China Salary and Wages

Introduction to minimum wages in China

A minimum wage is the lowest remuneration that employers can legally pay their employees. Generally, minimum wage doesn’t include overtime pay, night shift allowance, summer high temperature allowance, the special working environment allowance, and subsidies for meals, transportation, and housing.

What are the minimum wages in China?

According to China’s Provisions on Minimum Wage, the legal minimum wage refers to the minimum labor remunerations that shall be paid by the employers to the employees under the precondition that the employee has provided normal labor within the promissory working hours or within the working hours that is prescribed in the labor contracts.

The minimum wage standards are determined by provincial governments by taking into consideration factors, such as the minimum living costs of local employees and their dependents, the urban residents’ consumption price index, the social insurance premiums and the housing funds paid by the employees themselves, the average salary of the employees, the level of local economic development, the local employment status, etc.

In general, the minimum wage standards appear in two forms, namely the monthly minimum wage standard and the hourly minimum wage standard. The monthly minimum wage standard applies to full-time employees while the hourly minimum wage standard applies to non-fulltime employees, such as part-time and temporary employees.

To be noted, the minimum wage is just the basic wage that employers must pay their employees, which excludes overtime pay, night shift allowance, summer high temperature allowance, the special working environment allowance, and subsidies for meals, transportation, and housing.

Nevertheless, China’s minimum wage standards do include the social insurance premiums and housing fund contributions paid by employees in most regions. In fact, it is possible that the employee’s take-home pay is lower than the corresponding minimum wage standard in these regions. Only a few regions, such as Shanghai, clearly stipulate in their local rules that their local minimum wage standards exclude social insurance premiums and housing fund contributions.

Local governments in China are generally required to update their minimum wages every few years but have the flexibility to adjust wages according to local conditions.

Most provinces set different classes of minimum wage levels for different areas depending on the given region’s level of development and cost of living. For example, a higher minimum wage class is established for the provincial capital and the most developed cities in the province, whereas smaller cities and rural areas fall under a lower wage class.

Minimum wage in China 2022

Minimum wages in China continue to rise.

Starting in 2022, Shenzhen and Henan raised their minimum wage standards from January 1, while Chongqing and Fujian will raise their minimum wage standards from April 1. Meanwhile, Hebei province has announced that it plans to adjust its minimum wage standards in 2022 after completing an ongoing process of evaluation and calculation.

Since 2021, more than 20 provinces in China have raised their minimum wage standard, including Anhui, Beijing, Guangdong, Hainan, Heilongjiang, Hubei, Jiangsu, Jiangxi, Jilin, Liaoning, Ningxia, Shaanxi, Shandong, Shanghai, Shanxi, Tianjin, Tibet, Xinjiang, and Zhejiang.

Currently, Shanghai has the highest monthly minimum wage among 31 provinces (RMB 2,590/US$400 per month) and Beijing has the highest hourly minimum wage (RMB 25.3/US$3.9 per hour). Eight regions – Shanghai, Guangdong, Beijing, Tianjin, Jiangsu, Shandong, Hubei, and Zhejiang – have surpassed the RMB 2,000 (US$308) mark in their monthly minimum wage standards.

Yunnan’s minimum wage level (RMB 1,350/US$213 per month) is slightly higher than that in Anhui (RMB 1,340/US$212 per month).

A complete guide to China’s minimum wages can be found below.

Impact of minimum wage increase on China’s labor costs

Minimum wages only tell part of the story of labor costs in China.

As China’s economy moves up the value chain and makes the transition to innovation and services, most workers employed by foreign-invested enterprises earn above the minimum wage.

For example, workers in Shanghai made an average of RMB 10,338 (US$1,632) per month through 2020 – nearly four times the local minimum wage.

Moreover, employer social insurance and housing fund obligations add around an additional 37 percent to employers’ labor cost on top of the employees’ gross salary.

For foreign investors, rising wages are an unavoidable feature of doing business in China. Yet, when other factors like productivity, infrastructure, transportation costs, and access to a massive domestic market are considered – China may still emerge as the more cost-efficient option compared to countries with lower statutory labor costs.

When comparing locations for foreign investment into China, minimum wages are a helpful barometer to gauge labor costs across different regions.

From there, identifying industry-specific wage levels, availability of talent, and access to regional incentives offer a more nuanced view of ultimate labor costs within a given region.

How are overtime wages calculated in China?

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In China, overtime is paid differently depending on the work hour system adopted by the employer, by either standard work hours, comprehensive work hours or non-fixed work hours. The standard work hour system requires that an employee’s normal working day should not exceed eight hours, that the normal working week not exceed 40 hours, and that each employee should be guaranteed at least one rest day per week. The majority of white-collar jobs in China now operate according to this model.Daily overtime cannot be over three hours and monthly overtime cannot be over 36 hours. Workers shall be granted at least one rest day per week.

Under standard work hour system, overtime payments are subject to the below overtime rates:

• For overtime work in normal days, not less than 150 percent of the normal wage shall be paid;
• For work on a rest day, and where such rest days cannot be postponed and taken at another time, not less than 200 percent of the normal wage shall be paid; and
• For work on an official public holiday, not less than 300 percent of the normal wage shall be paid.

The comprehensive work hour system accumulates work hours over a specified cycle (weekly, monthly, quarterly, or yearly). The average number of hours is then determined based on this accumulation period. Broadly speaking, this system is most suited to work roles with irregular shifts, including seasonal or project-based work.

Although the distribution of hours worked during this period may be quite irregular, the average number of work hours per day and per week should roughly correspond to the levels set out in the standard work hour system.

Under comprehensive work hour system, overtime is applicable for hours worked above the standard set per cycle. Such rates match those of the standard work hour system for extra hours worked and work on public holidays. However, no rest day is outlined under this system. 

Lastly, the non-fixed work hour system is geared towards positions like senior management, salespeople, and employees in the transport, warehousing and railway sectors who generally do not receive overtime payments, as it is considered impractical to measure their time spent on working.

Note that comprehensive and non-fixed work hour systems require special approval to implement.

The non-fixed work hour system accommodates employees whose work hours are impractical to measure. Employees on such a work hour system will generally be paid as a salaried employee. This salary is a set amount paid per period, often monthly in China.

Generally, no overtime cost is associated with the non-fixed work hour system except for hours worked on public holidays. The latter is subject to local variances. For example, Beijing doesn’t take hours worked on public holidays by non-fixed work hour employees as overtime, while such hours are regarded as overtime in Shanghai and 300 percent of the normal wage shall be paid.

Employers are required to observe appropriate work and rest schedules, though it is ultimately up to the employer’s discretion.

This type of work hour system and payment method makes sense when outcomes trump specific hours spent at work, such as lawyers and senior management.