China: A Guideline to Payroll and Employer of Record

Establish your presence globally with Neeyamo – Global Payroll services and EOR services as we help you go beyond borders to manage your international global payroll and hire new talent in China.

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Overview

When we think of ice cream, we tend to associate it with the USA or Italy. What if I told you that its origin has roots in China as far back as 2000 BCE? The birth of ice cream serves as a testament to China's rich history of innovation, a legacy that extends seamlessly into its contemporary business landscape. This enduring spirit of innovation has transformed China into a thriving hub for organizations pursuing growth and opportunities.

Do your organization’s expansion plans require you to hire employees in China? Do you lack a physical entity in the country – a key requisite to hire local talent? Neeyamo – one of the top Global payroll providers, assists organizations worldwide with onboarding and managing employees in China- processing payroll, managing local compliance requirements, benefits, and more.

Our Presence

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APAC
Shanghai, China
Neeyamo Enterprise Management (Shanghai) Co., Ltd.
Pudong New Area, Nanhui New City, No. 888 West Huanhu No. 2 Road, Building C , Shanghai Shi, Pudong Xinqu, 200120

Tools And Instances

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Global Payroll

Neeyamo’s global payroll solution covering 180+ countries

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Global Work

A tech-based EOR solution to manage your extended workforce

Facts And Stats

Capital

Beijing

Currency

Chinese Yuan (CNY)

Official Language

Mandarin Chinese

Fiscal Year

1 January - 31 December

Date Format

YYYY/MM/DD

Country Calling Code

+86

Other Languages

Yue (Cantonese), Wu (Shanghainese) and Minbei (Fuzhou)

Time Zone

UTC +08:00

Global Payroll

Overview

What is Global Payroll?

Handling payroll for a widespread workforce can pose a significant challenge for any organization, and the added complication of compliance can make things worse. If companies spend more time processing payroll, it directly impacts day-to-day operations and their overall productivity. The solution to this is global payroll outsourcing.

What is a global payroll system?

Over the years, Neeyamo – Global Payroll Services has observed these complexities and strived to provide global payroll solutions through a single technology platform – Neeyamo Payroll. Neeyamo's global payroll services ease the process for companies looking to outsource their global payroll requirements and aid them in maneuvering the tricky payroll system in China. Neeyamo's payroll software provides the perfect solution for all your global payroll needs – for employees working in primary geographies, the long-tail region, remote or internationally located.

How is payroll calculated?

Neeyamo acts as your personalized Payroll Calculator. Ensuring adherence to local regulatory requirements using multi-level controls. Providing timely and accurate payroll, courtesy of our experts worldwide and using a tech-based integrated smart helpdesk solution with seamless support experience manned by payroll experts - Neeyamo has all your payroll needs covered.

Payroll Taxes

Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the general population's welfare. These are statutory in nature and are levied from both the employer and employee. Additional statutory contributions are made by employers towards aiding both short-term and long-term benefits for their employees.

Employee Taxes

Employee Payroll Contributions

Beijing: Earnings Thresholds: (Lower 2,834 CNY) (Higher 21,258 CNY)

  • 8.00% - Pension
  • 0.50% - Unemployment Insurance
  • 2.00% - Medical Insurance
  • 12.00% - Housing Fund (In some cities, excess of 12% is allowed)
  • 22.50% - Total Employee Cost

Shanghai: Earnings Thresholds: (Lower 3,563 CNY) (Higher 17,817 CNY)

  • 8.00% - Pension (monthly salary cap of CNY 34,188)
  • 0.50% - Unemployment Insurance (monthly salary cap of CNY 34,188)
  • 2.00% - Medical Insurance (monthly salary cap of CNY 34,188)
  • 7.00% - Housing Fund (In some cities, excess of 12% is allowed)
  • 17.50% - Total Employee Cost

