How Big Are Bonuses in China? Your Guide to Year-End Payouts

Most companies in China dish out annual bonuses around Chinese New Year. But how much should employees expect? And what about the taxman? Let’s break it down.

Bonuses: How Much is Normal?

There’s no legally mandated amount for year-end bonuses in China, but it’s not uncommon for workers to receive two- or three-months’ salary as a bonus.

There are typically two types of annual bonuses:

• Performance-based bonuses that fluctuate based on company/individual results
• Fixed bonuses like the “13th month salary” regardless of performance

Many companies do provide at least one month’s extra pay (13th month), but beyond that, it’s highly variable. Here’s the lowdown:

Industry Variations

High-tech industries, including communications, automobile manufacturing, and finance, typically offer more substantial bonuses for white-collar workers.

Automobile manufacturing stands out, with 21.3% of white-collar workers pocketing bonuses over 10,000 yuan ($1,430), according to Chinese recruitment portal Zhaopin.

Regional Differences

• Beijing leads with an average bonus of 10,298 yuan
• Shanghai follows closely at 10,070 yuan
• Shenzhen offers an average of 9,971 yuan

Overall Average

Unfortunately for Chinese white-collar workers, the average expected bonus across industries was 6,950 yuan in 2024, down from 8,428 yuan in 2023.

Employer Tip: Use these figures as a benchmark, but consider your company’s financial health and overall compensation strategy.

Are Bonuses Taxable?

Yes, bonuses are taxable – but there’s good news. China has a preferential tax treatment for annual one-time bonuses, extended until Dec. 31, 2027.

Two Ways to Tax

When giving out bonuses, your employees have two choices for how it’s taxed:

1. Tax the bonus separately from regular salary
2. Add the bonus to yearly income and tax it all together

For most average earners, option 1 (separate taxation) usually means a lower tax bill.

Important: This choice only applies to the first bonus of the year. Any extras get lumped in with regular income.

Who Decides?

In most cases, employers automatically apply the most favourable method. Employees don’t usually need to do anything.

Recommendation: High-earning employees should consult with a qualified tax professional or financial advisor well before bonus payout.

Hidden Implications of the Base Salary

The bonus value you provide will have implications you need to consider.

Base Salary for social insurance calculations

The base monthly salary is calculated by taking the total income from the previous year and dividing it by 12.

For example, if an employee has a monthly salary of 10,000 yuan with a 14-month salary package, their bonus will be 20,000 yuan. After receiving their bonus, their base salary will increase from 10,000 yuan to 11,666 yuan.

This is important because the base salary serves as the reference for these calculations:

• Social Insurance: A high bonus will skew your monthly social insurance contributions, increasing them.
• Employer Liability Insurance: The base salary is used to calculate other insurance premiums.
• Severance Pay and Injury Pay: The base salary is referenced for all types of payouts during termination and work-related injuries.
• Recruitment Fees: Many recruiters (not Kinyu) include bonuses in their calculations when charging fees.

If you plan to pay high bonus or commission-based salaries, it is advisable to consult with an accounting and HR expert on this matter.

Bonus Best Practices

• Clearly outline your bonus policy in your employee contracts and handbooks
• Be transparent about how bonuses are calculated
• Apply the rules fairly across similar positions
• Consider paying bonuses at the end of calendar year or just before Chinese New Year (it’s expected!)
• Be wary of what the base salary will be, and how it impacts other costs.

Simplify Your Bonus Payments with The China Desk

Consider streamlining your China operations with The China Desk by Kinyu. Whether hiring your own staff or using our Flexi-Desk workers, we’ll manage all salary and bonus payments, including taxes. This frees you to focus on growing your business while ensuring fair and compliant rewards for your team.

Get in touch today to learn how we can optimise your China strategy!