China’s business has been going strong in the past decades, enjoying double-digit growth in the past 30 years. As the world’s largest economy, it is a very attractive location for business expansion. Shanghai is especially attractive, as it is the country’s biggest city and a global financial hub that is getting much attention from businesses all around. To help companies prepare themselves for business, Links International has created a legislative page of the main employment laws and best practices in Shanghai. Please note that all the information listed below is to be used as a general guideline. For more detailed accounts of laws and regulations, please visit official governmental websites.
These are your options when registering a business in China.
A newly set up enterprise receives the business license as a legal person and other organization unified social credit code (referred to as the “unified code”) from the Administration of Commerce and Industry. The business does not need tax registration and is no longer required to apply for a tax registration certificate from October 2015. After the completion of the supplementary information collection, a business license with uniform code can be used instead of the tax registration certificate.
This can be done once registration has been completed. For WFOE, you need to set up an RMB basic account and a foreign currency capital contribution account. Foreign investors for RO should open a bank account in China, as well. Requirements vary between different banks.
Typically documents required will include:
Shanghai is at a central location along China’s coastline. Shanghai has become a major trading port, China’s largest industrial city and the Financial Center in the Far East. Shanghai has become one of the most important economic hubs of the country and the world.
The Port of Shanghai faces the East China Sea to the east, and Hangzhou Bay to the south. Shanghai is China’s top sea port. Shanghai has overtaken Singapore as the world’s busiest container port.
Milestone progress has been made in building the “Three Ports and Two Networks”, referring to the Deep Water Port, Aviation Port, and Information Port, railway and highway networks respectively. The spill-over economic effect of this increased infrastructure has been greatly enhanced.
See here to read about more benefits of doing business in Shanghai.
In China, full-time employees are required to submit Social Contribution. The specific insurance types are pension insurance, medical insurance and unemployment insurance, which are submitted by employer and employee accordingly. Work-related injury insurance and maternity insurance are submitted by the employer only. The amount of social insurance is based on average monthly income of the last year. The rate of contribution differs in each city.
Security Fund of wages in arrears will be charged once a year. Each Legal Entity receives the notice every October.
As a general rule, any person other than those having the right of abode or land in China must obtain a visa/permit before coming to China for the purpose of taking up employment.
Visas for foreigners to work in China as professionals are under the General Employment Policy. Considerations for visa approval for each applicant include:
Once all required documents have been submitted to the Immigration Department, it takes about four weeks to process the visa application.
The authorities in Shanghai adjust the statutory minimum wage in each April. Since 1st April 2018, wages for full-time workers will be raised to RMB 2,420 per month, while wages for part-time employees will be raised to RMB 21 per hour.
The Employer shall practice a working hour system under which labourers shall work for no more than eight hours a day and no more than 44 hours a week on average. An employer shall ensure each employee to have at least one day off for a week.
Employees who have worked over one year are entitled to annual leave with pay. For employees who have been in the workforce for less than 10 years, the annual leave is 5 days; for more than 10 years and less than 20 years, the annual leave is 10 days; and for more than 20 years, the annual leave is 15 days.
Employees employed under a continuous contract are entitled to not less than one day of rest per week.
The employee with the below situation, the employer is able to terminate the employee and without notice period:
For employees in the situations below, the employer is able to terminate the employee, but should provide formal written notice 30 days in advance:
Refer to the clause 25 & 26 of “Labor Law of the People’s Republic of China”
In cases where the employer terminates the labor contract with the employee or the labor contract is completed and employer doesn’t renew, the employer should give severance payment to the employee.
Benefits In Kind
Employers are not obligated to provide employees with additional medical insurance and additional housing fund. It’s a choice for companies to provide these as benefits to their employees.
Employees have to pay salaries tax on any benefits associated with stock-based awards arising from their office or employment.
Upon hiring new employee(s), the employer must report the personal details of the new employee(s), date of commencement and the terms of employment to the staffing agency within one month of the commencement date.
China generally stipulates that all persons are equal before the law and the law shall prohibit any discrimination on any ground. This principle is materialized through the enactment of the following ordinances: Labourers shall not be discriminated against in employment, regardless of their ethnic community, race, gender, or religious beliefs.
Female employees meet the Population and Planned Parenthood Statute of Shanghai City are eligible for 128 days maternity leave and get birth allowance paid monthly and medical benefits from the social insurance centre.
In terms of the provisions of Shanghai, during the first year in the company, the medical treatment period shall be 3 months. After each year of work, the medical period is increased by one month, but no more than 24 months.
The standard of sick pay should be determined by the length of the medical treatment and the working age of the employee. If an employee’s disease or non-work-related injury requires continuous leave within 6 months, the enterprise shall pay sick leave salary according to the following standards :
1st January to 31st December of each year.
Individual income from wages and salaries shall be taxed at progressive rates ranging from 3 percent to 45 percent of which the tax threshold is 3500 RMB (4800 RMB for foreigners). Social insurance and housing fund amount and some other items stipulated by the law are tax-free income.
Employers withhold the tax and arrange the payment to authority. Employees earning more than 120,000 RMB annually need to report their income directly to the tax authorities during March of each year.
Employers complete the monthly submission. The employee can get records via the government’s website.
The method used for wage payment is autopay or cash, normally. The majority of Chinese employees are paid on a monthly basis.
For each pay period, employees will be paid the basic salary, allowances, bonus, commission, overtime and other ad hoc payments as required.
Although not required by law, it is common practice for employers in China to give employees a bonus at the end of the year. The bonus amount is determined by the company. Alternatively, companies provide employees with a 13-month salary.
Employees are entitled to public holidays as follows:
|New Year’s Day||1 January|
|Chinese New Year||24 to 30 January|
|Qingming Festival||4 to 6 April|
|Labour Day Holiday||1 to 5 May|
|Dragon Boat Festival||24 to 27 June|
|National Day Holiday||1 to 8 October|
Work must stopped once temperature over 40℃; Over 37℃, lower than 40℃, the working hours should be within 6 hours; Employees are entitled to receive the high temperature allowance from June to September. See here for more information.
Working Hours: 09:00-12:00 a.m. 13:00-16:00 p.m.
Standard time zone: UTC/GMT +8 hours