Contractor Payroll in China

Positioning a candidate internationally means navigating unfamiliar tax and payroll systems. Not only does this generally mean more work for you, but even small missteps can have serious financial or even legal consequences.

If you want to successfully place a contractor, you should first familiarize yourself with the contractor payroll process in China, as well as how you can make the situation simpler.

Contractor Payroll in China

Payroll options in China

There are several different options for payroll in China:

  • The client can provide payroll for the contractor, but not all clients offer this for temporary workers.  
  • The contractor can do it on their own, but this creates serious risk for the end client and possibly your agency, as well. Like most people, many contractors do not specialise in China’s tax system, nor do they always have the time or means to pore over complex tax returns.
  • Your contractor can use a local payroll company.

The third option is the simplest and quickest. An even simpler and quicker option is to use an Umbrella Company, as they offer the same services as a local payroll provider in addition to other services that simplify international assignments (such as Work Permit sponsorship).

Check out our FAQ for specific quotes on payroll providers and Umbrella Companies. 

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Questions and Answers about

Questions and Answers about Payroll in China

Q: How does payroll work in China?
A: Your employer (the company sponsoring your visa) pays the candidate on a monthly basis, social security and income tax are deducted at source and paid to the China tax authorities. Candidates are able to offset their taxable income with relevant business expenses. China has 20% employers social security contribution and 8% employees contribution which covers pension, health insurance, maternity insurance, work-related injury insurance and unemployment insurance. This varies by region and generally has a limit to the employer contribution where the maximum social security contribution cannot exceed three times the average monthly wage. e.g. in Shanghai in 2012 the maximum social insurance contribution was RMB 11689 per month - because the average monthly wage was RMB 3896. The World Bank estimates it takes employers in China 192 man days to ensure compliance with payroll and labour taxes each year.

Q: What is the monthly cost to outsource payroll in China?
A: $100 per person if it’s simple calculations.

Q: What is the estimated net retention for a contractor in China earning USD 1000 per day?
A: Depending on how it’s structured but around 75%.

Q: What is the minimum salary required per month in China when a candidate is sponsored on an Work Permit?
A: $300 USD per day