How Is Payroll Paid in China? Individual Income Tax, Social Insurance, Housing Fund and the Monthly Process

Set the conclusion and accounting boundaries first

For businesses in Mainland China, monthly payroll should be split into at least seven fields: gross pay (normal contractual wages, overtime pay, bonuses, allowances, subsidies and legally accrued holiday pay); employee social-insurance contributions; employee Housing Provident Fund contributions; tax-calculation fields (including income items, exempt or excluded items, basic deductions, special deductions, additional special deductions and other deductions determined by law; the payslip should show only the necessary summary of deductions and not reproduce family details or other additional-special-deduction data); IIT withheld under resident or non-resident rules; other deductions supported by a court instrument or another clear legal, contractual or policy basis; and net pay.

Use this internal formula for checking only, not as a substitute for filing: net = gross - employee social insurance - employee housing fund - IIT withholding - other lawful deductions. Employer social insurance, employer housing fund, and approved benefits or insurance are borne separately by the employer and belong in another group of fields for employer cost and the general ledger. Do not add them to employee deductions or count employee contributions again as employer cost. National wage-payment rules allow withholding and remittance of IIT and social-insurance and Housing Provident Fund contributions borne by the employee, but wages must still be paid in full and on time. Do not merge every deduction into one ‘company cost’ number. See the Interim Provisions on Wage Payment and the Labour Law.

Wages should be paid in money, on the agreed date and at least once a month, and must not be delayed or withheld without cause. Payslips and wage-payment records should show the pay period, gross items, deductions and net amount; retaining only a bank's aggregate batch-payment total is not enough. National rules generally require wage records to be kept for at least two years; local rules may require longer. Shenzhen's current wage-payment regulations already require payroll statements to be kept for at least three years.

A nine-step monthly payroll close board

Perform the nine steps in the same order each month. Every step needs an owner, deadline and readable evidence. A ‘completed’ item without evidence belongs only in the exception queue.

1. Freeze employee master data and the cut-off for changes. First lock the month's active employee list, actual work city, contractual pay, hire and termination dates, bank accounts, identity documents and basic taxpayer information. Pay increases or reductions, role or city changes, marriage, childbirth or family-deduction information, and resident or non-resident status should each record the effective month and approver. Where a pay change is a contractual term, the parties should agree it through consultation and in writing; see Article 35 of the Labour Contract Law.

1. Collect evidence for hours, overtime, leave and attendance. Lock original attendance records, overtime requests and approvals, time off in lieu, sick leave and other leave evidence by employee and payroll period. Under standard working hours, extended work, rest-day work and statutory-holiday work cannot be represented by one ‘overtime hours’ field. Where a role uses a comprehensive-hours or flexible-hours system, retain the local approval or basis of applicability as well.

1. Calculate gross pay. First separate normal-hours pay under the contract and actual performance, then add confirmed overtime, bonuses, allowances, subsidies and holiday pay. For a mid-month hire, termination or pay adjustment, calculate separate periods by effective date and actual working days; do not apply the new full-month salary backwards to an earlier period. Shanghai, Shenzhen and Beijing have their own rules on payday, overtime bases, sick leave and records, so the work city should be a required calculation variable.

1. Create IIT fields and route by status. A resident individual's wages are generally calculated monthly under cumulative withholding; a non-resident individual's wages are withheld under the relevant monthly rules after deductions from monthly income. Do not treat a software checkbox for ‘resident’ as a tax-residence conclusion, and do not automatically classify foreign employees as non-residents. First collect facts on days of residence, employment relationship, onshore and offshore payments, and tax treaties, then have a tax professional review them.

1. Calculate city contribution bases and split employee and employer amounts for social insurance and the Housing Provident Fund. The national Social Insurance Law requires an employer to complete the relevant registrations within statutory periods after establishment and actual employment, make full and timely contributions, and tell employees the amounts they personally contribute. The Housing Provident Fund similarly has a framework for employer registration, employee accounts and separate employer and employee contributions. A system display saying ‘base calculated’ does not mean local agency administration and tax payment have succeeded.

1. Generate payslips and apply an exception gate. Internal calculation and reconciliation tables should separate gross pay, employee social insurance, employee Housing Provident Fund, use of special deductions, IIT, other lawful deductions, net pay and employer-funded items. An employee's payslip should show the necessary deduction summary to explain net pay, without printing unnecessary family information. Exceptions include a missing bank account, inconsistent identity-document or taxpayer information, unapproved overtime, an unconfirmed city contribution base, negative net pay, employee objections and duplicate deductions. Each needs an owner, next action and payment treatment.

1. Make bank payments on the contractual payday. Before payment, reconcile the total payslip amount to the bank batch, payment account and number of employee accounts. Track bank rejections or payment-interface exceptions separately. Do not use ‘the social-insurance account is not open’ or ‘the IIT software is not yet submitted’ as a reason to withhold earned wages that are due. Protect wage payment first, then record the remedy and correction path.

1. File and pay within the respective windows. IIT withheld is generally filed and paid to the Treasury within 15 days of the month following payment of income. Social insurance and the Housing Provident Fund are handled through the administering systems, tax channels and current monthly notices for the actual work city. Retain filing receipts, payment vouchers, social-insurance entitlement or contribution results, and Housing Provident Fund remittance results. Clicking submit or completing a software calculation is not a government-system receipt.

