Guide to China labor laws

Key takeaways

• China offers top talent, but regulations are tricky: The country has 34 provincial-level regions where employment laws vary and change frequently.

• New law changes raise the stakes: Updates to retirement age, holidays, and who courts hold liable for labor disputes increase compliance complexity.

• Costs extend beyond base salary: Employer contributions to social insurance and benefits affect the total cost of hiring.
  The right partner simplifies hiring in China: With G-P as your partner in global employment, you can hire in China quickly and compliantly, without worrying about complex regulations.

China has millions of skilled workers across industries ready to join your company. But cracking the country’s regulatory code takes local know-how. 

Chinese labor laws shape contracts, working hours, overtime, termination, and mandatory benefits. These requirements vary by region — and laws are constantly changing. In 2025 alone, reforms affected retirement age planning, public holiday entitlements and pay, and other employer responsibilities. 

This guide gives you a practical view of Chinese employment laws so you can hire confidently without the risk.

2025 legislative shifts

2025 marked a major shift in China’s labor landscape. Three regulatory updates took effect:

1. A gradual increase in the retirement age

China has begun a 15-year transition to raise the statutory retirement age. The change is being phased in based on a specific sliding scale, so a person’s retirement date will depend on their birth month and year, as well as the implementation schedule.

The statutory retirement ages are now:

• Males in all roles may retire at 63 (up from 60)

• Female managers/specialists may retire at 58 (up from 55)

• Female workers may retire at 55 (up from 50)

2. More public holidays

There are now 13 public holidays in China per year (up from 11). Companies must pay employees 300% of their normal wages for work done on a public holiday. 

In China, you’re not allowed to give employees time off instead of public holiday pay. 

3. Supreme People’s Court Interpretation II

Effective late 2025, this new judicial interpretation clarifies how courts identify the true employer in labor disputes. Judges will apply a substance-over-form standard, looking beyond contracts to actual management, supervision, and control. 

If a company controls someone’s daily work — tells them what to do, manages their schedule, and supervises them — the courts may treat that company as the real employer, even if another entity is named on paper. That means international parent companies or related businesses can be held jointly liable for unpaid wages or severance if they exercise direct control over an employee's daily work or act like the employer in practice.

Core employment principles

China’s labor law system is highly structured and enforcement-driven. Detailed rules govern how employees are hired, managed, and terminated. Although many employment rules vary by region, the All-China Federation of Trade Unions (ACFTU) is the only official union recognized by the government. All other local, industry, or enterprise-level unions and associations are under ACFTU’s control.

As of 2025, workers have the right to:

• A minimum wage — set and updated by region

• A formal employment contract 

• A 40-hour week with fixed overtime rates 

• Social security (the "five insurances") - which covers pensions, healthcare, unemployment, work injury, and maternity 

• A housing fund 

• Statutory severance pay (paid directly by the employer upon qualifying terminations)

• Annual leave 

• At least 13 statutory public holidays

• Protection against discrimination, with new emphasis on age and flexible retirement options

• Trade union representation
  

1. Employment contracts

Chinese labor laws require employers to sign a written labor contract within 30 days of an employee’s start date. Skipping this step creates immediate legal and financial risk.

If you wait more than a month to sign a written contract, you must pay the employee double their wages for each month they worked without a written contract (starting from the second month) — up until the contract is signed or until one year of employment. 

If you don’t sign a written contract after one year, the law treats the relationship as an open-ended contract. An open-ended contract is one of the three contract types recognized in China. Contract choice affects renewal strategy and long-term termination flexibility.

Courts will look beyond the contract itself to determine who the true employer is. They’ll consider who directed the work, set schedules, managed performance, and paid wages and contributions. This means that the entity exercising actual control over the employee may be held liable for employment obligations, even if a different company is named in the contract.

Strong contract discipline and the right global employment partner can reduce this risk. 

2. Probation period

Labor laws and protections apply during probation. Employees must be enrolled in statutory social insurance. Probation length is based on the contract term. Employers can’t extend it informally or apply multiple probation periods to the same role.

Probation also affects termination:

• Employers can’t terminate “at will” during probation when an employee doesn’t meet job qualifications or performance standards defined in the contract or role requirements. Evidence plays a critical role. Courts expect a paper trail if an employee challenges a probation termination. Document performance gaps, training steps, and feedback.

• Employees can resign with minimal notice. They only need to give three days’ notice, compared with 30 days after probation. 
  

3. Working hours and overtime

China sets limits on working time, protects rest, and assigns clear pay rules for overtime and holidays. Standard working hours in China are 40 hours per week.

Since the number of statutory holidays increased to 13, the average monthly working days used for payroll and overtime calculations dropped to 20.67 days.

In 2025, China set total annual working hours at 1,984 hours. Regulators and courts use this annual cap to assess compliance. Companies must update their payroll formulas and track hours carefully, especially when teams work across time zones or during peak demand periods.

Employees can’t work more than three hours of overtime per day or more than 36 hours per month.

These requirements can’t be waived through contract language. Payroll accuracy and precise recording of working hours play a direct role in compliance under China employment laws.

4. Employee leave

China assigns most baseline leave entitlements at the national level, then provinces and regions expand them. 

