What are minimum wages for first-tier cities in China?
First-tier cities include Beijing, Shanghai, Guangzhou and Shenzhen, so called because they are the most developed and economically vibrant cities in China. As such, they have higher average wages across industries than other provinces and cities.
Shanghai has the highest minimum wage rate in China. As of the April 1, 2017 update, monthly minimum wage stands at RMB 2,300 (US$347) and minimum hourly wage is RMB 20 (US$3). Shenzhen trails Shanghai with monthly minimum wage at RMB 2,130 (US$321) and minimum hourly wage at RMB 19.5 (US$2.9).
Beijing’s most recent minimum wage update was on September 1, 2017. Monthly minimum wage increased from RMB 1,890 (US$285) to RMB 2,000 (US$301). Minimum hourly wage (applied to non-full time workers) increased from RMB 21 (US$3.2) to RMB 22 (US$3.3).
Guangzhou’s monthly minimum wage is RMB 1,895 (US$286), and minimum hourly wage is RMB 18.3 (US$2.8).
What is the cost of hiring manufacturing workers in China?
The average wage for a manufacturing worker in China in 2015 was RMB 59,404 (US$8,951) annually – a 7.7% increase from 2014.
However, there is great variation between cities when it comes to average wage. First-tier cities, which are generally more expensive and pay higher wages, have more expensive manufacturing labor. As the tier lowers, so does the cost of labor.
In Beijing, a first-tier city, the average manufacturing wage was RMB 88,934 (US$13,400) annually in 2015. In Shanghai, another first-tier city, it was RMB 86,536 (US$ 13,039) annually. These were the highest average manufacturing wages in the country.
In addition, there is wage variation based on a coastal versus inland divide. Provinces closer to the coast are generally more developed and thus manufacturing workers there can command a higher wage than those in inland provinces. For example, in Jiangsu province, which border Shanghai to the north, the average manufacturing wage in 2015 was RMB 62,731 (US$9,452); in Shanxi province, southwest of Beijing, it was RMB 41,093 (US$6,191).
What’s the trend in manufacturing wages in China?
Average annual manufacturing wages in China have grown quickly over the last five years, from RMB 36,665 (about US$5,525) in 2011 to RMB 55,324 (about US$8,336) in 2015. However, there is a wide ranges of wages across the country with first-tier cities, which refers to Beijing, Shanghai, Guangzhou and Shenzhen, commanding higher wage rates. In general, this is the case for most industries. The lower wage range provinces are further inland.
- 2011: RMB 36,665 (about US$5,525)
- 2012: RMB 41,650 (about US$6,276)
- 2013: RMB 46,431 (about US$6,996)
- 2014: RMB 51,369 (about US$7,740)
- 2015: RMB 55,324 (about US$8,336)
In 2015, Beijing had the highest average annual manufacturing wage at RMB 88,934 (about US$13,401), followed closely by Shanghai, where it was slightly lower at RMB 86,536 (about US$13,039). The province with the lowest average annual manufacturing wage in 2015 was Shanxi, which is located in the northcentral part of China, to the west of Hebei province and to the north of Henan province. Average manufacturing wage there was RMB 41,093 (about US$6,192). Following Shanxi province was Henan province with RMB 41,338 (about US$6,229).
Additional Costs & Social Benefits
How much does overtime cost an employer in China?
According to Chinese Labor Law, the standard employee workday is eight hours. Any work done beyond the eight hours is considered overtime.
If the overtime takes place on a normal workday, then the employer must pay a minimum of 150% of the employee’s salary. If the overtime takes place on a weekend, the employer must pay 200% of the employee’s salary. If the overtime takes place on a public holiday, the employer must pay 300% of the employee’s salary.
There are only a few circumstances under which overtime work is allowed.
- Employers consulted with trade unions and agreed on overtime work. The longer work hours cannot exceed three hours per day and 36 hours per month.
- The company has received government approval for a Comprehensive Working Hour system or a Flexible Working Hour system.
Further overtime specifications, such as alternate working hours systems and compensatory time, depends largely on local provincial or city regulations.
What social benefits are companies responsible for in China?
Besides the salary, companies also have to contribute to the Chinese welfare system, including social security and the housing fund. Both the employer’s and the employee’s contribution is based on the salary. Contributions include the following:
- Housing fund
- Medical insurance
- Maternity insurance
- Pension
- Employment injury insurance
- Unemployment
Specific tax percentages on wage for each contribution varies by city or province, and by industry. They are calculated based on the average monthly wage and updated annually by the local Human Resource and Social Security Bureau and the local Statistics Bureau.
What about annual leaves in China?
According to Chinese labor law, the minimum requirements for annual leave are:
- 5 days if employee has worked less than 10 years in total
- 10 days if employee has worked between 10 and 20 years in total
- 15 days if employee has worked over 20 years in total.
In addition, there are 11 public holidays to honor traditional celebrations, such as Spring Festival and the Mid-Autumn Festival. The government decides the specific dates of each holiday every year. Asking for overtime work during public holidays is discouraged as the rate is considerably more expensive.
Companies that want to attract more or better talent will offer more annual leave days.
Labor Contracts & Terminations
What’s required in labor contracts in China?
China has strict requirements for labor contracts and has strong worker protections in place in case there is an issue with the contract.
Every labor contract must include:
- Company name, address and legal representative.
- Employee name, address, and ID code (national ID card or passport).
- Time limitation (if limited).
- Length of probation period.
- Salary.
- Description and location of the work.
- Specifications for working hours, rest and leave days.
- Work conditions (with provisions for safety).
- Social insurance.
A written contract must be provided to the employee within one month after the start of work. Otherwise, the company will be liable to pay twice the salary for every month that a contract was not provided. If a written contract is not provided for 12 months or longer, then the contract automatically turns into an open-ended contract, which means there is no time frame of employment, and lawful termination of that employee becomes difficult.
Can companies terminate an employee with written notice?
The employer must give 30 days written notice or pay an additional one month’s salary under the following circumstances:
- The employee is found to be incompetent even after training and adjustments.
- Due to a non-work related issue, the employee falls sick and is unable to perform his or her duties.
- A fixed-term contract expires and is not renewed.
- Both the employer and the employee agree to terminate the contract and the employer first proposed it.
- The company closes.
- The employee proposes termination due to the employer’s engagement in illegal activities.
- Due to changes not of the company’s making and facing financial difficulties, the company must fire 20 employees or at least 10% of all employees.
Can companies terminate an employee without prior notice?
The employer can immediately fire an employee without written notice or additional salary payment under the following circumstances:
- During the probation period, the employee is found to be incompetent
- The employee is under investigation for illegal activities/actions.
- The employee materially breaches company rules.
- The employee’s negligence or engagement in corruption causes damage to the employer.
- The employee has another job which interferes with his or her ability to perform duties, and the employee refuses to terminate said job.
- The employee purposefully attempts to cause the employer to terminate or amend the contract through deceit or coercion.