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Human Resources and Payroll in China 2016-2017 (5th Edition) -

83

3.7 Distributing Salaries

The vast majority of companies in China handle salary distribution via electronic funds transfer

(EFT). EFT files can be uploaded through bank websites by the HR manager and approved online

for payment to employees by the financemanager. If employees have bank accounts with the same

bank as the company then the transactions should be processed immediately; otherwise, there can

be a short delay of normally no more than one day.

Uploading one EFT file which includes details of each employee’s net take home pay saves time,

and also has the advantage that individual salary details will not appear on the bank statement at

the end of the month. Before the batch is processed, the bank will require approval from the finance

manager at the company for the total amount of salary to be released. This is the figure that will

appear on the company’s next bank statement. Only the person that uploaded the EFT file will know

the contents of that file; usually the HR manager at the company.

Salary payments in China should be handled through the company’s main operating bank account

if possible so that payments can easily be classified as salary payments.

It is not always possible to process a batch of EFT files for companies that use an international bank

as their main bank account. Salary details for each individual will therefore appear on the statement.

To avoid this situation, some companies set up a domestic bank account, first transferring the funds

into this new account (specified as a payroll account) before remitting to their employees’accounts.

Another alternative is to pay a lump sum to a payroll agent, which will then pay salary, mandatory

benefits and possibly IIT on behalf of the company. This method is not recommended, however,

as it causes an unnecessary delay in the monthly payroll process while the agent verifies that the

funds have been received. There is also the risk that the agent fails to make the required payments.