3 Key Advantages of Outsourcing Payroll Services in China

Your company’s most valuable assets are its employees. A critical, yet often overlooked, component of maintaining employee satisfaction is accurate, efficient and reliable pay runs. However, achieving this in-house can be incredibly time-consuming.

Do you know how many hours your in-house team spends on payroll processing? It might be time to consider outsourcing payroll, so that you can focus on what really matters: the strategic business drivers that grow your company.

To help you make the best decision for your business, consider the following key advantages of engaging an outsourced payroll services provider in China.

One of the most significant risks that employers face when executing payroll in China is non-compliance with the country’s complex labour and tax laws. Staying informed of the latest regulatory changes that impact payroll, and then accurately applying them, takes considerable time.

Outsourcing your payroll to a specialist service provider like our team of experts at BoardRoom can minimise your exposure to compliance risks and help give you the confidence you need to focus on higher-value business tasks. Let us take care of the following compliance considerations so that you and your team don’t have to:

• Tax deductions: these vary from region to region (and even city to city) across China, but they usually total around 40% of an employee’s salary.
• Withholding tax: employers must withhold approximately 15% of employees’ wages for individual income taxes, and pay these to China’s tax bureau before the 15th of each month. Employers are also required to withhold and pay a shares tax, bonus tax or severance tax when applicable.
• Social insurance schemes: Employers and employees are required to contribute to China’s mandatory social insurance schemes. These include pension, medical, industrial injury, unemployment, maternity and Housing Fund (HF) insurance. The HF scheme allows employees to save towards purchasing their own homes.

Social insurance and HF contribution rates are adjusted annually, with rates based on the average salary of the specific city or region where the employee works.

Employers must also pay insurance withholdings to the Bureau of Labour Insurance, National Health Insurance Council, and the Employee Pension Board before the 15th of the following month.

• Minimum wage-setting: Generally, local government agencies across China set minimum wages. However, the country’s labour bureaus set standard minimum wages for specific job types.
• Working hours: China has an eight-hour workday with an average working week of no longer than 44 hours, and (most commonly) two days off per week.
• Pay cycles: Salaries in China are typically paid monthly.
• Employment termination: An employee may terminate their employment by giving 30 days’ written notice of termination. Employers must also give their employees 30 days’ notice if they wish to terminate the employment.

Unless the employee failed to satisfy the conditions of their employment contract, or they violated any laws or company policies, the employer must also issue severance pay.

• Paid holidays: these include the first three days of the traditional Chinese lunar calendar, three days for International Labour Day on May 1-3, three days for National Day from October 1-3, and one day on 1 January. China’s government occasionally also establishes special holidays on short notice.
• Annual leave: employees are entitled to between 5-15 days of paid annual leave, depending on their length of service with the company. Employees can also apply for sick leave, marriage leave and funeral leave, when applicable.
• Parental leave: maternity leave entitlements are 98 days, paid by the employer. Some provincial regulations extend the amount of leave available by as much as three months in some instances. Paternity leave entitlements are between 7-20 days, with some extensions permissible.

When you outsource payroll, your in-house HR team can focus on achieving more strategic objectives, such as increasing employee engagement and productivity. With the time saved by outsourcing, your company can then reallocate staff towards core business activities. Outsourcing payroll can also save your company money because it can:

• avoid the need to hire an in-house payroll expert;
• implement more streamlined payroll processes; and
• avoid maintaining  payroll software or managing paperwork and tax liabilities in-house.