China

Country starter pack
Business practicalities in China
103
Wages and salaries: There is considerable freedom for
enterprises operating in China to set remuneration,
including compensation and benefits. A provision,
established in China’s Labour Contract Law, is that wages
of staff cannot be lower than the prescribed minimum
wage applicable for the location in which the company is
registered. Enterprises may also offer incentives to staff,
such as sales targets, and a range of performance bonuses
in the form of stock options and the like, in a bid to attract
and retain top employees. This is particularly relevant
for management and sales positions, which are often
critical to a company’s performance and, consequently,
fortunes. Reflecting cultural aspirations and practice,
companies will usually offer staff a bonus at Chinese New
Year, generally equal to one month’s salary. This is usually
paid either in a one-off lump sum or in the form of a
double wage in the last month of the lunar calendar. The
provision of a bonus is routinely included in an employee’s
contract, so it rarely comes out of the blue, with some
companies stipulating that it is based on the performance
of the team or company itself, while others may base it on
the employee’s position within the company (say, senior
manager, or supervisor or rank and file).
Companies normally pay staff in regular intervals: at least
once a month in local currency. The date for paying staff
is usually agreed between the company and its workers,
with companies risking a financial penalty should they
fail to meet this commitment without good reason. As in
Australia, employers are required to withhold individual
income tax from the gross pay of employees.
Businesses contemplating establishing operations in
China should be aware that, despite long-held perception,
average wages in China have been climbing on the back
of the country’s economic emergence, to the point where
it is less a low-cost hub as it is a dynamic and complex
economy. However, the recent cooling of the Chinese
economy has blunted the wages surge after a double-digit
increase in 2009, as noted by the International Labour
Organisation. Nevertheless, average real wages in stateowned
and other urban-based enterprises grew by nine
per cent in 2012 and 7.3 per cent in 2013, while those
of workers in private enterprises climbed 14 per cent
(2012) and 10.9 per cent (2013). Reflecting the Chinese
‘boom’ was the more-than trebling of the average annual
salaries of city workers from RMB14,000 in 2003 to
RMB51,500 a decade later. Accompanying this new
wealth, however, were sharply increased living costs.
Working hours: Working life in China is usually centred
on a 40-hour week spread across five days (most often
Monday to Friday). A standard working day is eight
hours long. Alternative working hours and systems
are allowed under Chinese labour laws, but require
government approval. These are categorised under the
Comprehensive Working Hours System or the Flexible
Working Hours System.
Overtime and overtime payment: Under standard
employment arrangements, employees who work more
than eight hours a day or more than 40 hours in any week
are entitled to compensation:
• Overtime on work days – 150 per cent of the normal
wage rate
• Overtime on rest days – compensatory leave or 200
per cent of the normal rate of pay
• Overtime on statutory holidays – 300 per cent of
normal rates of pay.
Also, employers need to consult with their employees
and the relevant labour union before having workers
do overtime. Generally, extra hours should not
exceed one hour per day (or three hours under special
circumstances), and no more than 36 hours per month.
Leave: Employees in China legally must be given at least
one day off per week as well as public holidays, according
to law. Those who have worked for one continuous
year are entitled to five days’ annual leave. However,
businesses are not obliged to grant leave to employees
who have yet to work a full year. In most cases, employees
are given weekends off. Foreign-invested companies
typically give employees 15-25 days’ annual leave.
Social welfare contributions: Both employers and their
workers are required under Chinese law to participate
in the country’s statutory social benefits system. These
contributions are dictated by schemes operating in the
locale of the enterprise. For much of the workforce, this
will amount to on-costs equivalent to as much as 35 to
40 per cent of their salary cost. Exact percentages will
differ from city to city and according to an individual
employee’s hukou. Businesses should consult local
professional advisors on requirements specific to their
business. Social insurance programs incorporate a variety
of benefits, including:
• Pensions
• Medical insurance
• Unemployment insurance
• Work-related injury insurance
• Maternity insurance
• Housing subsidies.
To be able to participate in social insurance programs,
corporations must first register with the relevant labour
bureau, establish an account with a social insurance
management authority and pay the required insurance
premiums on a monthly basis. On top of this, employers
are required to deduct their employees’ insurance
premiums from their salary before forwarding the
payments to the authority. In the case of representative
offices, these premiums should be paid via the authorised
employment agency.