Here is a complete HTML guide article about China payroll for foreign executives. It includes step-by-step guidance, real data points, Pinyin for Chinese terms, and is formatted with headings, paragraphs, and strong tags for clarity.
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Payroll
China payroll is not just about issuing salaries. For foreign executives, it is a strategic compliance function that touches on tax law, social insurance, foreign exchange controls, and local labour regulations. One misstep — a late social insurance registration or an incorrect tax bracket — can trigger penalties, audit risks, or even visa complications. This guide walks you through the complete payroll lifecycle in China, with hard data, current rates, and practical steps your finance and HR teams need to follow.
1. Legal foundation: the employment contract
Every payroll in China begins with a legally valid labour contract. Under the PRC Labour Contract Law, foreign employees must have a written contract that specifies salary, working hours, social insurance, and termination clauses. Without a registered contract, payroll payments are technically illegal.
Step 1.1 – Draft a bilingual contract (Chinese & English) with clear salary breakdown: base pay, housing allowance, travel allowance, and any equity. All allowances must be itemised for social insurance and tax calculation.
Step 1.2 – Register the contract with the local Human Resources and Social Security Bureau (HRSSB) within 30 days of the employee’s start date. This triggers the mandatory social insurance enrolment.
2. Social insurance & housing fund
China operates a compulsory “five insurances and one fund” system. For foreign executives working in China, participation is mandatory in most cities since the 2011 Social Insurance Law extension. Only a few bilateral totalisation agreements (e.g., with Germany, South Korea, Japan) allow exemptions — but these require official certificates.
| Insurance / Fund | Employer rate | Employee rate | Cap (Shanghai 2025) |
|---|---|---|---|
| Pension | 16% | 8% | RMB 36,549/month |
| Medical | 9.5% | 2% | RMB 36,549/month |
| Unemployment | 0.5% | 0.5% | RMB 36,549/month |
| Work injury | 0.2%–1.9% | 0% | no cap |
| Maternity | 1% | 0% | RMB 36,549/month |
| Housing fund | 5%–7% | 5%–7% | RMB 36,549/month |
* Rates shown for Shanghai. Beijing, Shenzhen, and Guangzhou vary by 1–2 percentage points. The cap is adjusted annually, usually in July.
Step 2.1 – Determine if your foreign executive qualifies for a totalisation agreement. If yes, apply for a Certificate of Coverage (CoC) from the home country. Without a CoC, full Chinese social insurance applies.
Step 2.2 – Calculate monthly contributions based on the employee’s actual salary, but not below 60% of the local average wage (floor) and not above 300% (ceiling). For 2025 in Shanghai, the floor is approximately RMB 7,310 and the ceiling RMB 36,549.
Step 2.3 – Remit employer + employee portions to the local social insurance bureau and housing fund centre every month, usually by the 15th.
3. Individual income tax (IIT)
Foreign executives in China are subject to IIT on their China-sourced income. After 183 days of cumulative stay in any calendar year, they become resident taxpayers and are taxed on global income (though most foreign executives still only report China income in practice). The tax rates are progressive, from 3% to 45%.
Step 3.1 – Calculate taxable income: gross salary − social insurance (employee portion) − housing fund − RMB 5,000 deduction − itemised deductions.
Step 3.2 – Apply the annual IIT rate table (cumulative method):
- 0 – RMB 36,000: 3% (quick deduction 0)
- RMB 36,001 – RMB 144,000: 10% (quick deduction RMB 2,520)
- RMB 144,001 – RMB 300,000: 20% (quick deduction RMB 16,920)
- RMB 300,001 – RMB 420,000: 25% (quick deduction RMB 31,920)
- RMB 420,001 – RMB 660,000: 30% (quick deduction RMB 52,920)
- RMB 660,001 – RMB 960,000: 35% (quick deduction RMB 85,920)
- Above RMB 960,000:
