Minimum wages in China continue to grow. Local governments are required to update their minimum wages at least every few years but have the flexibility to adjust wages according to local conditions.
The minimum wage standard shows how much the company should pay the employee when this one is in a legal employment relationship.
The minimum labor remuneration generally does not include overtime pay, allowances under special working conditions, and statutory welfare benefits.
So how does the minimum wage affect the company and employees? And what are the recent updates of the law related to the minimum wage in China?
Continue to read to know more!
Overview of Minimum Wages in China
In China, the minimum wage is set by local governments based on the needs and conditions of their respective regions. As of April 12, 2023, Shanghai has the highest monthly minimum wage among 31 provinces (RMB 2,590/US$400 per month), and Beijing has the highest hourly minimum wage (RMB 25.3/US$3.9 per hour). The minimum wage is reviewed and adjusted periodically to keep pace with inflation and changes in the labor market. While the minimum wage is intended to ensure that workers are paid a fair wage for their labor, there are some exemptions and limitations on its application, and enforcement of the minimum wage can be challenging in some industries and regions.
Recent updates of the minimum wage law
1) Sick pay has been increased during the sick leave
According to relevant regulations, the company shall pay sick leave wages according to the following standards if the employee takes a vacation within 6 months for illness or non-work-related injury:
At the same time, the company shall pay no less than 80% of the minimum wage standard for the employees of the city’s company during the year of sickness pay or sickness relief during the employee’s sick leave.
If the minimum wage standard is raised, the sick leave wages will also increase accordingly.
2) Employees on probation period are paid more than before
According to the Labor Contract Law, the probation period is included in the labor contract period.
The wages of laborers during the probation period shall not be lower than the minimum salary of the same position of the unit or 80% of the wages agreed in the labor contract, and shall not be lower than the minimum wage standard in the location where the employer is located.
Therefore, even during the probation period, the company should guarantee the minimum wage standard.
In China, it is common for employers to put their new employees on a probationary period before making them permanent staff. During this period, employees are expected to learn the ropes of their job, adjust to the work environment, and prove their worth to the company. In recent years, it has become common for companies to pay their probationary employees more than they did in the past. This has been due to various factors, including the rising cost of living, inflation, and the minimum wage laws in China.
The minimum wage in China is set by each province, and it varies depending on the region. The minimum wage is the lowest amount of money that an employer can legally pay their employees. The minimum wage is set to ensure that employees are not exploited and receive a fair wage for their work. In some regions of China, the minimum wage has been increasing steadily over the years to keep up with the rising cost of living.
In some cases, employers may pay their probationary employees more than the minimum wage. This is because the probationary period is a trial period for both the employer and the employee. The employer wants to ensure that the employee is the right fit for the job, and the employee wants to show that they are capable and willing to work hard. By paying a higher wage during the probationary period, the employer can attract better-quality candidates and incentivize the employee to work harder and perform better.
In addition to the financial benefits, a higher wage during the probationary period can also help to motivate and retain employees. When employees feel that they are being compensated fairly, they are more likely to feel valued and motivated to work harder. This can lead to better job performance, increased productivity, and higher job satisfaction.
In conclusion, the minimum wage in China plays a significant role in determining the wages of employees, including those on probationary periods. Employers may pay their probationary employees more than the minimum wage to attract better candidates, incentivize hard work and retain employees. Ultimately, a fair wage can lead to better job performance, increased productivity, and higher job satisfaction.
3) If the employer stops production, the payment of labor remuneration will be increased
Article 12 of the “Interim Provisions on Wage Payments” stipulates:
- If the company stops work or production and this is not caused by a worker’s reason, the employer shall pay the worker’s wages in accordance with the standards stipulated in the labor contract.
4) The economic compensation for the employees goes up
Article 47 of the “Labor Contract Law” stipulates:
- economic compensation is paid to the worker according to the standard of the worker’s length of work in the company and one month salary per full year (based on the worker’s 12 months before the labor contract is terminated). The average wage is the standard, if it is lower than the minimum wage standard, it will be calculated according to the local minimum wage standard. If the minimum wage standard is raised, the economic compensation received will also increase.
