Setting up and managing your China payroll
With the second-largest economy on the planet, 1.4 billion people, and a fast-moving, innovative business sector, China is an enticing country for many businesses looking to expand their operations.
One important aspect of any international expansion is hiring employees in your target country, and these employees need to be paid. But setting up payroll in China requires you to follow the local labor and taxation laws, and can be a very complex, expensive process. Not following the proper procedures can result in significant fines and legal trouble, and rules can change frequently, so it’s important you do your due diligence before embarking on your expansion.
An excellent option for many businesses is to work with a China PEO & Employer of Record, such as Horizons. We can help you to set up your China payroll outsourcing, acting as the employer of record within China to simplify the whole process and eliminate the need for you to establish a legal entity in China.
Why choose the Horizons payroll solution?
If you have an entity
For organizations with a registered entity in China, we can establish and manage your local China payroll outsourcing. In addition, we can handle the associated HR, administration, and compliance work so you don’t have to.
This is a great option for larger businesses and those committed to building a long-term presence in China.
If you don’t have an entity
If you haven’t yet registered an entity in China, we can use our China PEO & Employer of Record to act as employer of record for your hires. We can also set up and manage your China payroll outsourcing to ensure full compliance with the local laws.
This is a flexible, low-risk, and scalable outsourcing option for any businesses looking to explore the Chinese marketplace.
China payroll guide
What are the rules for withholdings and payroll tax in China?
Paying your China payroll taxes is a legal requirement, so you need to understand and follow the rules closely. As with most countries, China follows a progressive taxation model, with higher earners paying a larger percentage than low earners. These rates vary from 3% to 45%, and corporate tax is set at 25%
Additionally, employers are legally responsible for paying towards a housing fund for employees, which usually constitutes up to 25% of salaries, and the amount is often negotiated by hires.
On top of this, there are five mandatory benefits of health insurance, unemployment insurance, maternity, pension, and worker compensation, which employers must contribute to.
China payroll & tax laws
|Total Employment Cost||22.20%|
|Total Employer Cost||38.32%|
Contractual rights and termination regulations
Prior to establishing your China payroll outsourcing, employment contracts need to be in place for staff in China. These contracts must include the rights and entitlements of hirees, such as sick pay, vacation days, maternity allowance, and so on.
Employees are entitled to full sick pay for up to 12 months in relation to work-induced health problems. Sickness not related to work can grant workers anywhere from a few months to two years of paid leave.
The contracts must also specify the terms of termination, which will depend on the type of employment. For example, fixed-term contracts do not need any specified notice period, but other forms of employment will require a 30-day notice period for termination without proper cause.
How to establish China payroll outsourcing
If you are expanding into China, you need to follow several steps when setting up your payroll in China.
Firstly, you will need a legal entity in China to act as the employer of record. This could be one of our global PEO solutions, or your own local entity.
Then, you’ll need a bank account to be opened in China, and employees paid in Chinese Yuan currency. Beyond this, employees need to have comprehensive contracts of employment with key terms and details like social insurance, contracted hours, and a description of workplace conditions.
Your ongoing China payroll processing then needs to be closely managed to ensure ongoing compliance with local payroll and employment laws. For example, payroll processing must recognise that foreign employees in Shanghai are not yet required to pay the Chinese social security for foreign nationals. In other cities in China, foreigners must pay the full amount of Chinese social insurance.
A global PEO can manage your payroll in China, on your behalf, in one of two ways: By you engaging the global PEO as your employer of record in China; Or by you outsourcing China payroll for your local entity or subsidiary to the global PEO.
Manage payroll in China
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.