Rivermate | China flag


Salary and Compensation Insights

Explore salary structures and compensation details in China

Market competitive salaries

Understanding market competitive salaries in China is crucial for both employers seeking top talent and employees negotiating their worth. Here's a breakdown of key factors influencing competitive salaries in the Chinese job market.

Geographic Disparity

Salary expectations vary significantly across China's vast landscape. Tier-one cities like Beijing, Shanghai, Shenzhen, and Guangzhou offer considerably higher salaries compared to smaller towns and rural areas. This reflects the higher cost of living in these metropolises.

Industry Specialization

Certain industries in China command premium salaries. The information technology (IT) sector boasts the highest average annual salary, followed by finance. Industries like education and healthcare typically offer lower salaries.

Experience and Qualifications

Experience and qualifications significantly impact competitiveness. Senior professionals with proven track records can command much higher salaries than entry-level candidates. Similarly, individuals with advanced degrees or specialized certifications often earn more than their counterparts with less education.

Company Type

The distinction between private and non-private entities plays a role. State-owned enterprises (SOEs) traditionally offered higher salaries and benefits but may be less flexible in terms of compensation packages. Conversely, private companies, particularly those in booming sectors like tech, often compete aggressively for talent with attractive salary structures.

Negotiation and Benefits

Base salary isn't the only factor to consider. Competitive compensation packages often include benefits like health insurance, housing allowances, and pension contributions. Strong negotiation skills are valuable for securing a salary and benefits package that aligns with your experience and the market value of your position.

Minimum wage

China's minimum wage system is unique in its decentralization. Unlike many countries that have a single, national minimum wage, China's Ministry of Human Resources and Social Security (MOHRSS) only establishes guidelines. The responsibility for setting minimum wages falls on local governments. This allows provinces, municipalities, and regions to tailor minimum wages to their specific economic conditions and cost of living.

Decentralized System

Local governments are required to set minimum wages that meet certain criteria. The minimum wage should be no less than 40% of the average local wage. Additionally, the "Employment Promotion Law" mandates minimum wage increases that keep pace with local living standards, with a minimum target of 13% by 2015.

Minimum Wage Standards

Due to the decentralized system, minimum wages can vary significantly across China. As of February 2024, Shanghai boasts the highest monthly minimum wage at RMB 2,690, while Heilongjiang has the lowest at RMB 1,450.

Variations Across Regions

Local governments are expected to review and adjust minimum wages periodically. These adjustments consider factors like inflation, economic growth, and cost of living changes.

Regular Reviews and Adjustments

The unique structure of China's minimum wage system allows for flexibility and adaptability to local economic conditions, but it also results in significant regional variations.

Bonuses and allowances

Employee benefits in China are a crucial part of the total compensation package, alongside base salary. These benefits can be broadly categorized into mandatory benefits, as stipulated by law, and additional benefits offered by employers to attract and retain talent. This discussion will focus on the various bonuses and allowances commonly seen in China's employment landscape.

13th Month Salary

A unique feature of Chinese employment is the 13th-month salary. This is essentially a mandatory bonus, usually paid around the Lunar New Year (typically in January or February). While not mandated by law, it's a well-established tradition and expected by employees.

Performance-Based Bonuses

In addition to the 13th-month salary, many companies in China offer performance-based bonuses. These bonuses are determined by an employee's individual performance or the company's overall profitability. The amount and criteria for awarding these bonuses can vary depending on the company and industry.

There are limitations on how much companies can award in bonuses to senior management in state-owned enterprises. Government regulations restrict the total bonus pool to not exceed 15 times the average annual income of all employees.

Common Allowances

Several allowances are commonly offered by employers in China to offset employee expenses. These can include:

  • Housing allowance: This allowance helps employees with housing costs, particularly in expensive cities.
  • Transportation allowance: This allowance covers commuting expenses, especially if the workplace is far from an employee's residence.
  • Meal allowance: This allowance helps employees defray the cost of meals during work hours.
  • Communication allowance: This allowance covers phone and internet expenses related to work.

It's important to note that these allowances are not mandatory and vary depending on the company, industry, and employee position.

Payroll cycle

In China, the payroll cycle is governed by specific legal and regulatory guidelines that employers must adhere to.

According to the Labour Law of the People's Republic of China, employee wages must be paid at least once a month. The exact date for salary disbursement is determined by the employment contract but must fall on a business day. If the designated pay day coincides with a public holiday or non-working day, the payment must be issued on the last business day preceding.

Mandatory Employer Contributions

Employers in China are responsible for withholding and remitting various contributions alongside employee salaries. These mandatory contributions include:

  • Social Insurance: This comprises five social security programs: pension, medical, unemployment, maternity, and work-related injury insurance. The contribution rates for each program are shared between the employer and employee, with specific percentages established by local authorities.

  • Housing Fund: This mandatory savings scheme applies to employees in most Chinese cities. Both employers and employees contribute a certain percentage of the employee's salary to the housing fund, which can be used towards purchasing a home.

Tax Withholding and Reporting

Employers in China are obligated to withhold individual income tax (IIT) from employee salaries and submit it to the local tax bureau by the 15th of the following month alongside a provisional income tax return. Failure to comply with tax deadlines can result in penalties.

Maintaining Records and Payslips

Chinese law mandates that employers maintain comprehensive payroll records for a minimum of five years, with some regions requiring seven years of record retention. These records should include detailed information on employee salaries, deductions, and tax contributions.

Additionally, employers must provide employees with payslips, which can be issued electronically. These payslips should clearly outline the breakdown of the employee's salary, deductions, and net pay.

Rivermate | A 3d rendering of earth

Hire your employees globally with confidence

We're here to help you on your global hiring journey.