The cost of employing staff in China.

Labour costs in China extend well beyond base salary. For employers, the total cost of hiring a member of staff includes mandatory social insurance contributions, housing fund payments, statutory leave entitlements and severance exposure on termination. Understanding these components from the outset helps companies budget accurately and avoid unexpected cost overruns.

This guide breaks down each cost component, with indicative figures for major cities.

Breaking down the total cost of hiring staff in China

The total cost of employing staff in China comprises three main layers: the salary and any agreed allowances or bonuses, mandatory social insurance and housing fund contributions and statutory obligations relating to leave, overtime and termination. The costs associated with these statutory obligations can vary over the employment lifecycle. Social insurance contributions are the largest additional cost beyond salary for most employers. In tier-one cities, employer contributions across all five insurances and the housing fund typically add between 30% and 40% to the base salary, with the exact rate varying by city, salary level and industry risk classification for work-related injury insurance.

Social insurance and housing fund costs

Employers are required to contribute to China’s social security system on behalf of each employee. The five insurance types are pension, medical, unemployment, work-related injury and maternity. The housing provident fund is administered separately but is equally mandatory for most employees.

Contribution rates are set locally and vary by city. The table below provides indicative employer and employee rates for Shanghai and Beijing as a cost reference.

Note: Figures reflect rates as of 2026 and are subject to periodic adjustment by local authorities.

Contribution base floors and ceilings

Social insurance contributions are not always calculated on the employee’s actual monthly salary. Each city sets a floor and a ceiling for the contribution base, and these are updated annually, usually effective from July,though the official figures may be announced later in the same year. Employers should monitor local authority notices rather than assuming the new figures are available from the effective date. Where an employee’s salary falls below the floor, contributions are calculated on the floor. Where it exceeds the ceiling, contributions are capped at the ceiling. The floor is typically set at around 60% of the local average salary and the ceiling at 300%.

Bilateral agreements and foreign employee exemptions

China has totalisation agreements with 12 countries currently in force. Eligible foreign nationals from these countries may be exempt from certain contributions, which can reduce employer costs for qualifying expatriate staff. Employers should confirm whether their employee’s home country is covered before applying for an exemption, as exemptions are not automatic and the list of agreement countries is subject to change.

Employee wages and overtime costs in China

Understanding salary floors and overtime obligations helps employers model labour costs accurately before hiring. Both are set by law, but the specific figures vary by location and are reviewed regularly.

Minimum wage

Minimum wages in China are set at the provincial or municipal level and reviewed annually or at least every two years. They represent the floor below which no employee’s base salary can fall. Monthly minimum wages for major cities are as follows:

Note: Figures reflect rates current as of 2026.

Probation period salaries should not fall below 80% of the agreed wage or the applicable local minimum wage, whichever is higher.

Overtime payment

Standard working hours are eight hours per day and 40 hours per week. Where employees work beyond these limits, the following minimum pay rates apply:

• Weekday overtime: 150% of the regular wage
• Rest day overtime where no time off in lieu is given: 200% of the regular wage
• Statutory holiday work: 300% of the regular wage

Overtime on rest days can be offset with compensatory time off instead of the 200% payment, which can reduce cost exposure for employers managing shift-based or project-intensive teams.

Statutory leave costs in China

Statutory leave entitlements in China create ongoing cost obligations for employers across annual leave, sick leave and maternity leave. The amounts vary by employee tenure, city and whether the employee participates in the relevant social insurance schemes.

Annual leave

Statutory annual leave ranges from five to 15 days per year depending on the employee’s total years of service. Employees with one to 10 years of total employment receive five days, those with 10 to 20 years receive 10 days and those with more than 20 years receive 15 days. Unused statutory leave that the employer prevents the employee from taking can be compensated at 200% of the daily wage.

Sick leave

Sick leave is payable to both local and foreign employees. The rate depends on tenure and the duration of the leave. Payment generally ranges from 40% to 100% of salary, subject to city-specific standards.

Maternity leave payment

Female employees are entitled to at least 98 days of maternity leave nationally, with most provinces extending this to between 128 and 190 days. The cost to the employer depends on whether the employee participates in the local maternity insurance scheme.

Where the employee is covered by maternity insurance, the social insurance fund pays maternity allowances directly, calculated as follows:

Maternity pay = company average salary for the preceding year ÷ 30 x maternity leave days

Where the employee is not covered, the employer is responsible for paying the full salary during the leave period. The table below summarises how maternity costs are shared in three major cities:

Note: Maternity leave arrangements vary by province and are subject to change.

Termination and severance costs

Severance is payable in most termination scenarios, including mutual agreement where the employer initiates, non-renewal of a fixed-term contract, termination under special circumstances and mass layoffs, but not where termination is due to serious misconduct.

Severance is calculated at one month’s salary per full year of service, based on the employee’s average monthly remuneration over the last 12 months. For partial years, less than six months counts as half a month and six months or more as a full month, with the monthly reference salary capped at three times the local average monthly salary. For a full breakdown of employee termination process, see our guide on how to terminate an employee in China.

Conclusion

The total cost of employing staff in China is materially higher than base salary alone. Social insurance and housing fund contributions, overtime obligations, statutory leave entitlements and severance exposure all need to be factored into workforce budgeting from the outset. Given that contribution rates, minimum wages and leave entitlements vary by city and are updated periodically, building a city-specific cost model for each location where staff are based is the most reliable way to avoid budget surprises.

How Acclime can help with HR and payroll in China

Getting employment costs right in China requires accurate, up-to-date contribution rates, correct salary calculations and timely filings. Acclime China handles the full employment cost cycle, from social insurance registration and monthly contribution calculations to payroll processing and year-end compliance. Contact us to discuss how we can support your HR and payroll needs in China.