Employee Income Tax

Up to 36,000 CNY 3%
36,001 CNY - 144,000 CNY 10%
144,001 CNY - 300,000 CNY 20%
300,001 CNY - 420,000 CNY 25%
420,001 CNY - 660,000 CNY 30%
660,001 CNY - 960,000 CNY 35%
960,001 CNY and above 40%

Employer Taxes

Employer Payroll Contributions

Shanghai: Earnings Thresholds: (Lower 3,563 CNY) (Higher 17,817 CNY)

  • 16.00% - Employer Pension (maximum monthly salary base, 34,188 CNY)
  • 0.50% - Employer Unemployment Insurance (maximum monthly salary base, 34,188 CNY)
  • 9.50% - Employer Medical Insurance (maximum monthly salary base, 34,188 CNY)
  • 0.16% to 1.52% - Employer work-related Injury Insurance (dependent upon the type of work being carried out) (maximum monthly salary base, 34,188 CNY)
  • 1.00% - Employer maternity Insurance (Maternity insurance has been merged into medical insurance in many cities (maximum monthly salary base, 34,188 CNY)
  • 7.00% - Housing Fund (In some cities, excess of 12% is allowed)
  • 34.16% - 35.52% - Total Employment Cost

Payroll Cycle

Overview

Undoubtedly, payroll is a critical process for any organization. The pay cycle in China refers to the period for which an organization pays its employees, and this can vary depending on the pay frequency that the organization chooses to adopt.

Frequency

Employees in China are paid on a monthly basis.

13th Month Cycle

There are no provisions in the law regarding 13th salaries.

Global Work

Overview

What is Employer of Record?

An Employer of Record services / EOR services provider helps you eliminate the hassle of handling complexities while onboarding a new employee in an international location. They help bridge the gap that otherwise mandates organizations to have a local registered entity and a local bank account prior to making a job offer to an international hire.

An Employer of Record services / EOR services provider acts as a legal employer, facilitates salary payments, and manages other statutory requirements such as health insurance, payroll taxes, and employee benefits, ensuring compliance with local tax laws and regulations.

This allows organizations to focus on collaborating with the employee in China for operational tasks, with the knowledge that they have a cost-effective solution to support their global payroll management & HR requirements as they continue their global expansion.

HR Mandates and Practices

Minimum Wage

The national minimum wage in China differs per region. As of March 1, 2023, the minimum  wage  of  the  provinces  Anhui,  Hebei  and  Qinghai  have  increased based on city/urban areas. The most common minimum wages are:

Beijing 2,320 CNY

Shanghai 2,590 CNY

Shenzhen 2,200 CNY

Overtime

Overtime is limited to one hour per day. However, in exceptional circumstances, it can be up to 3 hours but limited to 36 hours per month. Overtime pay is 150% per hour for overtime during workdays, 200% per hour on rest days, and 300% per hour on official public holidays.

Employees under flexible working hours are generally not entitled to overtime payment, which requires approval from the labor bureau.

Data Retention Policy

Records may be held either physically or electronically.

Tax records in China's territories generally must be kept for five years; however, the China Capital Territory requires that they be kept for seven years.

Hiring and Onboarding Requirements

Hiring

In China, according to Labor Law, the Employment Promotion Law, and other labor rules and regulations, employers may not discriminate against women, disabled persons, ethnic minorities, candidates who are carriers of infectious diseases, candidates who come from rural locations and hold rural household residency, or secondees if dispatched to employers by any staffing firm, during the recruitment process.

Under the labor and employment laws of China, if an employee is laid off for reasons such as bankruptcy of an organization, difficulties in production or business operations, adjustment of the enterprise's business methods, or material changes in the economic conditions, this employee will have priority if the employer intends to recruit new staff within six months.

