About

 

China, home to 1.4 billion people, is the most populous country in the world, and the third-largest country by land area. China’s GDP is USD 14.28 trillion, making it the second-largest economy in the world, and it ranks at 31 on the World Bank’s scale of ease of doing business. China’s largest exports are computers, broadcasting equipment, telephones, integrated circuits, and office machine parts.

Hiring in China

Written employment contracts are mandatory for full-time employees. Employers have one month to finalize contract terms, after which employees are entitled to twice their salary while they remain without a contract until they have been employed for one year.

When negotiating terms of an employment contract and offer letter with an employee in China, it may be useful to keep the following standard benefits in China in mind:

Employment Contracts in China

It is legally required to put a strong employment contract in place in China which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in China should always state the salary and any compensation amounts in Chinese Yuan Renminbi rather than a foreign currency.

This information is provided as generally accepted information and is not intended as advisory services.

Working Hours in China

The Labor Law of the People’s Republic of China designates a five-day workweek of no more than 8 hours a day and no more than 44 hours a week. Offices are usually open from 9 am to 6 pm each day, with a one-hour lunch from noon to 1 pm, although hours may vary from city to city.

Holidays in China

7 national public holidays are celebrated in China, including:

• New Year’s Day

• Chinese New Year (Spring Festival)

• QingMing Festival

• Labor Day

• Dragon Boat Festival

• Mid-Autum Festival

• National Day

The statutory minimum is to provide paid leave for the legally required holidays, however, market norm/best practice is to permit the employees a bit of flexibility around the Chinese New Year so that they can avoid the peak travel days. Offering employees an extra day off before and after the officially published dates is an excellent supplementary benefit.

Vacation Days in China

Employees who have the accumulated total workforce:

• Between one year and less than 10 years are entitled to 5 days of paid annual leave.

• At least 10 years but less than 20 years are entitled to 10 days of paid annual leave.

• At least 20 years of work entitles employees to 15 days of paid annual leave

In practice, most foreign employers hiring mid-level to senior executives in China will provide 2-4 weeks of annual vacation days.

Employers can require employees to take their entire annual leave entitlement each year. If an employee does not use all of his or her annual leave in a certain year, and does not agree to carry the leave forward, then the employer must pay the employee 200% of the employee’s average daily wage for each day of unused annual leave, in addition to regular salary.

China Sick Leave

Employees are entitled to between 3 and 24 months’ leave for medical treatments depending on the length of service with the employer and the number of years in general employment.

Sick pay should not be below 80% of the local minimum wage.

If the employee becomes injured or sick on the job, he/she is entitled to a maximum of 12 months’ leave at full pay for medical treatment.

Maternity/Paternity/Parental Leave in China

Women are legally entitled to at least 158 days of paid maternity leave, which they can take starting 15 days before childbirth. The actual number of days depends on a different city.

If the mother has multiple births, an additional 15 days is granted for each additional child.

Women are entitled to receive full pay during their maternity leave. This is either paid through social security or if the employer did not contribute to social security on her behalf, then it is to be paid by the employer.

Paternity leave varies widely, depending on location, but normally varies from 10 to 25 days. In Shanghai, a male employee can expect 10 days of leave, while in Beijing/Shenzhen he can expect 15 days. The actual number of days depends on a different city.

Both parents will be entitled to at least five days of parental leave until their child turns three, the actual number of days depends on a different city.

Health Insurance in China

Basic health and pension insurance is provided through the national system, however, supplementary health insurance may be provided to the employee.

China Supplementary Benefits

Chinese employers contribute to a housing fund, similar to a 401k plan. The fund subsidizes employee real estate rental and purchasing costs. Some contributions are mandatory; however, employees normally negotiate for an increased housing fund rate. Different cities have different policies related to the housing fund.

Issuing stock options to employees in China is complicated. We strongly recommend reviewing whether it is “worth” offering this benefit prior to offering stock options to your employees in China.

In general, we recommend budgeting 20-30% for employer taxes on top of the total cost of an employee’s salary to estimate the total cost of compensation in China.

