Due to the complexity of the China local employment, payroll, and tax regulations, it is not easy for foreign employers to understand how to calculate employee salary in China and handling payroll. This article explains the most important factors to consider when hire employee in China and calculate employee salary in China, which foreign employer must understand and learn in order to ensure payroll and tax compliance in China.
In China, employees’ salary is paid on the monthly basis. Employer shall calculate employee salary in China and pay salary at least once a month. The specific date for the salary release date shall be prescribed by the employer and employee. In the event of a public holidays or rest day, salary shall not be delayed and shall be paid in advance.
With respect to employees who are subject to the annual salary package or whose salary are paid in accordance with the assessment period, employer shall pay salary in advance at the standard of no less than the minimum wage every month and settle accounts at the end of the year or at the expiration of the assessment period.
In case of full-time employment, employee salary and China payroll shall be paid at least once a month;
In case of part-time employment, the longest settlement and payment cycle or part-time labor shall not exceed 15 days.
Leaning calculate employee salary in China, it is important to learn the monthly gross salary first. Employee monthly gross salary point to the total monthly salary before paying individual income tax and mandatory benefits contribution. Employee monthly gross salary is consisting of two parts, fixed salary, and variable Salary when calculate employee salary in China.
According to current law, social security is a legal obligation of the employer in China. When employer and employee enter an employment contract in China, the employer is required by law to pay the employee’s social security which is 5 social insurances and 1 housing fund base on the contribution policy in the city where employee placed. Such contribution shall all be considered when handling China payroll and calculate employee salary in China.
If employer fails to pay employees’ social security and housing accumulation fund, employee may file a complaint with the social security bureau of the employer’s seat and the housing accumulation fund management center. For more details regarding China social security, please check Social Security in China.
★ Pension Insurance: when employees reach the official retirement age in China, they can receive the pension on the monthly basis as their living expenses, and it provides life respect in exchange for care. Before employee can receive pension benefits after retirement, employee must first accumulate pension insurance for 15 years.
★ Unemployment Insurance: this covers employees’ living expenses, medical expenses, and job-transfer training, as well as production self-help and job introduction and other security measures during their unemployment period.
★ Medical Insurance: Specifically, employee is in medical treatment, which is a safeguard measure of nursing respect during illness. Medical insurance is a type of social security system that provides medical services or economic compensation to employee who are sick or injured, and it is a type of material assistance provided by the government or society. Employee can use their credit in their medical card when they take the treatment and medicines in the hospital.
★ Work-related injury insurance: when employee get injured at work, temporary or permanent loss of ability to work, employee can apply the wage income compensation from local government. It is the medical care and life care measures for employees injured at work.
★ Maternity Insurance: income subsidies and security measures for female employees during their pregnancy period.
★Housing Fund: a fund that contributed by both employee and employer. Such fund contribution all went into employees’ personal housing fund account, and can be used as their housing mortgage
Social insurance and housing fund shall be contributed monthly in China. It is employer’s obligation to register employees in the company social security account when they onboard, calculate, contribute both employee and employer’s contribution on the monthly basis when calculate employee salary in China.
In China, it is employer’s obligation to ensure all the employees hired are fully registered under the social security system.
Employer shall contribute all 5 social insurance and 1 housing fund, while employee shall contribute 3 social insurance and 1 housing fund. Employees’ contribution shall be deducted from their monthly gross salary when calculate employee salary in China and contributed under employer’s social security account.
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Comprehensive guide to help you understand all practices about hiring employees in China to ensure your hiring in Chinese are fully compliance under China Employment Law.
