What are Employee Benefits?
Employee benefits in China are additional compensation and benefits offered to employees and their salaries and earnings. Overtime pay, medical insurance, vacation, profit sharing, and retirement benefits are a few examples of employee benefits in China.
Offering benefits to your employees is crucial since it demonstrates that you care about their general health and future. A comprehensive employee benefits in China package can aid in attracting and retaining top employees. In addition, benefits can help you set your company apart from the competition.
China is well-known for its generous employee perks and pay legislation. So, before you hire any employees or form a subsidiary, you should familiarise yourself with the legislation to pay employees a fair wage and provide additional perks to distinguish your firm from the competitors.
Compensation Laws in China
The minimum wage in China varies by province and city. Shanghai, for example, has the highest monthly minimum pay of 2,480 Yuan, while Shenzhen has a salary of 2,200 Yuan and Guizhou has a wage of 1,570 Yuan (amounts as of 2021). Employees are usually paid monthly, either in cash or through a bank account.
Although there is no legal requirement for an annual+ bonus or 13th-month compensation, it is common in China. The employment contract can specify monthly income, frequency of payment, and China's total annual compensation package. You can also declare a bonus if certain conditions are met. Salespeople frequently use commission schemes to substitute pay.
China's 2008 Labor Contract Law execution demonstrates how important employment contracts are in China. Employing full-time employees without a signed contract is practically unheard of. Employment agreements are based on a written employment contract.
On the other hand, labor contracts in China differ from other nations, such as the United States, where corporations, particularly private ones, are free to put whatever they see fit in the employment contract.
Certain contractual clauses must be incorporated in China. To provide a more practical application of labor legislation, a new Judicial Interpretation on Applicable Laws in Terms of Trial and on Labor Disputes Cases was implemented in 2013. This 2013 rule aims to enhance the 2008 Labor Contract Law by clarifying and clarifying the law's unclear and vague aspects.
The 2013 law is the fourth interpretation of China's labor contract law, demonstrating how complicated these labor laws have become.
The following mandatory information and requirements must be included in the employment contract, according to the underlying labor laws and the 2013 regulation:
- ~Employee's name, address, and ID number
- ~Company's name and address
- ~Legal Representative of the Company
- ~The term, time limit, or probation term (if appropriate)
- ~Provisions on working hours, leaves, and rest
- ~Social insurance terms
- ~Employment/job description
- ~Work condition, i.e., protection against occupational hazards and safety measures employed
- ~Working hours, leaves, and rest
- ~Social insurance terms
- ~Others that China's dynamic labor laws may require
The employee and the employer are protected by including the above elements in the employment contract.
To ensure that an employment contract complies with labor laws, you must hire a lawyer or legal expert well-versed in China's complicated labor laws.
How to Design an Employee Benefits Program for Employees in China?
There are several steps in designing an employee benefit program in China. These steps are:
Determine the organization's goals and budget:
Once you understand the company size and other primary aspects, you can define the objective. Then, based on the company's goals, you can determine the budget you want to spend on employee benefits in China.
Conduct a requirements analysis:
Analyse the current workforce demographics to help determine the demands of various employee groups. For example, paid time off may be more important to younger employees, whereas retirement income plans may be more important to older employees.
Compile the needs assessment results and compare them to any current benefits and potential benefits to determine which benefits will be most helpful in attaining the benefits program's goals.
Create a scheme for employee perks:
After completing the requirements assessment and gap analysis, the employer must create a new benefits plan. Employers can begin to construct benefit offerings in order of importance using the data gathered from all resources in Step 2. The company will then determine how much it will cost to provide the priority benefits and compare it to the benefits budget.
Inform employees about the benefits plan:
The following are the benefits of communicating your benefits and compensation plans:
- Increases employee’s financial security by understanding and appreciating new or existing benefits
- Provides a thorough grasp of the benefits available
- Encourages employees to make use of their advantages
Create a system for regularly assessing the effectiveness of benefits:
Consider establishing goals and metrics to evaluate the benefits programs and make improvements. The company may also periodically perform employee surveys and a full-fledged needs assessment or use trends and benchmarking to assess the benefits plan's effectiveness.
Types of Guaranteed Benefits in China
In addition to China's pay rules, employees have access to various guaranteed benefits and extra choices.
China has seven national holidays, each with a minimum of paid vacation. While this is the legal minimum, many firms go above and beyond by allowing workers to work from home during the Chinese New Year to prevent long commutes.
There are a total of 11 public holidays, as follows:
- ~New Year's Day is a one-day holiday (1 January)
- ~The Spring Festival is a three-day holiday (the lunar year's New Year's Day and the second and third days of the first lunar month)
- ~The Tomb-sweeping Festival is celebrated with a one-day holiday (the lunar Tomb-sweeping Day)
- ~Labor Day is marked with a one-day holiday (1 May)
- ~The Dragon Boat Festival will be celebrated with a one-day holiday (the Dragon Boat Day of the lunar year)
- ~The Mid-Autumn Festival is marked with a one-day holiday
- ~For National Day, there will be a three-day holiday (1 to 3 October)
Employees are entitled to full pay on certain public holidays. However, the statutory paid annual leave does not include public holidays.
Another example of benefits management in China is annual vacation. The number of required vacation days varies depending on how long a person has worked for the company:
- ~Employees who have worked for less than a year are not entitled to vacation days
- ~Those who have worked for one year to ten years are entitled to five days of vacation
- ~Those who have worked between 10 and 20 years get ten days off
- ~Those employees who have worked for at least 20 years get 15 days
Even though this is the legal minimum, international firms that hire mid-level or senior executives typically provide extra vacation. Offer letters are frequently accompanied by two to four weeks of annual vacation leave.