Bonuses

A 13th month salary or annual bonus is not required but is market norm in China. A commission plan may be seen as replacing this for a sales employee. When negotiating with employees, it is recommended to clearly state the monthly salary, how many months it will be paid, and the total annual salary.

Termination/Severance in China

A probation period may be agreed to between employer and employee in an employment contract. The maximum length of a probation period for an indefinite employment contract is up to 6 months.

The notice of termination depends on the employee’s employment period. There are no less than 3 days prior notice during the probation period; however, the prior notice period for those who have passed the probation period shall be not less than 30 days.

Terminations must be with cause and the reasons must be clearly documented.

Contracts may include a payment in lieu of notice (PILON) clause which allows employers to pay employees instead of requiring them to work their notice. Service of such notice (or payment in lieu) will satisfy an employee’s contractual rights, but further statutory rights against the employer may arise on termination. Much longer periods of contractual notice, binding on both parties, are common.

It is illegal to terminate a pregnant employee or one who is on maternity leave or breastfeeding.

Paying Taxes in China

Statutory benefits in China include the five “insurances” and include medical insurance, pension, worker’s compensation, unemployment insurance, and maternity benefits. Housing Fund is included on top of the five insurances.  The amounts vary by province and by the employee’s income bracket.

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Types of Work Visas in China

China uses abbreviations with letters and numbers to designate certain visa types. For example:

• Z visa: A visa for workers staying in China for longer than six months.

• X1/2: The X stands for xuéshēng, which means student, and the numbers indicate how long someone will stay. This visa is for students, and the X1 is for those staying longer than 180 days, while X2 is for a period shorter than that.

• J1/2: The J is from jìzhě, or journalist. This visa is meant for foreign journalists staying for a specific period.

• M: A business visa meant for stays of 30 to 60 days.

• F: A visa for exchange students, visitors, and study tours lasting 30 to 90 days.

• S1/2: This visa is meant for people visiting family members who are non-residents.

• Q1/2: China gives this visa to individuals visiting family members who are from or living in the country.

Other letters to watch for include “C” for chuányuán, or crew, “L” for lǎowài, or foreigner/tourist, and “G” for guòjìng, or transit.

Requirements to Obtain China Work Visas

The requirements to get a work visa can vary based on the type of visa. However, most Chinese visa applications need a passport, photograph, health certificate, and official employment license from the Chinese authorities.

As of June 6, 2022, China has waived the special invitation letter requirement for work visas.

All foreigners with a visa must comply with the Chinese Exit-Entry Administration Law and register with the Public Security Bureau (PSB). They must do so within 24 hours of arriving in the country. Here’s how each of your employees can comply:

• Go to the nearest police station

• Show a passport

• Show a deed or lease to a home or host’s household registration

• Complete a temporary residence registration form

After registering, your employee will get an approved Registration Form of Temporary Residence. This form can help when they’re trying to obtain a permanent Chinese residence permit.

Application Process

Applying for a work visa in China requires going to the closest Chinese Visa Application Service Center or Chinese embassy. Your employee will need to provide basic documents. China also scores work permit applications based on the value the applicant brings to the country with factors such as salary, qualifications, work experience, age, Mandarin proficiency, and more. Depending on how high an applicant scores, they may get additional benefits. We recommend applying for a visa about one month before planning to enter China.

Many of your employees will apply for Z visas and need to obtain a Chinese Residence Permit within 30 days of arriving in China. They must apply for this permit by:

• Going to the nearest Exit-Entry Administration Service Center

• Providing a passport

• Filling out a registration form

• Filling out a Foreigner’s Visa and Resident Permit Application form

• Providing a passport photo

• Showing an official health certificate

• Providing supporting documents as necessary

Other Important Considerations

When your employees submit their working visa application form, they can state how many entries they want — single, double, or multiple. This number will show how often and in which time period they can enter China. For example, returning from a visit to Macao or Hong Kong is counted as a new entry, requiring a double-entry or multiple-entry visa. If your employees don’t plan to go abroad while in China, a single-entry visa will work for them and cost less.