Guide to Hiring in Mainland China

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Guide to Hiring in Mainland China

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As the second-largest economy in the world, China boasts a wealth of natural resources, industrial and manufacturing facilities, and an increasing amount of skilled, top talent.

Adding to all of that with an impressive GDP of over 17 trillion, China’s humongous consumer market, digital innovation and growing global influence have made it an exciting destination to grow a business in.

Considering expanding into China? We’ve got all you need to know in this Guide to Hiring in China – complete information statutory leave and contributions, work visas, tax deductions and much more.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of China’s employment laws and regulations, please visit the official governmental websites.

Labour Law – Basics

What are the basic requirements for employers in China?

  • China has several legislations on labour law, such as the Labour Law of the People’s Republic of China which came into effect on 1 January 1995 and the Labour Contract Law of the People’s Republic of China that was enforced from 1 January 2008. Over time, other key laws have been passed to supplement these basic legislations such as the newly passed Women’s Protection Law and the Production Safety Law of the People’s Republic of China.These laws cover key areas such as working hours, statutory contributions by the employer and protective measures for women in the workplace.

 

  • Social Security Payments
    • Social security payments are to be made from the employer’s statutory accounts. It is the employer’s legal obligation to set up these accounts with the respective local authorities i.e., the social insurance company account and housing fund company account.

 

  • Individual Income Tax (IIT)
    • Employers are also responsible for calculating and withholding accurate income tax payments for their employees. Take note that for the year 2023, the preferential tax rate for annual bonuses and the tax exemption for expatriates have been extended to 31 December 2023.For a detailed breakdown of income tax rates, refer to the ‘What to note for existing employees?’ section.

 

What are the different work permits and visas in China?

China has different categories of visas such as the Z visa, X1/2 visa, J1/2 visa, M visa, and F visa. However, for those planning to work and remain in China for more than 6 months, they will need to apply for the Z visa.

China has a 3-tiered point-based system to grade applicants, as shown below:

  • Class A – Elite foreign talent
  • Class B – Professional foreign talent
  • Class C – Miscellaneous foreigners

Applicants under all the categories above can qualify through two means: directly fulfill various requirements set for each category OR reach sufficient points on the points table.

Directly quality by fulfilling requirements

A – Grade Foreign Workers

A foreign employee is considered class A if any of the following conditions are met:

  • They are a recipient of an international award;
  • Selected by China’s talent important plan;
  • Demonstrated entrepreneurial talents;
  • Will take a government-encouraged scarce job; or
  • Selected under the Youth Talent project

B – Grade Foreigners Workers

Foreigners will receive a B classification if they meet any of the following conditions:

  • Hold a bachelor’s degree and have at least two years of work experience;
  • Has a master’s degree from a university in mainland China;
  • Holds a master’s degree from a top 100 institution worldwide as ranked by Jiao Tong University;
  • For foreign language teachers, a bachelor’s degree or higher, no less than two years’ experience of teaching the language, and the language being instructed is the applicant’s native language.

C – Grade Foreign Workers

Class C employees are considered as such if:

  • They are domestic helpers hired by class A employees;
  • They enter China for an internship under a government agreement;
  • They are in China for seasonal employment.

 

Points system

Applicants must have the minimum points below to be able to apply for a Z visa:

  • Class A – above 85 points
  • Class B 60 to 85 points
  • Class C requires below 60 points