Although it is usual practice to give employees working under the conventional working hours system a one-hour lunch break, there are no particular legislative obligations regarding rest breaks during the working day.
- ~Between working days, there are rest periods
- ~An employer must provide at least one day off every week to its employees
- ~The same rules bind night/Shift Work Special Provisions Shift workers as full-time employees regarding working hours (see above, Working Hours). Additionally, in some places (such as Shanghai and Tianjin), employers must give a night shift stipend to employees
Health and safety
The People's Republic of China laws establishes severe workplace health and safety standards and penalties for non-compliance. Therefore, employers must generally establish appropriate safety procedures and the compensation and benefits policy in China. They must also provide employees with the training, equipment, and information needed to execute their responsibilities safely.
Social security contributions
Employers and employees in the PRC are required to participate in a mandated PRC social security plan, which includes contributions for:
- ~Pension insurance.
- ~Medical coverage is a must.
- ~Insurance for work-related injuries.
- ~Unemployment compensation and benefits in China.
- ~Insurance for maternity leave.
- ~Housing trust fund.
Employers and employees must pay salaries according to legislation stipulated by the local government. Employers must withhold employees' social security contributions, except for maternity benefits in China and work-related accident insurance premiums (solely paid by employers). Contribution rates fluctuate by city and are typically computed using the employee's average monthly wage for the previous year.
For example, the current rates in Beijing are as follows:
- ~Employers contribute 16 percent; employees contribute 8% to pension insurance.
- ~Employer provides 9%, the employee contributes 2% plus CNY3 for medical insurance.
- ~Workplace injury insurance: the company contributes between 0.2 and 1.9 percent, while the employee contributes 0%.
- ~Employers contribute 0.8 percent; employees contribute 0.2 percent to unemployment insurance.
- ~Employer contributes 0.8 percent; employee contributes 0 percent to maternity benefits in China insurance.
- ~Employer provides 5% to 12% of the housing fund; employee contributes 5% to 12% of the housing fund (they must pay the same percentage).
Foreign nationals working in the PRC are subject to unique rules. Foreign nationals from countries that have signed bilateral or multilateral social insurance treaties with China are exempt from the PRC social insurance system.
Foreigners must participate in the PRC social insurance plan under a regulation released by the PRC Ministry of Human Resources and Social Security on 6 September 2011. On the other hand, foreign nationals are not required to participate in the PRC housing fund plan.
Employee Benefits for Expatriates
Employment regulations in the People's Republic of China do not apply to seconded workers in general.
However, the following issues are covered under PRC labor law:
- ~Minimum Wages
- ~Hours of work
- ~You are entitled to a vacation
- ~Safety and sanitation in the workplace
- ~Permits to work and social security
How are Employee Benefits Taxed in China?
The offering determines the taxability of fringe benefits. For example, if the company provides free accommodation to the employee for the duration of his job in China, the tax authorities will allow this benefit to pass. Similarly, no tax would be assessed if the employer paid the employee's actual housing expenditures.
However, it would be a different issue if the employee were granted a monthly housing allowance and allowed to choose less expensive housing than the allowance. The portion of such an allowance spent on non-housing expenses would be taxable.
If the corporation conveyed the title to the home premises to the employee after, say, five years of work in China, the tax would be an issue. In this situation, the amount of the payment-in-kind would be spread out over his ten-year income and taxed proportionately.
Restrictions for China Benefits and Compensation
Standard benefits and compensation in China's constraints include working hours, minimum wage, and annual vacation time. Therefore, it is critical to study each law to remain compliant and ensure that your employees receive their entitled benefits.
Supplemental Benefits for Employees in China
Local population and family planning regulations mandate marriage leave typically lasts three to thirty days in various Chinese cities. Suppose a member of the employee's immediate family (parents, spouse, or children) dies. The employee may be granted 1 to 3 days of compassionate leave with the employer's agreement, depending on the circumstances. Marriage and compassionate leaves are recognized paid leaves under the PRC Labour Law.
In China, businesses often reward employees with contractual or discretionary bonuses. Employees are entitled to a "13th-month salary" at the end of a full year of employment.
Bonuses are often given based on performance reviews and at the employer's discretion.
However, the government issued an internal regulation in September 2009 that standardized the awarding of performance bonuses to senior management of major state-owned firms.
According to the regulation, the total bonus paid in a given year must not exceed 15 times the average annual income of all employees working at the company the previous year. This is because competent industry authorities determine the yearly wage of employees of central state-owned firms. Therefore, the enterprise must submit the performance bonus to a competent body per the Guideline laws.
Furthermore, an employer that promises to offer a specific bonus to an employee in the employment contract or through internal regulations is obliged by those requirements.
How Multiplier Can Help With Benefits Management in China?
In China, some businesses may distribute benefits themselves. It is vital to possess a thorough awareness of the legislation surrounding compensation and benefits in China. Since this can be a complicated process, it’s best to partner with a worldwide PEO like Multiplier. Our experts can assist you in offering an effective benefits program for your employees.
Furthermore, we can handle other activities like payroll, employee onboarding, etc., while you can solely focus on running your business.
Frequently Asked Questions
How many hours should employees work in China?
An employee should work about 8 hours for 5 to 6 days a week.
How much does an employee contribute to unemployment insurance?
An employee contributes 0.2 percent to unemployment insurance, and the employer contributes 0.8 percent.
How many holidays are employees entitled to in China?
All employees get 11 public holidays in China.