Clarifications About Minimum Wages in China
1) Why are there differences in the minimum wage in different provinces and cities?
China is a vast country with different regions and economic conditions, which can have a significant impact on the cost of living and the minimum wage. As a result, the minimum wage varies from one province to another and even within cities in the same province. There are several reasons why there are differences in the minimum wage in different provinces and cities in China.
Firstly, the cost of living varies widely across different regions in China. Urban areas such as Beijing, Shanghai, and Guangzhou are typically more expensive to live in compared to rural areas. The cost of living includes the price of food, housing, transportation, and other basic necessities. As a result, the minimum wage in urban areas is typically higher than in rural areas to account for the higher cost of living.
Secondly, the economic conditions of each province and city are different. Some provinces are more developed than others, and they may have a higher cost of living and a stronger economy. In these areas, the minimum wage is typically higher than in less developed areas with weaker economies.
Thirdly, the minimum wage in China is determined by the local government, and each province and city has its own standards. The government takes into account the cost of living, the local economy, and the labor market when setting the minimum wage. This means that the minimum wage may vary based on the local government’s policies and priorities.
Another reason for the differences in the minimum wage is that some regions have a higher demand for labor than others. In areas with high demand for labor, employers may have to offer higher wages to attract and retain workers. This can lead to higher minimum wage standards in those areas.
Finally, the minimum wage can also be influenced by cultural and social factors. For example, some regions may place more emphasis on social welfare and income equality, which could lead to higher minimum wage standards.
In short, the minimum wage in China varies across different provinces and cities due to various factors such as the cost of living, economic conditions, government policies, demand for labor, and cultural and social factors. The minimum wage is an important tool for protecting workers’ rights and ensuring a fair wage for their labor. Understanding the reasons for the differences in the minimum wage can help policymakers and employers make informed decisions about setting wages and improving labor conditions.
2) Does the minimum wage include the social insurance and the housing fund?
In fact, regarding whether the minimum wage standard includes the “five insurances and one payment” paid by individuals, local regulations are not consistent, so the value of the minimum wage is different.
Most places are explicitly included. For example, Sichuan clarified that the minimum wage standard includes the social insurance premium and housing accumulation fund that should be paid by individuals.
Some places clearly do not include, for example, Beijing and Shanghai make it clear that the various social insurance premiums and housing provident funds payable by individual workers are not part of the minimum wage standard, and the employer should pay separately according to the regulations.
3) What if the wage is lower than the minimum wage?
According to the “minimum wage regulation”, when the employee is in a legal employment relationship, the salary that the company should pay cannot be lower than the local minimum wage after excluding the below items:
- Pay for extended working hours;
- Allowances under special working conditions such as middle shift, night shift, high temperature, low temperature, underground, toxic and harmful;
- The laborer welfare treatment set by the law, code, and country.
In China, the minimum wage is set by the government to ensure that workers receive a fair wage for their labor. However, there are cases where a person’s wage may be lower than the minimum wage. This can occur due to various reasons, including non-compliance by employers, exploitation, or the worker’s lack of awareness of their rights. In such cases, it is important for the affected individual to take action to protect their rights.
If a person’s wage is lower than the minimum wage, the first step is to understand their rights under the law. The Labor Law of China stipulates that every worker is entitled to a minimum wage, and employers must comply with this law. Workers have the right to file a complaint with the labor department if they are not receiving the minimum wage. Employers who violate the minimum wage law can face fines, legal action, or other penalties.
It is also important for workers to keep records of their working hours, pay stubs, and other relevant documents. This can help them prove that their wage is lower than the minimum wage and take appropriate legal action. Workers can also seek legal assistance from lawyers or labor rights organizations to help them navigate the legal system.
In some cases, workers may fear retaliation from their employer for reporting the violation of the minimum wage law. To address this issue, the Chinese government has established a hotline where workers can report violations anonymously. Workers can also seek support from labor rights organizations, trade unions, or other groups to protect their rights and advocate for fair labor practices.