Qualifications

Standards – Points
Direct Qualification
  •  Be selected to the National Talent Plan or international acknowledged professional contributions standards 0 points
  • Be in the encouraged industry or position 0 points
  • Innovation and entrepreneurial talent and excellent young talents 0 points
Annual Salary (CNY)
– Highest 20
  • ≥ 450,000 – 20 points
  • 350,000 – 450,000 – 17 points
  • 250,000 – 350,000 – 14 points
  • 150,000 – 250,000 – 11 points
  • 70,000 – 150,000 – 8 points
  • 50,000 – 70,000 – 5 points
  • < 50,000 – 0 points
Education – Highest 20
  • Doctor or equivalent – 20 points
  • Master or equivalent – 15 points
  • Bachelor or equivalent – 10 points
Related Working Years – Highest 20
  • For ≥ 2 years, add one point for each year – Highest 20
  • 2 years – 5 points
  • < 2 years – 0 points
Annual Working Time (months) – Highest 15
  • ≥ 9 months – 15 points
  • 6 – 9 months – 10 points
  • 3 -6 months – 5 points
  • < 3 months – 0 points
Chinese Level – Highest 5
  • < Chinese related major bachelor or equivalent – 5 points
  • Former Chinese citizen – 5 points
  • HSK 5 – 5 points
  • HSK 4 –  4 points
  • HSK 3 – 3 points
  • HSK 2 – 2 points
  • HSK 1 –  1 point
Working Area – Highest 10
  • Western China – 10 points
  • North East China or industrial areas in China – 1o points
  • Poor areas in China – 1o points
Age – Highest 15
  • 18 – 25 – 10 points
  • 26 – 45 – 15 points
  • 46 – 55 – 10 points
  • 56 – 60 – 5 points
  • > 60 – 0 points
Graduation / Experience – Highest 5
  • Graduated from World – Top 100 universities – 5 points
  • Work experience in Fortune Global 500 companies – 5 points
  • You own patent(s) or intellectual property – 5 points
  • You continuously work in China over 5 years
  • 5 points
Encouraged Points from Provincial Government
  • Local social and economic talent shortage – 0 – 1o points

What to note for existing employees?

  • Individual Income Tax (IIT) for Employees

Residents and non-residents have different tax rates.

Residents are those who are:
i. domiciled in China, or

ii. not domiciled in China but have resided in China for an aggregate of 183 days or more within a tax year.

On the other hand, non-residents are those who are:

i. not domiciled in China and do not reside in China, or

ii. not domiciled in China but have resided in China for less than 183 days in aggregate within a tax year.

 

Residents – calculated based on a cumulative amount of a 1 year

GradeAnnual Taxable IncomeTax rateQuick deduction amount
1¥≤36,0003%¥0
2¥36,000 – 144,00010%¥2,520
3¥144,000 – 300,00020%¥16,920
4¥300,000 – 420,00025%¥31,920
5¥420,000 – 660,00030%¥52,920
6¥660,000 – 960,00035%¥85,920
7¥>960,00045%¥181,920

Residents must complete the Annual Tax Reconciliation process, which means they must recheck their IIT paid and deducted in the tax year, calculate the refundable or supplementary tax payable, report to the tax authorities, and make the tax settlement. This is usually done between March to June of each year.

 

Non – residents – calculated on a monthly basis

GradeAnnual Taxable IncomeTax rateQuick deduction amount
1 ¥≤3,0003%¥0
2¥3,000 – 12,00010%¥210
3¥12,000 – 25,00020% ¥1,410
4 ¥25,000 – 35,00025% ¥2,660
5¥35,000 – 55,00030%¥4,410
6 ¥55,000 – 80,00035% ¥7,160
7¥>80,00045%¥15,160

Non-residents are not required to complete the ATR process.

  • Social Insurance Contributions

Please refer to the ‘Is employment insurance compulsory in China?’ section for a detail list of social insurances in China and their contribution rates across various regions.

What to remember when hiring new employees?

It is critical to note that Employment law is relatively employee friendly in China and employers need to be very careful when deciding which contract type to engage workers under.  For white collar workers, typically employers will use two back-to-back 3-year fixed term contracts to hire employees in order to give the employer a 6-month probation period and defer the employee becoming an indefinite or open-ended employee (once an employee completes two back-to-back fixed term contracts, they generally become indefinite employees).

  • Types of labour/employment contracts
    • Employers can offer employees 1 of 3 types of labour contracts: Fixed-term labour contracts, open-ended labour contracts, or labour contracts that are special to certain tasks.
  • Requirement of written labour contract
    • Employers must provide a written Chinese labour contract with employees to formally begin the employment relationship.
    • This contract must be signed no later than 1 month from the start of the employee’s service.
    • Employers who fail to adhere to this can be penalised by being made to pay a double salary.
  • Terms of labour contract
    • The contract between employer and employee should cover major items such as:
      i. Employer information
      ii. Employee information
      iii. Contract term
      iv. Job description and work location
      v. Working hours
      vi. Salaries and wages
      vii. Social security
      viii. Health and safety policy
    • Other optional terms that can be covered include probation, training, confidentiality, and other benefits.


What are the different discrimination laws in China?

