Client Onboarding
When hiring as an expat or overseas business owner, it can be challenging to determine the appropriate budget for employee salaries and benefits. This challenge results in part due to the many factors to consider, such as the cost of living and average wages in China.
The cost of living can vary per region. As such, you must consider this when creating your employment budget. When making your budget, consider both the cost of living and average wages in China to build a fair and competitive salary for your employees.
In addition to salaries, there are other factors to contend with, such as benefits and income tax. Both employers and employees contribute to mandatory benefits, which should be accounted for when considering their compensation. Citizens are also required to pay compulsory income tax.
The minimum wage in China continuously varies per region. However, minimum wage typically applies to blue collar work, such as factory workers, restaurant staff and cleaners. It is not a good reference point for foreign companies to find reliable team members. Expect to pay much higher than minimum wages to attract the right talent.
Two primary legal considerations are "The 1995 Labor Law and 2008 (amended in 2012) Labor Contract Law (sometimes referred to as Employment Contract Law)". These laws have a few defining features:
- All employees must have a contract with a company
- A standard working week constitutes 40 hours
- Employers should account for mandatory benefits when determining
- There are specific rules surrounding contract termination, including levels of severance pay
The five benefits that employers are required to contribute towards are:
- medical insurance
- pension insurance
- unemployment insurance
- work-related injury insurance
- maternity insurance
The amount that you are required to pay also varies per region, as a minimum contribution would be modelled off the minimum wage in that area.
In addition to base pay, you should also consider bonuses and incentives. For example, whilst Western employees may benefit from a Christmas bonus, some Chinese employers invest in 13-month pay schemes, with the employee receiving "double pay" around the Chinese new year. Due to the competitive nature of the Chinese culture, incentives are a significant consideration - especially in larger cities.