China – Shanghai
HR & Labor
Disabled fund, paid once a year, increases from 78.61 RBM to approximately 312.12 RBM.
The tax base of social security changes every year in July, expect adjustments in the total payment of social security (for items other than disabled fund).
Minimum wage is 2,190 yuan per month.
Employer contributes 20% of the employee’s wages.
Employee contributes 8% of regular wages. The salary ceiling for contributions is 17,817 yuans per month.
Severance payments are paid at one-month salary for each year the employee worked with the company.
There are two possible scenarios for employees terminated under the terms of unilateral termination.
1. The employee violates laws, or materially breaches the employer’s rules and regulations, or commits serious dereliction of duty or practices graft etc.: no advance notice necessary.
2. The employee is incompetent and remains incompetent after training or adjustment of his position: Either 30 day written notice, or payment in lieu of notice.
There are two types of termination procedures in China - termination upon expiration and early termination. For termination upon expiration, the employer has the right to not renew the employment contract after it had expired. In this case, the employee is entitled to severance payment. In accordance with the Chinese Labor Code, the employee can request an open - ended employment contract after the expiration of the second fixed-term contract and employer must accept it. However it is common practice among the employers in Shanghai to offer fixed-term contract after the expiration of the second fix term contract as long as the employee agrees. If the employer decides to terminate the contract before they are expired there are two types of terminations. Early termination through mutual agreement allows both parties to decide the date of termination and the amount of severance payment that the employee will receive. If there the employer and employee could not reach a mutual agreement, then it is a unilateral termination. To terminate the contract unilaterally the employer must clearly prove the cause that is stated in the Labor Code. In the case employee violates laws, or materially breaches the employer’s rules and regulations, or commits serious dereliction of duty or practices graft etc., the employee is not entitled to any severance payment. Lastly the employer can terminate the contract with an employee by providing a 30 day notice or a payment in lieu of notice if the employee is incompetent and remains incompetent after training or adjustment of his position. In this case, the employee is also entitled to a severance pay.
During the Probation period, if an employee is found unfit for a position, the employer may notify the employee explaining the reasoning for termination. Employees termination is effective immediately, and they will receive their payment with the next standard payroll cycle.
After the probation period, termination is significantly more complicated. First the employer must notify the employee that they are believed to be unfit for the position, and show relevant KPIs or other proof as reference. Following, the employee must be offered additional training or to be moved to another position within the company.
If employees performance has not improved after an agreed length of time the employer is entitled to terminate the employment contract by giving notice of 30 days, and employee and employer must sign a termination document.
Sick days are from 3 to 24 months (employer cannot terminate the contract during this period).
Employer must pay 40-100% of the employee’s regular wage during a sick leave, depending on the number of the sick days and years worked in the company.
Employee must submit required medical paperwork to the company’s HR department.
Employer must pay 300% of employee’s regular wage if the employee did not take the entitled paid leave and they did not get carried into the next year due to company's fault (i.e. employer doesn’t agree that the employee takes the leave as requested).
If the employee worked between year and less than ten years, they have 5 days of paid leave. If they worked ten years and less than twenty years, they have 10 days of paid leave. Over twenty years, they will get 15 days of paid leave.
There are 11 public holidays. Employer must pay the employee 300% of the average salary if the employee works during public holidays.
January 01: New Years Day
February 15: Chinese New Year Eve
February 15-21: Chinese New Year
March 08: Woman Day (All women are eligible to receive half day holiday)
April 05: Ching Ming Festival
April 30: Labor Day Holiday
May 01: Labor Day
June 18: Dragon Boat Festival
September 24: Mid Autumn Festival
September 25: Mid Autumn Festival Holiday
October 01: National Day
October 2-5: National Day Holiday
Expat are not required to pay state pension contributions in Shanghai.
Additional Employee Withholdings
1. Medical Insurance- Employer contributes 10%
2. Unemployment Insurance- Employer contributes 1%
3. Work Related Injury Insurance- Employer contributes 0.2%-1.9%
4. Maternity Insurance- Employer contributes 1%
5. Housing Fund- Employer contributes 7%
1. Medical Insurance- Employee contributes 2%
2. Unemployment Insurance- Employee contributes 0.50%
3. Work Related Injury Insurance- Employee contributes 0%
4. Maternity Insurance -Employee contributes 0%
5. Housing Fund- Employee contributes 7%
In China there are several VAT rates. They are as follows:
11%: Retail, entertainment, hotel, restaurants, catering services, real estate and construction, telephone calls, postal services, transport and logistics.
6%: Financial services and insurance, telephone and internet data, technology and consulting.
3%: Chinese national education tax.
2%: Chinese local education tax.
7%: Maintenance and construction.