Guides - Human Resources & Payroll in China 2016 - 2017 (5th

101 / 127

Human Resources and Payroll in China 2016-2017 (5th Edition) - 101
[Example]
Mr. R (non-Chinese national) has worked in a company based in Shanghai since January 1, 2008. His
average monthly salary in 2014 was RMB 40,000. He didn’t join any social security plan. On January
1, 2015, he was terminated in the company’s mass lay-off. The average monthly salary of Shanghai
in 2014 was RMB 5,451.
The minimum severance payment Mr. R can get is calculated as follows:
1. The average monthly salary of Mr. R in 2014 was RMB 40, 000, which is over three times
the average monthly salary of Shanghai in 2014 (RMB 5,451 × 3 = RMB 16,353). So the
average monthly salary for calculating minimum severance payment is RMB 16,353.
2. His years of service is 7 years.
3. His minimum severance payment should be RMB 16,353 × 7 = RMB 114,471.
To gain the consent of Mr. R and avoid future disputes, the company decided to give Mr. R a lump-
sum payment of up to RMB 300,000.
The IIT burden on this lump-sum severance payment is calculated as follows:
1. Deduct 300 percent of annual monthly salary of Shanghai in 2014: RMB 300,000 – RMB 5,451 ×
12 × 3 = RMB 103,764.
2. Divide the remaining amount by the years of work in the company: RMB 103,764 ÷ 7 = RMB
14,823.
3. Deduct RMB 4,800 from the answer in step 2: RMB 14,823 - RMB 4,800 = RMB 10,023.
The corresponding IIT rate is 25% and quick deduction amount is 1005.
4. IIT burden on this lump-sum severance payment = (RMB 10,023 × 25% - 1005) × 7 = RMB 10,506.