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Global Payroll Team
Written by Global Payroll Team
Last updated May 1, 2026
Expert Reviewed
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Mercans offers complete payroll, PEO and HR services in China

China is an advanced digital economy and a complex market. The regulatory environment remains dynamic and businesses entering China should assess national and local compliance requirements carefully. At the same time, China continues to offer major opportunities across manufacturing, technology, consumer markets, logistics, life sciences and professional services.

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Doing Business in China

As a unique marketplace, businesses considering China should obtain advice from diverse sources including local advisors and should assess both national and regional policies before market entry. China offers a wide range of business and trade resources, but practical compliance depends heavily on the location, industry and operating model.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in China is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banks are open from Monday to Friday 9 am to 5 pm.

Working Week

Under the standard working hours system, employees generally work 8 hours per day and 40 hours per week, usually from Monday to Friday.

Labor Law

China’s labor law framework includes the Labour Law, the Labour Contract Law and related regulations. Employers must comply with rules on working time, overtime, leave, wage payment, social insurance, termination and written employment contracts, while some details also depend on local regulations.

Main Industries

Manufacturing, electronics, machinery, automotive, technology, e-commerce, chemicals, textiles and logistics

GDP Growth

5.0%

Dates & Numbers

yyyy-mm-dd

Official State Name

People’s Republic of China

Population

1.405 billion

Capital

Beijing

Major Languages

Mandarin Chinese

Currency

Renminbi (RMB)

Internet Domain

.cn

International Dialing Code

+86

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China
Beijing, CN
7:58 pm, May 3, 2026
13°C
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9 %
Wind Gust: 18 mph
Clouds: 34%
Sunrise: 5:12 am
Sunset: 7:09 pm

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Payroll

In China, payroll requires careful handling of individual income tax, social insurance and local labor compliance. Employers remain responsible for accurate withholding, remittance and payroll record management even where payroll processing is outsourced.

It is acceptable to provide employees with online pay slips, provided local payroll documentation requirements are met.

Payslip

Payroll reports should generally be kept for at least 5 years.

Reports

Employees with more than 12 months of cumulative service are generally entitled to 5, 10 or 15 days of statutory paid annual leave depending on total years of service.

Annual Leave

Sick leave entitlement and sick pay are mainly governed by local rules and length of service, so both duration and payment levels vary by locality.

Sick Leave

Employees are entitled to at least 98 days of paid maternity leave. Paternity leave is not uniform nationwide and usually depends on local regulations.

Maternity & Paternity Leave

In many statutory termination scenarios, the employer must provide 30 days’ prior written notice or payment in lieu.

Employee Termination

There is no statutory requirement for a 13th or 14th salary.

13th Salary

Locality-based

Minimum Wage

Overtime on working days is generally paid at 1.5x the normal rate. Overtime on rest days and statutory holidays is subject to higher premiums.

Overtime

Statutory severance is generally based on one month’s salary for each full year of service, subject to the applicable legal calculation rules.

Severance Pay

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Tax and Social Security

Residents are generally subject to individual income tax on worldwide income, while non-residents are generally taxed on China-source income only. China also requires mandatory social insurance participation, and contribution bases and rates are influenced by local rules.

Tax

China taxes income by category. The standard corporate income tax rate is 25%, while comprehensive individual income is subject to progressive rates up to 45%. China’s VAT system continues to apply multiple rates, with 13% being one of the standard rates for goods and certain transactions.

25%

Corporate Income Tax

45%

Personal Income Tax

13%

Sales Tax

13%

VAT

Social Security

China’s social insurance system generally covers pension, medical, work injury, unemployment and maternity insurance, and many employers also contribute to the housing provident fund. Actual employer and employee contribution rates and caps vary by city.

Varies

Social Security Rate

Varies

Social Security Rate for Employers

Varies

Social Security Rate for Employees

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Employment Law

Employment law and regulations in China are derived from multiple sources including national laws, administrative regulations and local rules. Employers generally face significant compliance obligations in relation to contracts, working time, social insurance, dismissals and employee protections.

Employment Agreement

Employers should enter into a written employment contract with employees. The written contract is central to confirming the employment relationship and setting out the key terms of employment.

Working condition

There are generally three working hour systems in China: standard working hours, comprehensive working hours and flexible working hours. The standard system generally provides for 8 hours per day and 40 hours per week.

Leaves

Employees are entitled to statutory public holidays with pay. Employees who have worked for more than 12 months are also entitled to statutory paid annual leave based on their total years of service.

Employment termination

Employment termination in China is regulated and requires the employer to rely on a valid statutory ground. Notice, severance and procedural requirements depend on the termination basis and the employee’s service history.

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30 days prior notice

Minimum notice period for terminating an employee

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13 Days

Total number of public holidays

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40

Working hours per week

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1-3 days

Total number of days for Compassionate & Bereavement Leave

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Immigration

China continues to be a major destination for foreign professionals, but work authorization remains formal and document-driven. Foreign nationals who will work in China generally need a valid work authorization and then a residence permit for work purposes after entry.

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Residency Permits

The residence permit is proof that a foreigner resides in China. Applications for the residence permit must generally be submitted to the local public security authority after entry, and permits for work purposes can be issued for more than one year depending on the case and local approval.

Work Permit validity

Usually 1 year initially

Required Documents

Valid passport or passport substitute

Work visa or other appropriate entry basis where applicable

Confirmed employment with an employer in China

No criminal record

Professional skills, qualifications or experience required for the role

Work permit application documents submitted by the employer

Residence permit application after entry where required

Compliant, reliable, error-free and touchless payroll in China

Build the best team and hire top talent compliantly in China. Get in touch with China payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in China and how does it work for foreign businesses?

    An Employer of Record (EOR) in China legally employs staff on behalf of foreign companies. It manages employment contracts, payroll, taxes, social security, and compliance with local labor laws, allowing companies to hire employees quickly without establishing a local legal entity.

    Why should companies use an EOR instead of setting up a legal entity in China?

    Using an EOR avoids the time and costs of setting up a local company. It provides fast market entry, reduces administrative work, ensures legal and tax compliance, and is ideal for businesses testing the Chinese market or hiring a small team.

    How does payroll outsourcing in China ensure compliance with tax, social security, and labor regulations?

    Payroll outsourcing ensures accurate salary processing, tax filings, and social security contributions according to Chinese law. It reduces compliance risks, avoids penalties, and provides expertise on local labor and tax regulations.

    Can an Employer of Record in China hire employees and manage work visas for international companies?

    Yes, an EOR can legally hire employees for foreign companies and manage work visas. It handles HR operations, payroll, and compliance with local labor and immigration laws, enabling smooth operations without a local entity.

    What are the key benefits of using EOR and payroll services in China for global expansion?

    EOR and payroll services enable faster hiring, local compliance, reduced legal and financial risk, and access to market expertise. They allow companies to expand into China efficiently while focusing on business growth.

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