How to calculate the employees’ payroll in China

Calculating the employees’ payroll is the common problem of the WFOE or JV company. China is a large country with far lower wages and also is increasingly able to make almost any product or offer almost any service for all the developed countries. According to the China Ministry’s data, by the end of 2020, a total of 1,040,480 foreign companies were registered in Mainland China. More and more world top 500 well-known foreign enterprises set up the headquarters or branches in Mainland China. Besides that, many Small and Medium-sized Enterprises (SME) will invest in Shanghai because of policy support towards Foreign-Invested Enterprises (FIE) by the Shanghai Government. If you set up a company in china, the first task is to handle the employee salary in China. This article will tell you how to calculate the employee’s payroll and the salary algorithm in China.

The Employment Payroll Calculator in China

In China, all employees (both local and expatriate) are required to join the local social insurance scheme, based on the same percentage of contributions. In general, China adopts an individual income tax withholding system, please read this article to understand what is the Five Social Insurances and Housing Fund system in China.

Whereby the employer deducts the relevant payment from the employees’ monthly salary and pays the local tax bureau on behalf of their employees (within 15 days after the end of the month).

Please use our  Automatic Wage Calculator to calculate employees’ salaries in Shanghai.

Employees’ payroll in China- Salary Chart

Basically, the employee’s base salary needs to be noted in the labor contract with careful consideration.

For example, Peter is an entrepreneur, came from France, and he successfully registered his own company in Shanghai. Ming is an employee of the company. How does Peter calculate Ming’s payroll per month?

We make an assumption that the pre-tax salary Ming is RMB 6,000. Below is a Social Insurance and Housing Fund chart showing how to pay the salary to Ming.

Social Security Chart

 

The employer monthly needs to pay RMB 1,725.6 social insurance and RMB 420 provident fund for Ming, the total amount is RMB 2,145.6.

Ming needs to pay RMB 630 social insurance and RMB 420 provident fund, RMB 1,050 in total. After payment, how much salary could he get indeed for the month?

China Payroll Chart

As can be seen from the chart, the net salary of MING each month is RMB 4,950.

Especially for the personal income tax, the employer is responsible for withholding the individual income tax of its employees at various rates on wages.

Now, you understand how to pay wages to Chinese employees. We sincerely hope you can start a business successfully in China.

If you need a professional and responsible agency, please do not hesitate to contact us. 

GWBMA provides professional company registration service for foreigners. We provide a one-stop service for you to start a business in Shanghai.

Contact Usservice@gwbma.com

Tel:  +86 15901819201

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