China’s social insurance and housing fund contributions add 30–45% to your payroll cost — depending on the city. That’s not a typo. Employer-side contributions in Beijing alone can reach 28%+ of base salary before housing fund. In Shanghai and Shenzhen, the numbers are similar. Model this before you quote a compensation package, or your HR budget will blow out in Q1.

China Employment at a Glance

Mandatory Social Insurance (“Five Insurances and One Fund”)

All employers must contribute to five mandatory social insurance programs and the Housing Provident Fund. Rates vary by city — the table below uses Beijing as a reference point.

Typical Rates (Beijing example)

Total employer cost can reach 30–45% on top of base salary depending on city and housing fund election. Your EOR applies city-specific rates — a provider that doesn’t distinguish between Beijing and Chengdu is guessing.

Labour Contract Law

China’s Labour Contract Law is employee-protective in ways that surprise most foreign employers:

• Written contracts required within 1 month of start date. Miss this and you owe double wages for every month of non-compliance.
• Fixed-term contracts: After two consecutive fixed-term contracts, the third must be open-ended (indefinite term). You cannot cycle employees through fixed terms indefinitely.
• Severance: N months’ average salary (where N = years of service), mandatory on most termination scenarios — including mutual agreement and company-initiated redundancy.
• Termination without cause: Not permitted. Must follow documented performance management, restructuring, or statutory grounds. Unilateral dismissal without grounds results in double severance liability.
• Non-compete clauses: Enforceable but require monthly compensation during the restriction period — typically at least 30% of the employee’s average monthly salary. Unpaid non-competes are void.

Using an EOR in China

EOR providers with strong China coverage:

• Deel — owned entity in China, handles Tier 1 and Tier 2 cities
• G-P — deep China expertise, multi-city coverage
• Remote — covers major Chinese cities
• Atlas HXM — strong Asia-Pacific presence including China

Setting up a WFOE (Wholly Foreign-Owned Enterprise) takes 3–6 months and requires registered capital. EOR lets you hire immediately while you determine whether the market justifies entity setup.

Key Considerations

City-by-city variation is material: Social insurance rates, minimum wages, and housing fund contribution percentages all vary by municipality. An EOR without genuine multi-city operations is a risk — they may be applying Beijing rates to a Shanghai employee or vice versa.

Individual Income Tax (IIT): Progressive rates run 3% to 45%. Employers withhold and remit monthly. Non-residents and expatriates have different thresholds and treatment for benefits-in-kind; ensure your EOR handles expat shadow payroll if applicable.

Data localisation under PIPL: China’s Personal Information Protection Law requires that employee personal data collected in China be stored domestically or pass a security assessment before cross-border transfer. This affects HR systems, payroll platforms, and any data your EOR sends offshore. Verify your EOR’s data architecture is PIPL-compliant.

Hukou considerations: An employee’s household registration (hukou) can affect where social insurance must be enrolled, particularly for migrant workers. A competent EOR navigates this — ensure they ask for hukou location at onboarding, not after the first payroll run.

AK Anchal Katyal Published January 1, 2026