Business China

China's Payroll System: What You Need To Know

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Payroll generation is a ridiculously complicated task. Not only do you have to account for factors like sick leaves and annuals, you must also have a deep understanding of your company’s business model so as to ensure the timely generation and transfer of the payroll.

China payroll
What makes matters worse is that the payroll system varies from country to country. This is perhaps the most evident in the People’s Republic of China where the payroll system is wholly unique.

Today, we’ll be taking a closer look at how the payroll system in China varies from other countries and how you can make things easier for your company operatives in the country.

The Labor Contract Law:

payroll in China

Doesn’t matter if your company’s a Joint Venture (JV) or a Wholly Foreign Owned Enterprise (WFOE), all organizations operating in the country must abide by the New Labor Contract Law (of 2008). 

Unfortunately, as this law has been revised multiple times, payroll generation and compensation management have become ridiculously complicated.

Here’s what you need to know:

1. Salary Payment:

When it comes to payroll generation, and particularly salary payment, nothing matters more than taking into account the various employment considerations in the country. 

This is where things start to get tricky as salary payment varies depending on the type (i.e. nature) of your company.

For example, only WFOEs can sign a direct contract with Chinese workers. However, if you operate a Representative Office in the country then your firm must hire local employees using a third party company called the Local Service Unit. 

2. No Tolerance for Discrimination:

The Chinese government is renowned for maintaining a zero tolerance policy over discrimination at the workplace. Regardless of race, religion, or sex, all employers must give employees, on the same rung of the corporate ladder, the same salary. In other words favoritism or nepotism is highly discouraged in the country and can lead to a hefty fine (or even the termination of your license).

payroll system in China
Similarly, you cannot employ minors to work for your company in China. All of your employees must be 16 or older at the time the contract is signed.

3. Individual Income Tax Calculation:

The Chinese government is entitled to a small tax on the salary of every individual. Generally speaking, your company is responsible for the deduction and due payment of this tax. Failure to comply with government regulations will lead to legal proceedings and can even result in the termination of your contract.

Owing to the complexity of payroll generation and salary payment, most companies in China turn to third party companies to handle payroll transfer. That being said, not all third party payroll generation companies are created equally as only the experienced ones can ensure that your organization complies with the government’s legislations.

Business China has ample experience in the world of payroll generation and salary compensation. This makes us the ideal option for companies who are struggling to adhere to China’s regulations pertaining to payroll transfer. 

Apart from payroll transfer, we provide other important services such as Hong Kong company registration, registered trademarks, annual reports, company accounting, capital transfer, financial consulting and so much more! 

Get in touch with us now by calling at +86-020-2917 9715 or dropping an email at!

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