5. Minimum wages

China doesn’t have a national minimum wage. Local governments set minimum wages and adjust them at least every two years. Minimum wages are typically higher in tier-one cities and developed regions and lower in smaller cities and rural areas.

In 2025, minimum wages rose across many regions. Shanghai set one of the highest monthly minimum wages at RMB 2,740 (about USD 394) per month, while Beijing set one of the highest hourly minimum wages for part-time workers at roughly RMB 27.7 (USD 3.99) per hour.

Minimum wages influence payroll compliance in three ways:

1. They set a pay floor for employees who perform normal work during legal working hours.

2. They can affect how local authorities set floors for social insurance contribution bases.

3. They force fast adjustments when regions update wage standards, especially for entry-level roles, probation pay, and allowance-heavy pay structures.

Companies must pay at or above the applicable minimum wage for the employee’s work location. The minimum wage only covers base pay. It doesn’t include overtime, bonuses, allowances, or welfare contributions.

Pro tip: Stay ahead of ongoing changes with our AI-powered global HR agent G-P Gia™. Get instant guidance on topics like regional minimum wage increases, so you can adjust pay promptly when authorities raise minimum wages. 

6. Termination

China doesn’t have at-will employment. Once a new hire passes probation, dismissal is only allowed based on specific legal grounds. 

Grounds for termination include:

• Employee misconduct

• Severe violation of company policy

• Incompetence even after training or reassignment

• Redundancy due to restructuring or economic downturn (with conditions)

• Mutual agreement on separation

Even then, procedural steps are required: 

1. Employers must notify the labor union of the intended termination and the reason in advance.

2. Employers may need to give 30 days’ written notice or pay one month of salary in lieu of notice.

Terminating someone immediately without compensation is unlawful unless it’s an extreme case of serious misconduct, such as theft, violence, or gross negligence. 

Certain categories of employees are protected from termination. You can’t terminate:

• An employee who is pregnant or on maternity leave

• An employee on medical sick leave

• An employee injured at work 

Their contracts must be extended through the protected period, even if their contract term expired during their absence.

Wrongful termination risk is higher under the 2025 Supreme People’s Court Interpretation. Courts apply stricter scrutiny to termination grounds and procedures, favor reinstatement where terminations are found unlawful, and look beyond formal contracts to actual practice. Mistakes can quickly escalate a termination into a costly dispute involving back pay or reinstatement.

That’s why companies of all sizes use an employer of record (EOR) like G-P to hire and build global teams, without the risk.

G-P EOR streamlines the entire employment lifecycle — from contract generation to payroll and offboarding —  so you focus on your team and business priorities.

7. Severance pay

Severance calculations in China follow a statutory formula based on length of service. The standard formula is represented by “N,” where N equals one month of average salary for each full year of service. Calculate the average salary using the employee’s average monthly pay over the last 12 months, including regular allowances and bonuses.

Count partial years as follows:

• Six months or more → count it as one full year

• Less than six months → count it as half a year

For example, 3.4 years of service would require 3.5 months’ salary in severance pay. 

The term “N+1” refers to notice pay and describes the total payout when an employer terminates a worker without giving the 30-day notice.

N = severance for years of service, +1 = penalty for no notice.

Paying a month’s salary in lieu of notice is also required if an employer doesn’t renew a fixed-term contract at expiration. You should either give a 30-day non-renewal notice or pay one month’s salary when the term ends — in addition to paying severance for the completed term.

The table below shows sample statutory severance calculations (“N” and “N+1”) for different lengths of service, assuming the employee’s monthly salary is within the statutory cap:

In China, employers pay for mandatory benefits on top of base pay. The benefits cover five types of insurance and a housing fund. Employer contribution rates vary by region.

2025 update: China expanded its occupational disease catalog to include work-related musculoskeletal disorders and work-related mental and behavioral disorders. 

The expansion means more conditions can qualify as work-related injuries, increasing employer responsibility under China’s work injury system. Employers may face more claims and closer scrutiny of workplace conditions.

This makes injury insurance setup and documentation more important. You must have clear reporting pathways, role-based risk controls, and complete records to support claims handling and dispute defense.

Housing fund

China’s housing provident fund works like a mandatory housing savings plan. Employers and employees contribute to these funds, which employees use for:

1. Home purchases

2. Mortgages

3. Rent

Details like contribution rates and caps are set by individual region regulations, not by a single national policy.

Contribution caps

A contribution base is the salary amount that authorities use to calculate how much an employee and employer must pay into China’s social insurance programs. Regions control the rules for that base and set minimum and maximum contribution bases each year.

Many regions cap social insurance calculations at three times the prior year’s average local wage. This means an employer’s total contribution costs can rise even when employee salaries stay the same.

Shanghai contribution cap example

Hire in China with G-P

From contracts to severance, every decision is a potential compliance pitfall. The right partner turns that complexity into momentum. 

G-P EOR lets you hire in China without setting up a local entity. We handle all matters of employment, so you can build your team quickly and compliantly.

With the right support, labor laws in China don’t have to slow you down. Start hiring in minutes, not months. 

Book a demo today.