How to Run International Payroll for Employees in China (2024)

Step #2: Pick a global payroll software solution

Learn more about the two kinds of international payroll solutions, global payroll processors and global payroll aggregators, so you can make an educated decision on behalf of your organization. You can learn about both in our guide, but here’s a summary:

• Global payroll processors, including Rippling, fully process your payroll, transmit funds, and calculate and file taxes in every country through their own software. Global payroll processors let you pay your international employees in the same, simple way as local employees—all together in a single pay run.
  
• Global payroll aggregators, such as Deel and Papaya Global, aggregate local payroll providers in every country and manually transmit your payroll files to them. These types of providers have many limitations: You’re forced to submit payroll up to 30 days in advance. What’s more, you can’t track, and automatically sync employees’ time in the same system.

Payroll aggregators can’t process payroll through companies that use their own entities. On the other hand, native global payroll providers like Rippling don’t make you switch systems as you scale. You can move employees from our EOR to your own local entity, without ripping out and replacing systems.

Step #3: Determine your workers’ employment status

Before you bring a new employee onto your team—and definitely before you run payroll—you need to understand if they are legally considered employees or contractors.

If you misclassify employees as contractors, you may owe fines and penalties, as well as overdue payroll deductions for employees, such as social security insurance and housing reserve contributions. Contribution rates vary by region—see our table below for more information.

Classification regulations are very strict in China. Chinese labor courts will look to the Circular of the Ministry of Labor and Social Security on the Establishment of Employment Relationship to determine whether an employment relationship exists between you and your worker. Per this legislation, there are three characteristics of an employee-employer relationship:

1. Both the employee and employer are legally qualified to enter into an employment relationship.
2. The employer’s rules apply to the employee, the employee is subject to the employer’s control and labor management, and the employee is paid for their work.
3. The employee’s work is part of the employer’s business.

If a dispute arises about misclassification, the courts will examine wage payment records, work certificates, recruitment methods, attendance records, and the testimony of coworkers.

Step #4: Capture your new hires’ Chinese payroll information

Have you decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified? Great! Now it’s time to get the information you need to pay your Chinese team. You can get much of this when they fill out their employment contract.

Here’s the information you need to collect:

• Name (matching the account where you’ll deposit their pay)
• Date of birth and date of hire
• Contact information, including their email and physical mailing address in China
• Identity certificate number. For employees using a Chinese ID card for identification, their tax identification number (TIN) is the same as their ID number. However, for those using passports or other types of ID certificates, a TIN will be issued by the local tax office. Passport numbers may be recognized as TINs for foreigners in certain parts of China. 
• Bank account information
• Amount to be paid in people’s renminbi or RMB (including any bonuses)

Step #5: Choose to pay in your local currency or in the people’s renminbi (RMB)

Pay your Chinese employees in the people’s renminbi (RMB) unless you have explicit, written permission to pay them in another currency. (China’s currency is also known as the Chinese Yuan or CNY.)

Foreign companies may face challenges paying employees in RMB. Namely, the exchange rates can vary and, if the rate is unfavorable, you’ll end up paying more in USD to cover your employees’ wages. You may also need to account for fluctuations in the exchange rate when calculating your financial statements, which can create accounting complexities.

With Rippling, you can pay everyone in RMB, in minutes, without waiting on transfers or conversions.

Step #6: Run payroll

Time to run payroll! Here’s a preview of how Rippling’s global payroll system works:

Step #7: File your taxes in China monthly

Once you’re paying your employees in China, you’re obliged to pay taxes. If you’re using an EOR, they will automatically calculate and file taxes on your behalf in China.

Employers (or their EOR) must accurately calculate and withhold individual income tax (IIT) on their employees’ compensation, which includes wages, salaries, bonuses, stock options, and allowances. After calculating and withholding that IIT, employers then submit it to the Chinese tax authorities on a monthly basis. Employers make the IIT filing within the first 15 days of the month through the online IIT system or by submitting a filing form to the governing tax bureau.

Employers who file taxes late might face penalties and interest charges. Rippling can reduce your busy work by automatically calculating and filing your taxes in China.

Frequently asked questions about running payroll in China

What are the employer costs for full-time employees in China?

Employers must deduct payroll taxes from their employee’s paychecks, and they must also make social security contributions, which vary from region to region. Here are some examples of contribution rates:

Income is taxed at a progressive rate between 3-45%. (See more in our chart below.)

What is the average employee salary for workers in China?