Onboarding

In China, the following documents are generally required to complete an employee’s onboarding processes

Employee's Personal Details (name, home address, postal address, personal phone numbers & emails)

  • Name of candidate
  • Date of birth
  • Identity Certificate Number
  • Address
  • Contact number
  • Email address
  • General Health Condition
  • Educational background
  • Work experience (if applicable)
  • Emergency Contracts
  • Work Visa (ex-pats)
  • work permit (ex-pats)

Probation

The length of the probationary period must be determined based on the terms of the employment contract, as follows:

  • For agreements between three months and one year, the probation must be no longer than one month
  • For contracts over a year but less than three years, the probation must be no longer than two months
  • For contracts over three years, the probation must be at most six months.

Leave

Public Holidays

There are seven public holidays. However, some regions have additional holidays.

China's national holidays for which paid leave is required are as follows:

  • Jan 1: New Year
  • Jan 22: Chinese New Year
  • Jan 22: Lunar New Year
  • Apr 5: Qingming Festival
  • May 1: Labor Day
  • Jun 22: Dragon boat festival
  • Sept 29: Mid-Autumn Festival
  • Oct 1: National Day

Sick Leave

Chinese labor law defines sick leave as a period off from work given to employees who suffer from an illness or a non-work-related injury. After being diagnosed and given the appropriate medical certificate, employees fall under the special jurisdiction of employment stability. It protects them from termination during treatment and orders that they be paid a reduced sick leave wage.

In China, employees are entitled to a period of medical treatment varying from 3 to 24 months for 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.

Maternity Leave

Female employees are entitled to maternity leave of at least 98 days, beginning 15 days before the expected delivery date. Maternity leave is extended by 15 days if a woman undergoes difficult labor and delivery. In cases of multiple births, women get an additional 15-day period of maternity leave for each additional child. If a woman gives birth to her first child at 24 or older, she is entitled to additional maternity leave, which varies depending on locality.

Paternity Leave

Paternity leave is granted to the father for three to 30 days, depending on the locality.

Parental Leave

Parental leave includes maternity and paternity leave and leaves for when a child is adopted. An employee must have completed at least 12 months of employment to be eligible. Parental leave is unpaid leave that lasts for 12 months, and it is possible to request an additional 12 months from the employer.

The employees in Shanghai are only eligible to apply for childcare leave for a child under the age of 3 years old, and the eligible leave for each child is five days. Employees should receive regular pay during parental leave, which does not include year-end bonuses or salary payments for special circumstances.

Other Leave

Marriage Leave: Each city follows its laws, which vary between 3-10 days. In Beijing and Shanghai, employees are entitled to 10 days' marriage leave.

Bereavement Leave: Varies between cities and is between 1-3 days.

Termination

Notice Period

In cases where notice is required (i.e., termination is not immediate), the employer must either provide 30-days' prior notice to the employee or one month's salary in lieu of notice.

If the employer fails to give notice, the employee may request payment in lieu of notice. One month's salary is payable as the notice period is 30 days.

Severance Pay

Severance pay varies based on the reason for termination, but in general, severance is one month's salary for each year of employment, capped at three times the minimum wage, and cannot exceed 12 months.

Visa

Overview

Any foreign worker wishing to engage in business in China must have a work visa. The employer must sponsor the visa and be a recognized business that is allowed to employ foreign workers. The employee must be a recognized foreign authority in the industry in which they will work.

Male candidates for work visas in China must be between 24 and 65, while female applicants must be between 24 and 55. A government-issued employment permit and visa notice letter, which the employee must sign and return to the Chinese government, must be sent by the employer to the employee. After arrival, a Z visa is only suitable for 30 days. The employer must apply for a temporary residence permit on the worker's behalf during this period. The Z visa can be obtained for up to 50 years and 90 days.

Employee Background Checks

Legal and Background Checks

There is no legal guidance on checks an employer may carry out about the background and health of job applicants.

Typically, employers may conduct background checks on a job applicant during the hiring process. However, there are some practical limits on how far an employer can go. For example, the employer should not check on family background, medical history, or circumstances involving other sensitive personal information.

Last updated on September 13, 2023

If you have any queries or suggestions, reach out to us at irene.jones@neeyamo.com

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