2% 10.5% 2% 9.8% 2% 6.35%
Unemployment 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% 20.77% to 21.85%
Ceiling for monthly salary base CNY 31,014 CNY 28,221 CNY 22,941 for pension; CNY 33,786 for other insurances

Note:

  • The rates and ceilings are valid as of 30 June 2022 and are subject to changes in accordance with local regulations.
  • The contribution base is normally capped at 300% of the City Average Salary (CAS) of the preceding year and adjusted annually or on needed basis.

The employer is obligated to withhold the applicable social contributions of employees from payroll for onward payment, together with the employer’s contributions, to the relevant local authorities on a monthly basis.

Employee

Income Taxes

Minimum Wage

General

Differs per region. Salary cannot be less than the minimum wage set by one of the 22 provincial governments. These wages are updated every few years and are adjusted to account for the region’s cost of living, level of development and local conditions. Common minimum wages are:

Beijing 2,320 CNY
Shanghai 2,590 CNY
Shenzhen 2,200 CNY

Payroll

Payroll Cycle

To be paid monthly

13th Salary

In China, it is customary to pay a “13th-month” or even “14th-month” salary during the month of the Lunar New Year or Spring Holiday. This will be stipulated within the employment contract.

Working Hours

General

Article 36 The State shall practise a working hour system wherein labourers shall work for no more than eight hours a day and no more than 44 hours a week on the average.

Article 38 The employing unit shall guarantee that its staff and workers have at least one day off in a week.

Article 41 The employing unit may extend working hours as necessitated by its production or business operation after consultation with the trade union and labourers, but the extended working hour per day shall generally not exceed one hour; if such extension is needed for special reasons, under the condition that the health of labourers is guaranteed, the extended hours shall not exceed three hours per day. However, the total extension in a month shall not exceed thirty six hours.

Overtime

All work above the standard weekly working hours is paid as overtime and regulated by employment contract/collective agreements. In general, no more than one hour of overtime a day is permitted except in exceptional circumstances. Overtime can increase to 3 hours a day with a maximum for the month of 36 hours.

Overtime is paid at 150.00% of the standard salary rate for weekday work, increasing to 200.00% for weekends.

Leave & Public Holidays

Paid Time Off

Leave
Article 45 The State shall practise a system of annual vacation with pay.
Labourers who have worked for one successive year or more shall be entitled to an annual vacation with pay. The specific measures therefore shall be formulated by the State Council.

For an employee within the first year of employment, there is no entitlement for paid annual leave. However, after completing the first year up to the tenth year, the employee is entitled to 5 days of paid leave. This increases to 10 days for employees within 10 to 20 years of service and a maximum of 15 days paid leave for employees who have completed 20 years’ service or more.

Public Holidays

Article 40 The employing unit shall, during the following festivals, arrange holidays for its labourers in accordance with the law:
(1) The New Year’s Day;
(2) The Spring Festival;
(3) The International Labour Day;
(4) The National Day; and
(5) Other holidays provided by laws, rules and regulations.

Sick Days

Maternity / Paternity Leave

Maternity Leave

Article 62 Female staff and workers shall be entitled to no less than ninety days of maternity leaves for childbirth.

Paternity Leave

In China, fathers are entitled to paid paternity leave of a total of 10 days, although this entitlement may differ per region.

Parental Leave
Other Leave

Termination

Termination Process

Termination by mutual agreement – Both the employer and employee agree at any time to revoke the labor contract if they reach consensus through discussion.

Termination by employee – An employee may voluntarily quit. If they do so, they must provide a 30 days’ written notice. An employee is exempt from informing their employer if the company has:
Created unsafe labor conditions
Failed to promptly pay their salary
Used violence, threats or detention to coerce an employee into working
Gives orders that violate the rules of the contract

Termination by the employer – An employer can immediately and unilaterally terminate an employment contract for employee misconduct.
Automatic termination – If any of the following conditions are met, the contract is automatically voided:
Contract term has expired
Employee reached statutory retirement age
Employee is dead or declared “missing” by the government
The employer declares bankruptcy
The employer’s business license is revoked

Article 26 In any of the following circumstances, the employing unit may cancel the labour contract, however, a written notice shall be given to the labourer concerned 30 days in advance:
(1) Where a labourer is unable to take up his original work or any work specially arranged by the employing unit after completion of the period of his medical treatment for illness or not work-related injury;
(2) Where a labourer is unqualified for his work and remains unqualified even after receiving a training or after readjusting the work post; and
(3) Where the objective conditions taken as the basis for the conclusion of the contract have changed so greatly that the original labour contract cannot be carried out, and no agreement on modification of the labour contract can be reached through consultation by the parties.

Notice Period

Severance Pay
Probation Period

VISA

General

The employer must sponsor the visa and must be an accredited company that may hire foreign employees. The employee must be a certified foreign expert in the field they will be working.

In China, there is an age limit for male and female applicants for a work visa; for male applicants, the age limit is 24-65, and for female employees, the age limit is 24-55. The employer must send a government-issued employment permit and visa notification letter to the employee, executed and submitted to the Chinese government.

A Z Visa is valid for only 30 days upon arrival, and then during this time, the employer must apply for a temporary residence permit on behalf of the employee. The Z visa is valid for 90 days up to 50 years.

Other visa options include the R Visa for highly skilled people in great demand in China and the J Visa for journalists.

The process usually takes about 8 weeks to complete.

VAT

General

Value-added tax (VAT)

An individual engaged in the sale or importation of goods, the provision of services, and the sales of intangible properties and immovable properties is subject to VAT. For general VAT payers, input VAT can be credited against output VAT.

The applicable VAT rates (for general VAT payers) from 1 April 2019 are set out in the following table, and the rate for small-scale VAT payers is 3%.

Industries Applicable VAT rate (%)
Sales or importation of goods 13
Sales or importation of necessity goods (e.g. agricultural products, water, gas) 9
Provision of repairs, replacement, and processing services 13
Tangible movable property leasing services 13
Transportation services, postal services, basic telecommunications services, construction services, immovable property leasing services, sales of immovable properties, transfer of land-use right 9
Value-added telecommunications services, financial services, modern services (except for leasing services), consumer services, sales of intangible properties (except for land-use right)  6
Exportation of goods; exportation of repair, replacement, and processing services; international transportation services and spacecraft transportation services; exported services that are completely consumed outside China, including:

  • Research and development (R&D) services.
  • Energy performance contracting services.
  • Design services.
  • Production and distribution services for radio, film, and television programs.
  • Software services.
  • Circuit design and testing services.
  • Information system service.
  • Process management services.
  • Offshore outsourcing services.
  • Transfer of technology.
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Date of Updates
13/07/2022

Why AYP

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