You may be curious about labor costs as you consider expanding hiring in China. Average wages in China vary widely per region and industry. 

These are the average annual salaries per region in 2019:

Here are the average salaries for some of the country’s major job sectors in 2019:

What are the minimum wages in China?

The minimum wage in China varies by region. It’s set at the local level and depends on that area’s level of economic development. As of January 2024, Shanghai has the highest monthly minimum wage at RMB 2,690 (approximately USD$370) per month. Beijing has the highest hourly minimum wage at RMB 26.40 (approximately USD$3.70) per hour. Compare that to Hong Kong, where the minimum wage in 2023 was 40 Hong Kong dollars per hour (approximately USD$5.10). 

What information is needed from employees to run payroll in China?

Here’s the information you need from salaried employees to process their payroll:

• Name (matching the account where you’ll deposit their pay)
• Date of birth and date of hire
• Contact information, including their email and physical mailing address in China
• Identity certificate number. For employees using a Chinese ID card for identification, their tax identification number (TIN) is the same as their ID number. However, for those using passports or other types of ID certificates, a TIN will be issued by the local tax office. Passport numbers may be recognized as TINs for foreigners in certain parts of China. 
• Bank account information
• Amount to be paid in people’s renminbi or RMB (including any bonuses)

How much does it cost to run payroll in China?

Typically, payroll software is priced on a per-employee basis or per pay run. The pricing may vary according to:

• Payroll frequency
• The number of employees on your payroll
• The number of provinces and territories where you employ Chinese workers
• How often you add and remove payees
• Any additional services you need, such as year-end processing or mailing out pay stubs

Can I manually run payroll for workers in China?

While some small business owners choose to run payroll themselves by using a payroll calculator and making a direct deposit to employee accounts, this is not always the cost-cutting process they believe it to be. Running payroll this way can be time-consuming and lead to errors. Here are some possible risks:

• Compliance: Running payroll manually in China without using native global payroll software puts you at risk of manual errors and omissions. Rippling handles your compliance work for you—enforcing Chinese minimum wages and overtime rules per the employee’s region, which can save you from heavy fines and other issues.
  
• Security: Processing payroll manually can pose security risks, especially if you are using spreadsheets or paper records. This increases the risk of sensitive employee information being lost, stolen, or misused. This is of major concern in China, where there are strict laws about how to handle and protect personal data. 

Rippling syncs all your business’s HR data with payroll—no more calculators or manually entering data, such as hours or payroll deductions. Rippling also handles your tax and compliance work—yes, it really can be that easy.

What are payroll taxes in China?

China’s individual income tax (IIT) follows a progressive tax rate structure, where higher income levels are subject to higher tax rates. The rates range from 3% to 45%. Employers (or their EOR) must accurately calculate and withhold IIT on their employees’ income, which includes compensation such as wages, salaries, bonuses, stock options, and allowances. After calculating and withholding that IIT, employers then submit it to the Chinese tax authorities each month. Employers make the IIT filing within the first 15 days of the month through the online IIT system or by submitting a filing form to the governing tax bureau.

Here are the IIT withholding rates for residents in China:

Rippling can automatically sync tax deductions to payroll. Plus, Rippling handles all of your tax and compliance work.

What are the late tax filing penalties in China?

• Failure to file penalty: Late penalties are typically set at .05% per day overdue, though there may be additional fines for failure to file. 
• Underpayment penalty: The Chinese tax authorities may charge you 50-500% of the unpaid or underpaid tax.
• Criminal prosecution if the underpayment or lack of payment is serious enough that it’s considered a criminal offense. 
• Other punishments include preventing travel abroad, restricting credit access, and restricting government financial support, among other penalties.

In addition to these penalties and interest charges, late filing and remittance can also result in delays, trigger additional governmental scrutiny, or even result in bans from operating in China.

How do you pay contractors in China?

• First, ensure you’re correctly classifying your workers as contractors (you can use Rippling’s free Worker Classification Analyzer).
• Next, agree on the payment terms with the contractor: the hourly or project rate, the payment cadence, and the method of payment. 
• Collect their payroll information, including their name, date of birth, contact information, bank account information, and identity certificate number (or TIN).
• Use your chosen payroll software to pay the contractor in RMB. With Rippling, you can pay both contractors and employees in their currency of choice, in a single pay run, without waiting on transfers or conversion.

Remember, when hiring Chinese contractors, employers are not responsible for deducting taxes from their paychecks. Instead, the contractor is solely responsible for tax remittance. However, you should still keep an accurate payroll record for each worker.

Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.