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Employment and Payroll Guide for China

China, with the second-largest economy in the world, presents a significant opportunity for businesses looking to expand. However, navigating the complexities of employment and payroll regulations in China is crucial for compliance and effective management.

Annual Leave

In China, annual leave is calculated based on an employee's years of work experience:

  • Less than 1 year: No minimum leave days

  • 1-10 years: Minimum of 5 days

  • 10-20 years: Minimum of 10 days

  • More than 20 years: Minimum of 15 days

Employees may not be entitled to annual leave if they have taken extensive leave for personal reasons or have been on prolonged sick leave. If annual leave is not utilized, employers must compensate employees with regular wages plus 200% of their daily salary for each unused day.

Working Hours and Overtime

The standard workweek in China consists of 40 hours, typically spread over 5 days with 8 hours per day. There are three primary work hour systems:

  1. Standard Work Hour System: Regular 9 am to 6 pm schedule with a 1-hour lunch break.

  2. Comprehensive Work Hour System: A set period (usually one month) used to calculate working hours.

  3. Non-fixed Work Hour System: Applicable to higher management and sales staff, with no standard overtime regulations.

Overtime compensation varies:

  • Normal workdays: 150% of regular wages

  • Rest days: 200% of regular wages

  • Statutory holidays: 300% of regular wages

Social Security and Employer Contributions

Employers in China are required to contribute to several social security funds, which may vary by region. These contributions typically include pension, medical insurance, unemployment insurance, work-related injury insurance, and maternity insurance.

Termination and Severance

Employment in China is not at-will; termination must be for just cause. Employees are entitled to 30 days' notice or payment in lieu of notice unless terminated for misconduct. Severance pay is calculated based on the employee's years of service, with one month's salary for each year worked.

Key Takeaways

  • Compliance: Ensure all employment contracts and company policies are compliant with Chinese labor laws.

  • Leave Management: Track and manage annual leave to avoid disputes and ensure proper compensation.

  • Work Hours: Monitor work hours and overtime to comply with legal requirements and avoid penalties.

Can Woodburn help you?


Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.


Talk to an expert

Schedule a 30-mins complimentary, no-obligation call to see how Woodburn can help you. Book a call with our Head of Business Advisory - Kristina Koehler-Coluccia.

Topics we can advise on include:

  • Company Registration

  • Cloud Accounting & Financial Reporting

  • Cloud Payroll Services

  • Tax & Audit Services

  • Recruitment

  • Employer-of-Record

  • Visa Application

  • Trademark Registration

  • Switch to Woodburn

  • Partner with Woodburn (cross referral)  

Our calls are automatically scheduled via Zoom - or via Teams, WeChat or WhatsApp upon direct request. 

Our advisory calls are available from Monday-Friday from 8am to 5pm CEST and Wednesday until 9pm CEST.



Woodburn Accountants & Advisors is one of China and Hong Kong’s
most trusted business setup advisory firms

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