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 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.
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:
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:
B – Grade Foreigners Workers
Foreigners will receive a B classification if they meet any of the following conditions:
C – Grade Foreign Workers
Class C employees are considered as such if:
Points system
Applicants must have the minimum points below to be able to apply for a Z visa:
Qualifications | Standards – Points |
Direct Qualification |
|
Annual Salary (CNY) – Highest 20 |
|
Education – Highest 20 |
|
Related Working Years – Highest 20 |
|
Annual Working Time (months) – Highest 15 |
|
Chinese Level – Highest 5 |
|
Working Area – Highest 10 |
|
Age – Highest 15 |
|
Graduation / Experience – Highest 5 |
|
Encouraged Points from Provincial Government |
|
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
Grade | Annual Taxable Income | Tax rate | Quick deduction amount |
1 | ¥≤36,000 | 3% | ¥0 |
2 | ¥36,000 – 144,000 | 10% | ¥2,520 |
3 | ¥144,000 – 300,000 | 20% | ¥16,920 |
4 | ¥300,000 – 420,000 | 25% | ¥31,920 |
5 | ¥420,000 – 660,000 | 30% | ¥52,920 |
6 | ¥660,000 – 960,000 | 35% | ¥85,920 |
7 | ¥>960,000 | 45% | ¥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
Grade | Annual Taxable Income | Tax rate | Quick deduction amount |
1 | ¥≤3,000 | 3% | ¥0 |
2 | ¥3,000 – 12,000 | 10% | ¥210 |
3 | ¥12,000 – 25,000 | 20% | ¥1,410 |
4 | ¥25,000 – 35,000 | 25% | ¥2,660 |
5 | ¥35,000 – 55,000 | 30% | ¥4,410 |
6 | ¥55,000 – 80,000 | 35% | ¥7,160 |
7 | ¥>80,000 | 45% | ¥15,160 |
Non-residents are not required to complete the ATR process.
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.
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).
Employment Contract Type & Duration | Probation Period |
Fixed Term ≤ 3 months | Not 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 tasks | Not applicable |
Employers are allowed to either pay 80% of the employee’s salary during probation – so long as it meets the minimum wage requirement.
City | Monthly Wage | Hourly 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 Labour Contract
Circumstances for terminations are limited and reasons include the following:
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:
* 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:
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:
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:
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.
Under China’s Social Security System, there are 6 types of mandatory insurance schemes:
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 Insurance | Employee Contribution | Employer Contribution |
Pension | 8% | 16% |
Medical (including maternity insurance) | 2% | 10% |
Industrial injury | 0% | 0.16% to 1.52% |
Unemployment | 0.5% | 0.5% |
Housing fund | 7% | 7% |
Beijing
Social Insurance | Employee Contribution | Employer Contribution |
Pension | 8% | 16% |
Medical (including maternity insurance) | 2% | 9.8% |
Industrial injury | 0% | 0.2% to 1.9% |
Unemployment | 0.5% | 0.5% |
Housing fund | 12% | 12% |
Guangzhou
Social Insurance | Employee Contribution | Employer Contribution |
Pension | 8% | 15% |
Medical (including maternity insurance) | 2% | 6.5% |
Industrial injury | 0% | 0.16% to 1.12% |
Unemployment | 0.2% | 0.2% |
Housing fund | 5% – 12% | 5% – 12% |
Years of Service | Days of annual leave |
Less than a year | May be pro-rated |
1 – 10 years | 5 days |
11 – 20 years | 10 days |
Over 20 years | 15 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 months | Sick leave 6 months > | |
Type of payment | Sick Leave Payment | Diseases Relief Fund |
# of years worked & payment amount |
|
|
Maternity leave in China comes in two parts – the ‘basic’ maternity leave and the ‘extra maternity’ leave.
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.
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.
Below are the public holidays in China for 2023 – applicable to all employees:
Holiday | Number of Days | Date |
New Year | 1 | 1 Jan |
Spring Festival | 3 | 21 Jan – 24 Jan |
Ching Ming Festival | 1 | 5 Apr |
Labour Day Festival | 1 | 1 May |
Dragon Boat Festival | 1 | 22 Jun |
Mid-Autumn Festival | 1 | 29 Sep |
National Day Festival | 3 | 1 Oct – 3 Oct |
Below are the public holidays in China for 2023 – applicable to certain employees:
Holiday | Number of Days | Date |
International Women’s Day | 0.5 | 8 Mar (only observed by women) |
Youth Day | 0.5 | 4 May (only for youths between 14-28) |
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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.
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.