In brief, if a person’s wage is lower than the minimum wage, they have the right to take action to protect their rights. Workers should be aware of their rights under the law and keep records of their working hours and pay. They can file a complaint with the labor department, seek legal assistance, or report violations anonymously to protect their rights. Employers who violate the minimum wage law can face penalties, fines, or legal action, which can help deter future violations and ensure fair labor practices.
4)Are there any exemptions from the minimum wage?
In China, there are some exemptions from the minimum wage requirement, although they are limited in scope. According to the Minimum Wage Regulations, certain types of employees may be exempt from the minimum wage requirement, including:
- Interns: Interns who are still in school or training programs may not be subject to the minimum wage requirement.
- Disabled employees: Employers may be allowed to pay disabled employees less than the minimum wage, depending on the severity of their disability and their ability to perform the job.
- Domestic workers: Domestic workers who work in private households, such as nannies, cleaners, and caregivers, may not be subject to the minimum wage requirement.
- Apprentices: Apprentices who are undergoing training may not be subject to the minimum wage requirement.
- Part-time workers: Part-time workers may be exempt from the minimum wage requirement if they work less than a certain number of hours per week.
However, it is important to note that these exemptions are limited and are subject to certain conditions. For example, employers must obtain approval from the relevant authorities before paying disabled employees less than the minimum wage. In addition, employers must ensure that their employees are not being exploited or mistreated, even if they are exempt from the minimum wage requirement.
Overall, the exemptions from the minimum wage requirement in China are intended to provide flexibility for certain types of workers and employers, but they should not be used to exploit or mistreat employees.
5)What impact does the minimum wage have on the economy?
The impact of the minimum wage on the economy is a topic of ongoing debate among economists and policymakers. Proponents argue that the minimum wage can boost the economy by increasing consumer spending and reducing poverty, while opponents argue that it can lead to job losses and higher prices.
One of the main arguments in favor of the minimum wage is that it can increase consumer spending by putting more money in the pockets of low-wage workers. This, in turn, can stimulate economic growth and create jobs. Additionally, a higher minimum wage can reduce poverty and income inequality, which can have positive effects on social mobility and economic stability.
On the other hand, opponents of the minimum wage argue that it can lead to job losses and higher prices, particularly in industries with a high concentration of low-wage workers. Employers may respond to a higher minimum wage by reducing their workforce, cutting hours, or increasing prices to offset the higher labor costs. This can lead to higher unemployment rates and inflation.
Overall, the impact of the minimum wage on the economy depends on a variety of factors, including the level of the minimum wage, the state of the labor market, and the structure of the economy. While there is no consensus on the impact of the minimum wage, policymakers must carefully consider the potential benefits and drawbacks when setting minimum wage policy.
6)What is the difference between the minimum wage and a living wage?
The minimum wage and the living wage are two different concepts that are often confused with one another. The minimum wage is the legal minimum amount that an employer is required to pay their employees for their work. It is intended to ensure that workers are paid a fair wage for their labor.
On the other hand, a living wage is the amount of money that a person needs to earn in order to meet their basic needs, such as housing, food, healthcare, and transportation. Unlike the minimum wage, the living wage takes into account the cost of living in a particular area, as well as the needs of the worker and their family.
The living wage is often higher than the minimum wage, as it is designed to provide workers with a basic standard of living. It is based on the idea that all workers should be able to earn enough money to support themselves and their families, without having to rely on government assistance or other forms of support.
While the minimum wage is a legal requirement that all employers must follow, the living wage is not mandated by law. However, many businesses and organizations have adopted living wage policies as a way to demonstrate their commitment to social responsibility and fair labor practices.
Overall, the difference between the minimum wage and the living wage is that the minimum wage is the legal minimum amount that employers must pay their workers, while the living wage is the amount that workers need to earn in order to meet their basic needs and achieve a basic standard of living.
Conclusion
We hope that this overview will give you an idea of the recent updates of the wages law in China and the minimum wage standard levels in China.
Our service can handle the complete employee payroll for your company in China in compliance with the local policies. As a non-state-owned consulting firm, we can directly hire employees for a company not having a legal entity in China by our specialized Employee Leasing / Talent dispatching services.