  • China’s Constitution of the People’s Republic states that all citizens are equal and that ethnic minorities, people with religious beliefs, and women are not to be discriminated against in any aspect of civil life – including employment (covering recruitment, salary, social benefits, etc.)
    In addition to that, the All-China Federation of Trade Unions (ACFTU) published a Manual for Promoting Gender Equality at Work in 2019. The manual was published to promote better treatment of women in the workplace. The Ministry of Human Resource and Social Security also released the Regulation on Employment Service and Employment Management to highlight that employees cannot be discriminated against due to disability or for migrating from rural areas.One of the biggest changes China made to its laws on equality was in October 2022, when it passed the highly anticipated Women’s Protection Law. This law which took effect from 1 January 2023 had 30 new provisions covering a wide range of issues such as gender equality in recruitment and contract negotiation, the employer’s obligation in sexual harassment prevention, as well as relief measures for women should their rights and interests be affected.

What are the working hours in China?

  • Chinese labour law states that a standard work day should be eight hours’ long, with a maximum of 44 hours a week. If an employee works beyond this, they are entitled to overtime payments.
  • Overtime Payment Calculation –
    • Overtime on a working day: 150%
    • Overtime on a weekend: employer to grant compensation leave or pay 200% overtime
    • Overtime on a public holiday: 300%

What is the legal probation period in China?

  • An employee’s probation period would depend on the type and duration of the employment contract.
Employment Contract Type & DurationProbation Period
Fixed Term ≤ 3 monthsNot applicable
3 months < Fixed Term ≤ 1 year≤ 1 month
1 year < Fixed Term < 3 years≤ 2 months
Fixed Term ≥ 3 years≤ 6 months
Open-ended≤ 6 months
Labour contract special for some certain tasksNot applicable

Employers are allowed to either pay 80% of the employee’s salary during probation – so long as it meets the minimum wage requirement.

 

What are the minimum wage requirements in China?

  • The minimum wage in China varies between each region. Monthly minimum wage rates typically apply to full-time employees, while hourly rates apply to casual employees and interns. The rates in some of the key cities at present are as follows:
CityMonthly WageHourly Wage
Shanghai¥2,590.00¥23.00
Beijing¥2,320.00¥25.30
Chengdu¥2,100.00¥22.00
Hefei¥2,060.00¥21.00
Guangzhou¥2,300.00¥22.20
Shenzhen¥2,360.00¥22.20
Nanjing¥2,280.00¥22.00
Hangzhou¥2,280.00¥22.00
Dalian¥1,910.00¥19.20

 

Termination of Employment – Employment Insurance, Tax, Severance Payment & Long Service Payment

  • In China, a labour contract can be either terminated or discharged.  It is critical to note that Employment law is relatively employee friendly in China and employers need to be very careful when terminated or discharging labour contracts in China to avoid the risk of an employment dispute. Once the employee is past probation, separations tend to be mutually agreed upon between the employer and employee. and include an element of severance payment based on the employee’s years of service.

 

Termination of Labour Contract

Circumstances for terminations are limited and reasons include the following:

    • The terms of the contract have expired.
    • The employee has retired and is receiving a pension.
    • The employee has passed away.
    • The employer is bankrupt or must close the business.

In the case where the terms of a contract have expired or employer is bankrupt or must close the business, a severance pay must be given by the employer.


Discharge of Labour Contract

A labour contract can be discharged due to the following reasons:

    • Mutual agreement between employer and employee.
    • Raised by the employee
      i. Must give 3 days’ notice if under probation
      ii. Must give 30 days’ notice if under regular working period
      iii. Immediate discharge in the event the employer breaks the law.
      Severance pay must be given in this instance.
    • Raised by employer without severance pay
      i. Employee proves to be unsuitable/unqualified during probation
      ii. Employee has broken internal regulations or caused major damage
      iii. Employee has fostered an employment relationship with another company
      iv. Employee has been convicted of a crime
    • Raised by employer with severance pay and a 30-day notice*
      i. Employee is sick and the medical period has expired. The employee can no longer work, or can they be transferred to other roles.
      ii. Employee proves to be unqualified and cannot be trained or transferred to other positions.
      iii. The labour contract cannot be performed due to change its in condition and both parties cannot come to a mutual agreement after consultation.
      iv. An economic layoff where a notification has been sent to the government in advance. In this case, there is no need for a 30-day notice.

* Employers have the option of offering one month’s salary instead of adhering to a 30-day notice.

