China’s Minimum Wages: All You Need To Know

Whether you are looking for a job in China, thinking of starting a business or simply want to better understand the level of pay, being aware of the minimum wage levels in each city in China, can help you understand the wage landscape better.

In this post, we will briefly discuss the importance of minimum wages, the minimum wage standard in different regions across China, and the other aspects that can be affected by increases in the local minimum wage.

The Minimum Wage in China Explained

The minimum wage refers to the minimum remuneration that an employee is entitled to receive from an employer, according to local regulations. Payment of a minimum wage is made provided that the employee has worked within the statutory working hours stated in the written contract that they agreed with the employer, as per Article 3 of the Minimum Wage Regulations.

Employees can enjoy different types of leave as long as they have worked within the agreed hours and conditions as stated in their contract. Some of the leave they may receive include:

• Paid annual
• Statutory leave
• Maternity and paternity leave
• Bereavement,

Minimum wage per region

Below is a table of minimum wages across China for 2022 as provided by the Ministry of Human Resources and Social Security of the People’s Republic of China (MOHRSS)

*Note: The minimum wage may differ between districts in each province, the amount reflected above illustrates the lowest minimum wage rate per province

The importance of implementing a minimum wage

China faced rising labor costs in the late 1990s, with an average growth of 13.8%. This exceeded the real GDP growth rate and growth of labor productivity. China then enforced a minimum wage policy, bringing pressure to businesses and addressing the wage issues for poorly paid workers.

Enforcing a minimum wage is one of the pillars of a labor market. It is vitally important as it sets up a market wage rate equilibrium that aims to regulate the wage proposed by institutions, both private and public. It prevents labor exploitation while encouraging competitiveness among organizations in employing skilled workers.

What you need to know about minimum wage regulations in China

Who does it apply to?

The minimum wage regulations must be upheld by enterprises, private-non-enterprise units, and individual industrial and commercial households with employees, so long as they are operating within Chinese territory.

Additionally, state organizations, institutions, and social organizations that have established labor contracts with workers must observe the state provisions on minimum wage.

What determines the minimum wage?

The minimum monthly wage is computed by considering the minimum living expenses of local employees and their dependents in a specific region in China. Moreover, the consumer price index, social insurance premiums, housing accumulation funds, average wage of employees, and level of economic development are factored into the computation. Adjustments should be made accordingly, depending on the changes in these aspects to make sure fair wage is given to laborers.

The monthly minimum wage standard should be the basis for determining the minimum hourly wage standard.

Factors like basic endowment insurance premiums and basic medical insurance premiums should also be taken into account. What should also be taken into consideration should be the employment stability of the part-time worker, labor conditions and intensity of work, employee welfare, and other aspects that differentiate hourly workers from full-time employees.

Who is responsible for changes in the minimum wage?

Changes in the minimum wage standard are drafted by the Ministry of Human Resources and Social Security (MOHRSS) after conducting thorough research of several factors.

The municipality, province, or region, together with the trade union and enterprise federation shall be involved in drafting the proposal for changes in the minimum wage. Drafts shall be forwarded to the MOHRSS for further review and approval.

The proposal should contain the basis for the change, the scope of application, formulation standards, and the descriptions of minimum wage determination and adjustment.

The MOHRSS may propose amendments as it sees fit. Otherwise, if no amendments are made within 14 days after the Ministry has received the plan, the original proposal will be accepted as is.

6 other factors influenced by the minimum wage

Aside from the minimum wage, overtime pay, allowances, and subsidies may also be subject to an increase. Here are some of the usual benefits that rise along with the minimum wage:

• Housing fund

The minimum contribution base of the housing fund in cities throughout China is usually similar to the local minimum wage standard and is generally increased a few months after the minimum wage rises.

The floor of the housing fund contribution is often the same as the local minimum wage standard, while its ceiling can be up to 3 times the previous year’s average local monthly salary. Companies should always keep a close eye on government announcements regarding changes in the housing fund contribution.

• Pay during probation period

The Labor Contract stipulates that the wage of employees during the probationary period shall be not lower than the lowest wage for the same job position in the company. Additionally, the wage shall not be lower than 80% of the amount stated in the labor contract. More importantly, the wage shall not be lower than the local minimum wage standard where the business is operating.

• Severance payment

The Labor Contract law states that the severance payment shall not be lower than the local minimum wage standard. In case the average pay of the employee within the year, before the termination of the contract is less than the local minimum wage standard, then the local minimum wage standard must be used to calculate the severance payment.

**Read more on Severance Pay here

• Pay during suspension of production or work

It is up to the companies to suspend their operations, depending on internal or external conditions. However, wages shall still be paid as per the Labor Contract law.

If the suspension is within 1 wage cycle, then the company shall make payment in line with the standards written in the labor contract. However, if the suspension goes beyond 1 wage cycle, a living allowance shall be provided by the company in compliance with the relevant local regulations.

• Pay during sick leave

While different cities may have varying standards, the generally accepted rule of practice is that the pay for sick leave shall not be lower than 80% of the local minimum wage. The wage for sick leave shall also be adjusted when the local minimum wage standard increases.

• Wage of injured workers and unemployment insurance

For employees who are suffering from work-related injuries, so long as the injuries are certified within grades 1 to 6 levels of disability, they shall enjoy a one-off disability allowance and monthly disability allowance. The injured workers shall be paid around 60-90% of their average monthly pay during the last 12 months prior to the injury.

Unemployment benefits are often paid at 70-80% of the local minimum wage standard.

Conclusion

When running a business in China, make sure that you understand and comply with the local minimum wage standard in the area where you are operating. Offering a competitive salary package can positively impact your workforce by attracting skilled workers. To do so, you have to research your competition and make sure you stay compliant with local hiring regulations. In cases like this, outsourcing your HR work to a registered agency may be the most efficient and practical method to ensure compliance and competitiveness. Contact MS Advisory today so our professionals can help you.

Disclaimer: all articles and its related content are the property of Moore Stephens Consulting Company Limited and may not be reproduced either in part or in full without prior consent.