Assumed exchange rate: 1 USD = 6.84 Yuan
Overtime
In China, overtime is paid depending on the work hour system adopted by the employer:
- standard work hours
- comprehensive work hours
- non-fixed work hours
Comprehensive and non-fixed work hour systems require special approval to implement. Under the standard work hours system, employees work eight hours or less a day and 40 hours or less a week. They have the right to at least one rest day per week.
The majority of white-collar jobs in China now operate according to this model. Rather than a unit of one week, the comprehensive work hour system adopts a set period (typically one month) as the base to calculate the employee’s working hours. Although the distribution of hours worked during this period can be irregular, the average number of working hours per day and per week should roughly correspond to the levels set out in the standard work hour system. Lastly, the non-fixed work hour system is geared toward positions that generally do not receive overtime payments such as:
- senior management
- salespeople
- employees in the transport, warehousing and railway sectors
Social insurance
Social insurance payments in China (also called “social welfare” or “mandatory benefits”) are mandatory contributions to government-run funds made by both the employer and the employee (whose contribution the employer is responsible for withholding each month). Social insurance obligations from the employee and employer, respectively, can vary considerably depending on the city in which the contributions are being made. For a company with employees based in many cities around the country, the overall cost to the company for an employee earning a monthly salary of RMB 10,000 in one city may be quite different for someone on the same salary based elsewhere.
In total, there are five social security funds:
- Pension
- Unemployment
- Medical
- Occupational injury
- Maternity
Added to these is a mandatory housing fund not strictly considered a type of social welfare, but generally included within the scope of social security. Housing fund contributions are mandatory and come from both the employer and the employee, apart from some special areas where the employee does not need to make a contribution. Money in the housing fund can be used by employees to pay the down payment on a house or to subsequently pay back a loan to the bank.
While employees are also mandated to make their own contributions to several types of social insurance, the portion contributed by the employer is normally higher. In fact, social security payments typically add an additional cost of between 30% and 45% of an employee’s salary each month.
Mandatory benefit types
Mandatory contribution rates are stipulated by local governments, and the exact calculations involved can be quite complicated. Percentages are not technically based on the employee’s monthly salary, but rather on a theoretical “base” salary stipulated differently from city to city. Foreign invested enterprises should follow the local rates when calculating payroll and paying mandatory contributions for the social security of their employees.