Note: Labour contracts cannot be terminated for the following reasons:

    • When employees are diagnosed with occupational diseases
    • Partial or totally disability from a work injury
    • Sicknesses that crop up during their medical leave period
    • Pregnancy, childbirth and breastfeeding
    • The employee has worked over 15 years in the company and is less than 5 years away from retirement

Calculating Severance Pay

Severance pay upon termination or discharge of a labour contract can be calculated
using the following formula:

                       Average Monthly Salary x Years of Service of current employer

Average Monthly Salary definition: 12 months before the labour contract is terminated,
with a cap of 3x the local monthly salary in the previous year – adhering to minimum wage requirements

Years of Service definition:

    • Less than 6 months = 0.5 month’s pay
    • 6 months to a year = 1 month’s pay
    • Over 1 year = 1 month’s pay for each year

 

What is the retirement age in China?

In March 2023, China announced that it had plans to change its retirement age – one of the lowest in the world. However, the amendments have not been formally made yet, and at present, these are the retirement ages that apply to men and women:

  • 60 years for men
  • 55 years for white-collar women
  • 50 years for women who work in factories

 

Employment dispute channels

China opened its first specialised labour court in Suzhou, Jiangsu in July 2021. In other regions, cases may be heard in ‘regular’ courts. However, litigation – going to court – should be the last resort.

Under the Labour Law of the People’s Republic of China, employers are expected to resolve disputes through either mediation or labour arbitration first. Parties can only file a case in court once the options of mediation and/or arbitration have been explored.

Is employment insurance compulsory in China?

Under China’s Social Security System, there are 6 types of mandatory insurance schemes:

  • pension fund
  • medical insurance
  • industrial injury insurance
  • unemployment insurance
  • maternity insurance
  • housing fund (optional for foreigner employees)

Contributions are made by both employers and employees – these amounts vary by region. As an example, below is the table of contribution rates in Shanghai, Beijing and Guangzhou.

Shanghai

Social InsuranceEmployee ContributionEmployer Contribution
Pension8%16%
Medical (including maternity insurance)2%10%
Industrial injury0%0.16% to 1.52%
Unemployment0.5%0.5%
Housing fund7%7%

 

Beijing

Social InsuranceEmployee ContributionEmployer Contribution
Pension8%16%
Medical (including maternity insurance)2%9.8%
Industrial injury0%0.2% to 1.9%
Unemployment0.5%0.5%
Housing fund12%12%

 

Guangzhou

Social InsuranceEmployee ContributionEmployer Contribution
Pension8%15%
Medical (including maternity insurance)2%6.5%
Industrial injury0%0.16% to 1.12%
Unemployment0.2%0.2%
Housing fund5% – 12%5% – 12%

 

Labour Law - Leave

  • An employee’s annual leave entitlement depends on their years of service, as shown in the following table:
Years of ServiceDays of annual leave
Less than a yearMay be pro-rated
1 – 10 years5 days
11 – 20 years10 days
Over 20 years15 days

Any unused mandatory annual leave is to be cashed out before the end of the year
or before the employee is terminated. In the event the employee wants to carry
forward the leave to the next year instead, employers may set a deadline for this.

In China, employees who take sick leave usually receive part of their wages only instead of the full amount. In other words, there may be a salary deduction if an employee was to take sick leave. This percentage that is deducted varies between each region, while the duration of sick leave that can be given will depend on the employee’s years of service.

The minimum sick leave stands at 3 months for employees who have worked less than 5 years with the current employer and less than a 10-year cumulative work history. The maximum sick leave for employees who have worked 15 years with their current employer and a 20-year work history is unlimited paid leave.

In Shanghai, for example, employees can be granted sick leave as shown in the diagram below. Sick leave payment must adhere to the minimum wage policy as well, i.e., any sick leave payment less than 80% of the monthly minimum wage is not allowed, and the employer is required to make up for the gap in pay accordingly.

Sick leave ≤ 6 monthsSick leave 6 months >
Type of paymentSick Leave PaymentDiseases Relief Fund
# of years worked & payment amount
  • < 2 years – 60%
  • 2 – 4 years – 70%
  • 4 – 6 years – 80%
  • 6 – 8 years – 90%
  • > 8 years – 100%
  • < 1 year – 40%
  • 1 – 3 years – 50%
  • > 3 years – 60%

 

 

Maternity leave in China comes in two parts – the ‘basic’ maternity leave and the ‘extra maternity’ leave.

