Business China

Structuring the Ideal Compensation Package for Employees in China

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Implementing proper human resource strategies in the Chinese labor market can be difficult for foreign companies that are operating there. They encounter various problems, especially when it comes to outlining and defining compensation practices. 

Being compliant with the labor laws in China can be a challenge, as they differ greatly from other countries. There are also cultural differences to navigate, which can be a serious impediment to constructive management.


The Basics of Compensation:

If a foreign company manages to familiarize itself with the basics of expected compensation in China, the process can be quite simple. Typically, a compensation package in China is divided into four specific elements:

Base Pay: The base salary is the monthly payable wage that varies from 12 to 14 months. The common pay-scheme for a year is 13 months, with an additional month’s salary issued in the Spring Festival month. A shortage of managerial talent in China means that foreign companies need to offer competitive salaries if they expect to retain and attract great employees.

Incentive Pay: This is directly related to the performance of each individual and can be paid at the company’s discretion. The company can choose to dispense incentive pay on a quarterly, annually, or even monthly basis. The pay is variable, and the concept is rapidly being welcomed by Chinese employees and many foreign and domestic companies. Current incentive pay schemes include individual performance, team performance, cash profit sharing, sales bonus, sales commissions, and awards for special recognition.

Employee Allowance: The employee allowance is a unique and important part of compensation in China. Although foreign companies aren’t obliged to provide it, cash allowances for meals, transportation, childcare, and clothing are often valued more than salaries by Chinese employees.

Benefits: There are two categories for benefits in China: supplemental and mandatory. Chinese Labor Law stipulates the mandatory benefits that employees and employers are entitled to. It comprises a substantial percentage of the total compensation being offered. The percentage and base contribution vary according to each city in China and is updated annually. 

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Social Security and Additional Coverage:

The workforce in China is also eligible to receive social security. Foreign workers in the company can choose private insurance providers for extra coverage. Local Chinese employees can request additional medical coverage which the employing company is expected to provide. 

Chinese regulations for overtime and working on Saturday and Sunday are also different. According to legal requirements, employees are entitled to 200% of their normal salary for working on rest days or need to be provided alternate rest days to compensate for the extra work done. 

How Business China Can Help

Business China
can help you establish a successful business in China with minimum effort on your part. Our expert staff has years of experience dealing with Chinese taxation, foreign investment, and employment laws. We can take care of registering your company, opening a bank account in China for your business, as well as help you prepare proper employee compensation packages that comply with the local labor laws!  

Contact us today at +86-020-2917 9715
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