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GPMI Education

Webinar Details Complexities of Payroll in China

By Kerry Cole

1475043814_25785Dezan Shira & Associates’ Adam Livermore and Helen Kong stayed up well past midnight to make sure their Global Payroll Management Institute (GPMI) audience had the information it needed during the recent “Payroll in China” webinar.

For the convenience of their worldwide audience, the pair conducted the webinar live from China from 11 p.m.-1 a.m., covering six hours of information over a three-part series:

  • Compliance Requirements Relating to the Payroll Process
  • Payroll Calculation Methodology and Subsequent Operations 
  • HR Administration—Legal and Practical Considerations

“We’ve definitely seen in the last eight years an increased focus on compliance from the Chinese government,” Livermore said as he explained the need for deeper knowledge about labor requirements in the world’s most populous country.

The first day of the webinar reviewed a number of issues, including full-time and part-time, maximum working hours, maternity leave, overtime, public holidays, and insurance. 

Livermore, a Dezan Shira Partner based in Dalian, China, said contribution amounts from employees and employers can vary from city to city. This means the overall cost to a company can differ for two employees who are paid the same salary but work in different locations. Costs in the largest cities, such as Beijing and Shanghai, tend to be similar.

“Companies based in large cities may find that if they employ an individual from a regional city in their head office, the employee will request to have social security paid in the city where the company is based rather than in their hometown,” he explained. “The reason is simple: the employee will be able to earn more money via the housing fund and potentially accumulate more pension.”

 Social security contributions can affect total compensation significantly, he said, a factor companies should consider when deciding where to operate.

On the second day, Livermore and Kong covered the complexities of sick leave, bonus calculations, and bank transfer files. 

They explained that when employees have not taken all of their paid annual leave and do not agree to carry over the untaken leave to the next year, the employer must compensate them with 200% of their average daily wage for each day of unused annual leave in addition to their regular daily wages.

Kong, Dezan Shira’s HR Manager, said the company has worked out a way to deal with the provision.

“We allow our employees to defer taking annual leave for three or four months because year-end is the busiest time for the operation team,” she said. “That means they can take their annual leave in March or April of the following year.”

On the webinar’s final day, the focus was on hiring and firing employees. Chinese labor law affords them many protections.

“It’s an area where American companies frequently make mistakes, and those mistakes can have some serious consequences,” Livermore said. “The consequences ultimately fall on payroll in terms of increased compensation and benefits expense, and the primary expense relates to severance payment on employee terminations.”

He said striking the proper balance between company needs and employee rights is a never-ending struggle for companies with employees in China.

“HR and payroll managers, your bosses will be looking to you to make suggestions and give advice on these issues,” he said. “I would suggest you get advice from professionals locally in the market here if you can.”

Nicole Smith, GPMI’s Director of Instructional Design and Learning Development, and Mark Thielmann, Instructional Designer, co-hosted the webinar, which is available on demand.