  • Basic Maternity Leave
    Basic maternity leave is granted by the State Council per the Special Provisions on Labor Protection for Female Employees (State Council Decree No. 619), and employees can get up to 98 days under this for normal births. If there are multiple births or other complications, the mother is eligible to take longer leave.In the case of a miscarriage or abortion, female employees can get 15 days of maternity leave for pregnancies under 4 months, and 42 days of maternity leave for pregnancies over 4 months.Salary given during this leave would depend on whether the employee has maternity insurance. If she does, she will receive a maternity allowance in lieu of salary. This allowance, together with a certain amount of medical expenses for the delivery will be paid for by the local security bureau. In some regions, if the allowance is less than the employee’s regular salary, the employer is required to make up for the gap in pay.

 

  • Extra Maternity Leave
    This leave varies between each local government, with the average duration of extra leave given ranging from 30-90 days. Typically, this ‘extra’ leave is granted to those who have children in accordance with the family planning policy and related regulations.In terms of payment/salary, this would also depend on the region/local government. There is no fixed rule on whether the maternity allowance should be extended to the extra leave. Therefore, in some regions, the insurance fund may cover part of it, whilst in other regions, the insurance fund will fully cover it. In places where the leave is not covered by the maternity allowance, the employer is expected to pay the employee’s salary.

The number of days given for paternity leave depend on various factors such as where the father is registered, conditions surrounding the birth, and even the age of the mother.

For instance, while Shanghai offers 10 days of leave for a ‘late childbirth’, in Shenzhen, a male employee can get 15 days of paternity leave if the mother of the child is aged 23 or older. Beijing allows fathers to get 15 days off following the birth of a child, while Sichuan grants up to 20 days. In Henan and Gansu, fathers can get a generous amount of 30 days of paid leave.

Employees across all regions of China get 7 statutory paid holidays in a year – a total of 11 days. This is applicable to all employees regardless of gender or age. However, there are other holidays that apply only to certain segments of the workforce such as International Women’s Day and Youth Day.

For a full list of the statutory holidays in China, refer to the ‘What are the 2023 public holidays in China?’ section.

Employees in China are to be given at least one rest day in a working week. While most companies designate Saturdays and Sundays as rest days, any day of the week can be considered a rest day.

The only condition is that the rest day must be a full 24-hour period in which the employee does not do any work.

What are the 2024 public holidays in China?

China Public Holidays 2024

Below are the public holidays in China for 2024– applicable to all employees:

HolidayNumber of DaysDate
New Year’s Day330 Dec 2023 – 1 Jan 2024
Spring Festival810 Feb – 17 Feb
Qingming Festival34 Apr – 6 Apr
Labor Day51 May – 5 May
Dragon Boat Festival38 Jun – 10 Jun
Mid-Autumn Festival315 Sep – 17 Sep
National Day71 Oct – 7 Oct

*Employers are encouraged to give their staff the day off on Chinese New Year’s Eve – 9 Feb 2024.

 

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In the meantime, stay updated on Labour Law updates throughout the year through our Labour Law Insider. For more news and insights into the market, make sure to subscribe to our blog so you don’t miss out on the latest HR news, or contact our team to learn more about the latest changes!

Please note that all the information listed above are to be used as a general guideline. For more detailed accounts of China’s employment laws and regulations, please visit the official governmental websites.

Interested to explore the idea of payroll outsourcing, EOR, or Visa application services?

Links International is a leading payroll outsourcing provider across Asia Pacific and supports payroll in over 19 countries. Please do not hesitate to contact us.

Relevant Links:

  • Employment Insurance:
    • Social Security Contributions – https://taxsummaries.pwc.com/peoples-republic-of-china/individual/other-taxes
  • Maternity Leave in China:
    • Special Provisions on the Labor Protection of Female Employees – http://www.gov.cn/zwgk/2012-05/07/content_2131567.htm
    • Relevant Rules for Maternity Leave – https://www.china-briefing.com/news/maternity-leave-and-payment-a-comparison-of-relevant-rules-in-mainland-china-and-hong-kong/
  • Public Holidays in China:
    • Notice on Holiday Arrangements – http://www.gov.cn/zhengce/content/2022-12/08/content_5730844.htm