Running payroll in China is manageable once you understand the rules, but there’s real complexity under the surface. Minimum wages vary by city, social insurance rates differ by location, and contributions aren’t calculated on actual salary. If you’re hiring in China for the first time, or looking to tighten up an existing payroll operation, this guide covers everything you need to know.
Payroll frequency and pay date
China runs on a monthly payroll cycle. Employers are expected to pay employees by the end of each calendar month, though many companies pay on a fixed date within the month. There’s no statutory requirement for mid-month advances or split cycles.
Employers must maintain payroll records and provide each employee with written pay details every month. In practice this means a payslip, delivered digitally or on paper, showing gross pay, each deduction line, and net pay. Keeping clean payroll records isn’t optional; it’s a legal obligation.
Minimum wage in 2026
China doesn’t set a single national minimum wage. Each city or province sets its own rates, which are updated on their own schedules. As of January 1, 2026:
- Shanghai: RMB 2,740/month; RMB 25/hour
- Beijing: RMB 2,540/month; RMB 27.7/hour
The hourly rates apply to part-time workers. Full-time employees are covered by the monthly rate. If you’re hiring across multiple cities, you’ll need to track the applicable local rate for each location. Paying below the local minimum is a compliance violation regardless of what an employment contract says.
How payroll deductions work
Every month, employers are required to withhold certain amounts from employee pay and remit them to the relevant authorities. These cover both social insurance contributions and individual income tax.
Social insurance and housing fund
Employees contribute to five social insurance schemes: pension, medical, unemployment, work injury, and maternity. In practice, work injury and maternity are employer-only schemes, so employees only contribute to the first three, plus the housing fund.
The employee-side rates are:
- Pension: 8%
- Medical: 2%
- Unemployment: 0.2% to 0.5% (varies by city)
- Housing Fund: 5% to 12% (varies by city)
These amounts are withheld from the employee’s gross salary each month and remitted by the employer alongside the employer’s own contributions.
Iit withholding
Employers are required to withhold Individual Income Tax (IIT) from employee salaries on a monthly basis. The standard monthly deduction is CNY 5,000, meaning employees don’t pay tax on the first CNY 5,000 of monthly income. After that deduction and any other allowable deductions, the remaining taxable income is subject to progressive rates ranging from 3% to 45%.
As an employer, your obligation is to calculate the correct withholding amount each month and remit it to the tax authority. Employees file their own annual reconciliation, but the monthly withholding responsibility sits with you.
The contribution base system
One of the more counterintuitive aspects of Chinese payroll is that social insurance and housing fund contributions aren’t calculated on the employee’s actual salary. Instead, they’re calculated on a “contribution base.”
The contribution base is set at 60% to 300% of the prior year’s average urban employee salary in that specific city. Each local government updates the contribution base annually, typically on July 1. This means the figures you use can shift mid-year.
Here’s how it works in practice. If an employee’s actual salary falls within the 60%–300% band, their salary is used as the contribution base. If their salary is below the floor (60% of the average), contributions are calculated at the floor. If their salary is above the ceiling (300% of the average), contributions are capped at the ceiling.
The practical implication is that high earners don’t pay proportionally more above a certain threshold, and very low earners still contribute at the floor rate. Employers need to apply the correct local contribution base for each city where they have employees, and update their calculations each time the local government releases new figures.
Employer contributions
Beyond the amounts withheld from employees, employers make their own contributions to the same social insurance schemes plus the housing fund. These rates also vary by city and are applied to the contribution base.
Typical employer-side contribution rates are:
- Pension: 14% to 16%
- Medical: 3% to 10%
- Unemployment: 0.5% to 0.8%
- Work Injury: 0.16% to 1.3%
- Maternity: 0.5% to 3%
- Housing Fund: 5% to 12%
In Shanghai, the combined employer social insurance cost (before housing fund) runs roughly 33.7% to 35.5% on top of the employee’s contribution base salary. When you’re building out employment budgets for China, this employer burden is a significant line item that many first-time hirers underestimate.
The spring festival bonus
China doesn’t have a statutory 13th-month salary. There’s no law requiring employers to pay an annual bonus.
That said, the Spring Festival (Lunar New Year) bonus is a deeply embedded custom. Most Chinese employers pay a bonus ahead of the holiday, and employees widely expect it. Skipping it without good reason can hurt morale and make it harder to retain staff, particularly when many employees return home for an extended period and factor the bonus into travel and family expenses.
The amount isn’t regulated. Some employers pay one month’s salary; others pay a variable amount tied to performance. What matters is that you treat it as a firm cultural expectation even if it isn’t a legal one, and that you’re consistent in how you apply it across your workforce.
Running china payroll through an Employer of Record
For companies without a legal entity in China, the most practical route to compliant payroll is through an Employer of Record (EOR). The EOR employs workers on your behalf, handles all payroll calculations, manages social insurance registrations across cities, withholds IIT, and remits contributions to the relevant authorities.
This matters in China specifically because the compliance requirements are genuinely city-specific. Contribution bases, rates, and housing fund rules all vary by location, and they change on different schedules. An EOR that operates across multiple Chinese cities already has the local infrastructure and regulatory knowledge in place, which removes a significant operational burden from your team.
If you’re evaluating providers, look for EOR services that handle multi-city payroll natively, rather than those that rely on local sub-vendors for each city. Consolidated reporting and a single point of contact will save you time as your China headcount grows.
Book a demo to see how RemotePass manages Chinese payroll across multiple cities.
Frequently asked questions
Is there a national minimum wage in china?
No. China doesn’t set a single national minimum wage. Each city and province sets its own monthly and hourly rates, which are updated independently. Employers need to apply the correct rate for each city where they have employees. Shanghai and Beijing, for example, both updated their rates on January 1, 2026.
How is the social insurance contribution base calculated?
The contribution base is set between 60% and 300% of the prior year’s average urban employee salary in a given city. If an employee’s salary falls within that range, their salary is the base. If it’s below the floor or above the ceiling, the floor or ceiling applies. Each city updates its figures annually, typically on July 1.
Do employers have to pay a 13th-month bonus in china?
No. There’s no legal requirement to pay a 13th-month salary or any annual bonus. The Spring Festival bonus is a strong cultural custom and most employers pay it, but the amount and structure are left to the employer’s discretion.
Can a foreign company run payroll in china without a local entity?
Not directly. Chinese law requires that payroll and social insurance contributions be managed through a registered legal entity in China. Foreign companies without a local entity typically use an Employer of Record, which employs workers in China on the company’s behalf and handles all payroll and compliance obligations locally.
