Wages and benefits in China
Minimum wages across China
Determining the minimum wage in China is complicated. First, wages are set for individual cities, provinces and other administrative units by their respective local governments rather than on a nationwide basis. Next, each of these principalities is divided into a number of wage classes, whose minimum wages vary according to local socio-economic conditions. Lastly, the minimum wage is differentiated between the minimum monthly salary and the minimum hourly wage (for full-time and part-time workers, respectively). According to China’s Employment Promotion Plan, the minimum wage in each jurisdiction must be increased at least once every two years.
Average wages are much higher compared to government stipulated minimum wages and continue to increase every year. The 2019 average wages are shown below:
Average annual salaries by region (urban units)
Assumed exchange rate: 1 USD = 6.84 Yuan
Average salaries in major sectors (urban units)
|Agriculture, Forestry, Animal Husbandry, and Fishery||39,340||5,751|
|Production/Supply of Electricity, Gas, Heat, and Water||107,733||15,750|
|Transport, Storage, and Post||97,050||14,189|
|Information Transmission, Software, and IT||161,352||23,589|
|Wholesale and Retail Trade||89,047||13,019|
|Hotels and Catering Services||50,346||7,361|
|Leasing and Business Services||88,190||12,893|
|Scientific Research and Technical Services||133,459||19,512|
|Management of Water Conservancy, Environment, and Public Facilities||61,158||8,941|
|Services to Households Repair and Other Services||60,232||8,806|
|Health and Social Service||108,903||15,921|
|Culture, Sports, and Entertainment||107,708||15,747|
|Public Management, Social Security, and Social Organization||94,369||13,797|
Assumed exchange rate: 1 USD = 6.84 Yuan
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
- employees in the transport, warehousing and railway sectors
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:
- Occupational injury
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.
|Employer rates||Employee rates|
|1 The contribution amount in each category is calculated by using the employee’s payment base figure and multiplying it by different percentages required by each local government entity.|
|Pension||Around 10% to 22%||Around 8%||An individual can receive a pension based on the amount accumulated in his/her individual fund after retirement.|
|Medical||Around 5% to 12%||Around 2%||In the event of illness/non-occupational injury, an employee can have part of the treatment cost covered by medical insurance.|
|Unemployment||Around 2%||Around 1%||In the event of redundancy, the employee may claim unemployment benefits for a maximum of 24 months.|
|Maternity||Around 0.5% to 1%||-||During maternity leaves, the employer receives reimbursement from this insurance fund.|
|Work-related injury||Around 0.5% to 2%||-||The work-related injury fund covers the cost of treatment should an occupational injury or illness occur.|
|Housing fund||Around 5% to 12%||Around 5% to 12%||Designed to ensure that workers save to purchase housing.|
In late 2011, the Chinese government announced that foreigners are to be included in the social insurance system at the same rates as Chinese citizens (excluding the housing fund); however, to date, implementation has varied by region.
Given the complicated requirements for social insurance contributions, many companies choose to outsource their payroll processing and related HR administration services. This has the added benefits of ensuring continuity (which can falter if an HR manager is absent or suddenly resigns), transparency and the confidentiality of salary information.
The Canadian Trade Commissioner Service in China recommends that readers seek professional advice regarding their particular circumstances. This publication should not be relied on as a substitute for such professional advice. The Government of Canada does not guarantee the accuracy of any of the information contained on this page. Readers should independently verify the accuracy and reliability of the information.
Content on this page is provided in part by Dezan Shira & Associates a pan-Asia, multi-disciplinary professional services firm, providing legal, tax, and operational advisory to international corporate investors.
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