Payroll in China is one of the world’s leading financial powers. With a population of over 1.3 billion people and strong economic growth This makes it an ideal offshore area for most investors around the world. All about Payroll in China Service below.
In 2019, China’s gross domestic product (GDP) was $14.2 trillion. is second only to the United States. However, China overtakes the United States. When you include the purchasing power of citizens in GDP when talking about imports/exports. China also ranks higher than other countries. Although the country’s economic growth has been sluggish in recent years, But it is still one of the most sought-after economic growth in the world.
Despite its impressive economic status But doing business in China can be quite challenging. and problems related to the outbreak of COVID-19 This makes jurisdiction a double-edged sword for investors.
Despite the problems, registering a company in China is still very lucrative. This country has great opportunities especially in the manufacturing sector. Import-export, energy and real estate
One of the main components that you will need when running a business in China is payroll management. This can be a significant challenge as it has to deal with complex payroll policies. Country tax requirements and guidelines for hiring employees Therefore, you should consider seeking help from a payroll expert in China. Here are some top salary considerations in China.
China Payroll Service: How to Get Started
Before You Start Thinking About Chinese Payroll The first step is to register a company in China. in this beginning It is important to recognize that different regions From provinces to cities in China, there are different wage rules. The most desirable areas for business are the main industrial and financial centers of Guangzhou and Beijing. Once you have selected a location You will receive evidence or a rental agreement to start the company formation process in China.
Then select the desired company form. Representative offices (ROs), joint ventures (JVs), and wholly foreign owned companies (WFOEs) are some common business forms you may want to choose from. If you choose a joint venture This means you need a Chinese partner who must hold majority shares in the company. The Chinese government encourages foreigners to choose other forms of venture capital instead.
A representative office (RO) is an extension of your company already established in your home country or other jurisdiction. Unlike a joint venture, with an RO you are only allowed to carry out non-commercial activities in China.
WFOE and Shareholding
Due to the significant constraints associated with joint ventures and ROs, WFOE has become the most popular structure for profit oriented companies. As the name suggests, WFOE allows you to hold 100% of the shares, which means that decisions are made relatively quickly and no profits are shared with affiliates.
Setting up a WFOE is a bit complicated. But Chinese authorities are trying to make things easier. “Five-in-one business license”, which attempts to include some elements such as business license, organization code, statistical registration certificate. and tax registration certificate required during registration despite efforts The Five-In-One Business License also does not include all registration elements. For example, separate certificates are required for VAT and import/export.
Other requirements include a statement of company size. feasibility study and evidence showing financial status Once you have completed the registration of the company and received the company incorporation letter. It’s time to start Here’s everything you need to know about China’s payroll.
One of the mistakes investors make with payroll in China is not following the country’s established guidelines. basic principles The same applies to most jurisdictions around the world. is that all employees should be treated fairly. regardless of gender or race. In addition, all workers should be entitled to collective bargaining agreements. and should not employ children
according to Chinese labor law The workers you hire must sign the agreement, however oral contracts are allowed in the case of part-time work. We must also point out that the requirements of the Employment Law vary depending on the company structure. For example, only limited companies are allowed to sign contracts with Chinese nationals. For investors who want to start a business in the form of a representative office Staffing can only be done through a third party known as a local service agency.
To hire employees in your company They are required to provide proof of residency. Then, your company must submit social security documents on the employee’s first day of work. You must specify the following in the contract:
Terms and conditions including compensation
Details of the prevention and safety of the working environment of employees
Contracts in China can be short-term or long-term. A temporary employment contract can be based on a certain period of time or until a certain event. If you want to hire employees from overseas You must obtain permission from the local labor authority and work visas must be issued to employees.
Compensation, Bonuses and Severance Pay
In China, the minimum wage varies from city to city and province to province. Shanghai has the highest minimum wage at 2,480 yuan/month and 22 yuan/hour. At the bottom is Liaoning province’s Tiling and Huludao. The minimum wage in these two regions is 1,120 yuan/month and 10.6 yuan/hour, however, these figures can change regularly.
If the employer requires employees to work overtime Many labor laws may require further consultation with the union. Overtime work can only be extended by one hour per day. In addition, overtime pay is often higher than the standard wage. Overtime is set by law at 150% of standard wages, however overtime on weekends and holidays is 200% and 300% of regular wages. These rates primarily apply to low-level employees. And top managers are automatically not subject to this condition.
Although bonuses are not compulsory in China. But your company expects to pay the 13th month’s salary before the Chinese New Year holidays. This additional payment is subject to all taxes applicable to standard wages. You may find some companies offering 15th and 14th month salary as an incentive for employees.
If the employee contract is terminated and the employer does not wish to renew the contract The law provides compensation equal to one month’s wages per year worked.
Benefits, Taxes and Deductions
The same applies to most jurisdictions in the world. Personal income tax is based on progressive rates. This means that higher tax rates apply to higher income earners. This model is based on the new personal income tax (IIT) system introduced in early 2019. How does this progressive rate work?
Employers are required to withhold and remit all applicable taxes from employees to the China Tax Office before every 15th day of the month. In addition, they are required to withhold and remit compensation, bonus tax and share tax if applicable.
Another important consideration when processing payroll China is the contribution to compulsory social plans. which includes health insurance Work injury insurance housing fund, social security and maternity insurance In the case of housing funds, check with the municipality because rates usually change every year.
as well as tax relief Withholding tax must be paid before the 15th of every month to the relevant committee. including the National Health Insurance Council union office and the Employee Pension Committee