Hire employees in China

The number of products labeled “made in China” is simply overwhelming but the People’s Republic of China is not only the world’s biggest player when it comes to manufacturing. The country is also very popular with international companies intending to grow their remote teams.

Not only are wages in China quite low but legal conditions are quite favourable for employers as employee protection as well as health and safety obligations are not as strict as in other countries. In many cases, employing in China means low employment costs and low wages in exchange for highly-qualified workers.

Under China’s Labor Contract Law, employers have to provide their employees with a written employment contract no later than one month after the employee’s first day at work – different regulations apply for part-time employees. Employment contracts in China can be concluded for a fixed-term, for an indefinite term or for the period required to complete an agreed assignment. The agreement should contain at least the following information:

• Identification of both parties

• Date of commencement and employment duration

• Workplace

• Job description including position, duties and responsibilities

• Basic salary as well as other compensation or benefits

• Working hours

• Total number of holidays

• Social insurance

• Protective measures at workplace

• Additional legal requirements

Information on probation periods, confidentiality, training etc. are optional.

Probation Period

The length of the probation period depends on the length of the respective employment contract:

• contract length between three months and one year: maximum one month probation

• contract length between one and three years: maximum two months probation

• contract length more than three years: maximum six months probation

Working Hours and Breaks

Under normal conditions, an employee’s standard working week should be 40 hours divided into five eight-hour days. It is mandatory to give employees at least one proper rest day per week.

Overtime

Overtime work is possible under certain conditions but should not exceed one hour per day – three hours per day in special cases but limited to 36 hours within one month. Any work performed beyond standard working hours is to be remunerated as follows:

• 150% of normal wages on standard working days

• 200% of normal wages on rest days

• 300% of normal wages on public holidays

It is common practice in China to pay employees on a monthly basis.

Minimum Wage

There is no national minimum wage in China. Instead, each Chinese province defines its own minimum wages. It is not unusual that minimum wages even vary within one single province, taking into account the cost of living in specific areas.

The highest monthly minimum wage rate applies in Shanghai where the current rate is set at CNY 2,590 per month. However, the highest hourly minimum wage needs to be paid in Beijing with CNY 25.3 per hour.

Sick Pay

Sick leave and sick pay in China depend on the employee’s length of service with his or her current employer as well as on his or her overall working experience. Sick leave entitlements range from three up to 24 months and sick pay rates lie between 60% and 100% of the employee’s usual salary.

Bonuses

Although not legally required, many employers grant their employees an annual bonus equal to one month’s salary which is usually paid out just before the Chinese New Year, i.e. in early February. Some companies even offer their employees a 14th salary.

Employees and employers in China are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

25%

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• 25% corporate tax rate

• 13% VAT (standard rate)

Employees

up to 45% *

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Individual income tax rates range from

3% to 45%

Social security

Employers

location-dependent

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Social security contribution rates in China are location-dependent. In Shanghai, for example, contributions amount to around 35% of the employee’s salary including:

• 16% pension

• 10% healthcare and maternity fund

• 0.16% - 1.52% occupational accident insurance

• 0.5% unemployment insurance

• 7% housing fund

Employees

location-dependent

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Social security contribution rates in are location-dependent. In Shanghai, for example, contributions amount to 17.5%% of the employee’s salary including:

• 8% pension

• 2% healthcare and maternity fund

• 0.5% unemployment insurance

• 7% housing fund

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

An employee’s annual leave entitlement depends on his or her length of service. Employees with one or more years of service receive five paid vacation days each year. Employees with a length of service between ten and twenty years gain ten days of annual leave and those who have been working for more than 20 years are entitled to 15 paid days off each year.

In addition, there are seven official public holidays, some of which stretch over several days.

Maternity Leave and Paternity Leave

The 2016 reform of China's legal provisions for parental leave saw the basic maternity leave entitlement of 98 days increased by up to 30 days - depending on the province. In November 2021, several provinces have introduced even more generous maternity leave policies. Shanghai and Beijing, for instance, have extended the length of the maternity leave to 158 days.

During maternity leave, the employee receives maternity benefits from the Chinese social security agency. Depending on the province, employers may be required to make a contribution to maternity allowances.

Despite there being no national law providing for paternity leave, fathers can claim paid leave on the occasion of their child’s birth under provincial regulations. Most provinces grant fathers of newborn children up to 20 days of paternity leave. In some regions, it's even possible for the mother to transfer her unused maternity leave to the child's father.

Parental Leave

Chinese labour law does not provide for additional parental leave. However, female employees can claim breastfeeding leave which allows them to reduce their daily working time by one hour until the child is twelve months old. In addition, some provinces provide for several days of employer-paid parental leave per year until the child reaches a certain age.

Additional Leave and Benefits

It is common practice among employers to grant (paid) additional leave – usually one to three days – in the following cases:

• marriage

• death of a direct family member

In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, an employee may be dismissed due to one of the following reasons (non-exhaustive list):

• staff reduction and other objective reasons making the employee redundant

• summary dismissal due to gross misconduct

• breach of employment contract

• employee’s underperformance

• employee’s incapability to work as a result of illness or injury

The minimum notice period for both employee and employer is 30 days. Pay in lieu of notice is possible.

Except in those cases where dismissal is based on employee behaviour, employees in China are entitled to severance pay which is based on the employee’s length of service:

• up to six months of service: half a month’s salary

• between six months and one year: one month’s salary

• over one year: one month’s salary for each completed year of service