Recruitment in China
The work culture in China is more personal and volatile than in Germany. Therefore, a dedicated retention & progression plan shall be prepared as Chinese employees are expecting to evolve quickly in their career and rarely accept remaining at the same position with the same salary for more than 2 years.
In principle, qualified workers are available, but it is important to develop a recruitment strategy to attract and retain talent. This can include different channels, which can also vary by province. One of the most common channels is the local job-hunting platform, where many Chinese people find out about jobs.
Also, Chinese employees are quite specialized in their set of skills. It will be difficult and expensive to recruit a local employee efficient in a wide range of skills, especially in second /third tier cities (e.g. an engineer efficient in sales, project management, and capable of communicating fluently in English).
What are the labour laws in China?
The legal basis is regulated in the Labour Law of the People’s Republic of China and the Labour Contract Law of the People’s Republic of China and includes regulations on contract type, probationary periods, equality, and anti-discrimination. Labour regulations are strict and favour employees.
In China, two types of labour contracts exist: fixed-date contracts and open-date contracts. Many companies privilege fixed-date contracts but after two ones, the employee is legally entitled to an open-date contract that the employer must satisfy at the end of the second fixed-date contract.
The two types of contracts highly protect the employee and require important compensation based on the number of years of loyalty to the company. In the case of an open-date contract, employers are usually expected to pay, at least, two months of salary per years of loyalty to the employee.
The probation period is allowed and aligned with the duration of the labour contract. Different duration of contract allows to one month of probation and up to six months of probation period maximum.
The monthly minimum wage, employer & employee social charges are different according to the city where the company is registered. Super and first-tier cities are usually the most expensive, while lower-tier cities have lower social minimums.
Last important element to consider is the “hukou”. The hukou is an important document that formerly linked a Chinese citizen to a city. Especially in first-tier cities, employees may face limitations to access property, education, and healthcare, thus, companies with the ability to assist employees in applying for “hukou” registration shall be a strong plus.
What must be considered for foreign employees in China?
China allows & welcomes foreign employees to live in China and work for foreign and/or local companies. However, it is important to note that their working & resident permits will be attached to a specific location: a foreign employee employed by a Shanghainese company must have its residence in Shanghai.
To obtain a working permit, foreign employees need to hold a Bachelor’s degree and have at least 2 years of related working experience in their home country.
The resident permit is linked to the working permit and is renewable. When the employee resigns from its position, the working permit will be cancelled as the resident permit.
Payroll in China
An understanding of local tax, reporting, employment, and compensation regulations is necessary to conduct accurate and compliant payroll in China. Late payment of tax can result in a penalty.
In China, both the employer and the employee contribute to social security. Benefits covered include pensions, healthcare, paid maternity leave, compensation for disability, work-related accidents and illnesses, and non-work-related illnesses. The contributions are not subject to income tax.
The employer contributes to social security, the housing fund, and the pension fund. Workers pay social security and pension contributions. Overall cumulated social charges can represent a +40% add-on monthly gross salary.
In addition, it is common, but not compulsory, to have a supplementary healthcare scheme. Also, many employees negotiate their gross salary on a 13th-month basis.
There are eleven bank holidays per year. These are:
- New Year’s Day (1 January)
- Spring festival (in February, based on lunar calendar)
- Tomb Sweeping Festival (in April, based on lunar calendar)
- Labour Day (May 01st)
- Dragon Boat Festival (in June, based on lunar calendar)
- Mid-Autumn Festival (in September, based on lunar calendar)
- National Day (October 01st to 07th)
Also, employees are entitled to other leaves granted by China labour law, for example: Child-related leaves and benefits, Marriage leave, Annual leave, etc…
Annual leave is generally granted based on an employee’s work tenure: 5 days of annual leave for 1-10 years of work tenure, 10 days of annual leave for 10-20 years of work tenure, 15 days of annual leave above 25 years of work tenure. However, foreign employers are used to providing more annual leave days than the legal amount.
If you have any questions about payroll in China or need assistance with this, please feel free to contact us.
