What do international companies need to know about payroll in China?

What do international companies need to know about payroll in China?

Compensation, benefits and payroll are critical aspects of running a business that cost a lot of time and money, even if you understand how the system works and what to expect. However, the Chinese system is very different from other payroll systems around the world. In order to understand the service-related laws, regulations and customs, many international companies operating in China hire a payroll service provider to meet their needs. Using a payroll service provider Payroll Services in China is likely to save your business time and money, help avoid fines or worse, and ensure you comply with all laws and Chinese regulations.

Understanding Salary Components and Labor Laws in China :

Chinese labour laws differ from those of other countries. They have a strict zero-tolerance policy towards discrimination in the labour market and authorities have been known to impose heavy fines and in some cases even revoke business licenses. Therefore, regardless of gender, race and religion, employers must compensate all employees at the same level of the company with a comparable salary.

Any company operating Payroll Services in China must provide severance payments to employees in accordance with local laws and regulations. Severance pay in China is complicating and is usually due unless the employer can prove that the employee has violated laws and regulations. As explained in the Chinese labour agreement or the employee handbook signed between employer and employee. If the employee’s contract ends and the company doesn’t want to renew it, the company must also pay the employee a severance package, usually one month’s salary for each year the employee has worked.

Bonus and 13th Monthly Salary

Although bonuses are not require by law by the Chinese government. Workers in China generally expect to receive a 13th-month salary as a bonus before the Chinese New Year holiday. This shows how complicated the payroll process can be, not only because of laws but also because of local culture and customs.

HR Payroll services in China

China has an extremely complex tax system, including income tax (IIT) paid only by employees, additional itemized deductions, and various social security benefits, the regulations of which vary from city to city. These social insurance premiums have a maximum and minimum premium based on the employee’s salary and change every year. Employers’ liability varies from case to case and the laws change every year.

Making paying taxes in China extremely time-consuming. Employers must calculate the appropriate employer contribution rate in their city for Social Security contributions, including retirement insurance, health insurance, unemployment insurance, work injury insurance, maternity leave insurance, and a housing fund. More attention should be paid to the tax rates for foreigners in China. Since January 1, 2019, personal income tax is calculating on a cumulative annual basis. Which makes it difficult to estimate the best way to take advice from Moore MS Advisory. As such, navigating the Chinese tax system is not something you should do without an experienced professional with local expertise.

Eliza beth

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