1. Perform four-way reconciliation and seal the monthly package. The total employee lines on payslips should equal actual bank payments. Employee social insurance, Housing Provident Fund and IIT should reconcile to the amounts filed and paid. Employer-funded items should reconcile to the general ledger, employee-compensation payable and benefit accounts. Put differences in the exception queue rather than amending historical tables directly. The monthly package should retain, at minimum, master-data snapshots, attendance and approvals, calculation versions, payslips, bank records, IIT filing and tax-payment receipts, social-insurance and Housing Provident Fund evidence, general-ledger vouchers and explanations of corrections.

IIT routing: residents, non-residents and deduction fields

Monthly withholding for a resident individual's wages can be understood through these variables; there is no need to memorise a net amount:

Cumulative taxable income for withholding = cumulative income - cumulative tax-exempt income - cumulative basic deductions - cumulative special deductions - cumulative additional special deductions - cumulative other deductions determined by law

Tax to be withheld for the current period = (cumulative taxable income for withholding × withholding rate - quick deduction) - cumulative tax reductions and exemptions - cumulative tax already withheld

The State Taxation Administration's withholding measures state that cumulative basic deductions are calculated by multiplying RMB 5,000 per month by the number of months in the current year through the current month in which the individual has worked for the employer, and that full and complete withholding returns are filed monthly. This formula checks relationships between fields; it is not a complete tax-filing commitment for any individual. Tax tables, income nature and annual reconciliation must still follow current tax rules and individual facts. See the Administrative Measures for Individual Income Tax Withholding and Filing and the Individual Income Tax Law.

Where a non-resident individual receives wages and there is a withholding agent, withholding and remittance generally occur monthly rather than under the resident individual's cumulative-withholding route. Foreign employees without domicile may also raise issues involving days present in China, payments by onshore and offshore employers, income for overseas work periods and tax treaties. Neither visa type nor nationality alone determines tax status.

Additional special deductions are not permanent entries in the payroll sheet based on an employee's verbal statement. Employees may provide their withholding agent with information on children's education, continuing education, mortgage interest or housing rent, support for elderly relatives and other permitted items. The employer deducts these as prescribed during withholding, or they can be claimed during the following year's annual reconciliation. Employees are responsible for the truthfulness, accuracy and completeness of their information, and supporting materials generally must be retained as required. During payroll close, retain the version provided by the employee or received through the system, start and end months, time of change and whether it has already been claimed elsewhere, to avoid duplicate treatment of the same item.

For a person without domicile, a year with 183 cumulative days in China, six consecutive years, a single departure exceeding 30 days, onshore and offshore payments, and treaty benefits can change the analysis path. Current official policy also addresses the starting and resetting of the ‘six-year rule.’ Beijing's government-service entry point likewise notes that facts such as exceeding 90 days or the 183-day threshold in an applicable tax treaty can affect non-resident self-filing. A qualified tax professional should review foreign or non-resident-status employees against the treaty and actual information. This article does not determine residence status for an employee.

Social insurance, Housing Provident Fund and three clocks

Social insurance and the Housing Provident Fund are part of payroll and employment rules, not optional ‘benefits’ that can be removed from a payslip at will. The Social Insurance Law provides that an employer completes employer registration after establishment and employee enrolment after hiring; the employer withholds and remits the employee's own contributions and notifies employees of the monthly details. The Housing Provident Fund system covers foreign-invested enterprises. After hiring an employee, an employer must handle contribution registration and the employee account as prescribed; the employee portion is withheld from wages and the employer portion is borne separately.

As at 24 August 2026, the State Council had published a decision amending the Housing Provident Fund Management Regulations, but the decision takes effect on 20 September 2026. A close template should include fields for the applicable regulatory version and effective date. The August close and rules after 20 September must not be mixed. For the national framework and local rates, caps, accounts and make-up-contribution windows, see the Social Insurance Law and the State Council decision amending the Housing Provident Fund Management Regulations.

Draw the close calendar as three clocks:

• Contractual payday: determined by the labour contract, wage policy and local wage-payment rules. It determines when employees receive wages already earned; whether payment must be advanced for public holidays depends on city rules.
• IIT filing and payment date: tax withheld from wages is generally filed and paid into the Treasury within 15 days of the following month. Where the filing period is deferred for public holidays, follow the tax authority's current notice.
• Local social-insurance/Housing Provident Fund deadlines: these may be formed jointly by employee additions and removals, contribution-wage declarations, debit dates, remittance dates and annual-base adjustments. Shanghai, Shenzhen and Beijing should not use one national default date.

When the three clocks conflict, protect the wage-payment obligation first. Then place social-insurance, Housing Provident Fund and tax work in the exception queue, recording the owner for remedy, make-up contribution or correction. The exception queue should have at least six categories: identity or document confirmation pending; failed bank payment; unapproved overtime or leave; city contribution base or employee addition/removal not completed; foreign employee residence status or treaty review pending; and filing receipt inconsistent with the books. For each exception, state whether wages may be paid first, what must be remedied, who will handle it and the latest date when evidence can be read back. Do not make ‘system processing’ a permanent status.

How to route by city: Shanghai, Shenzhen and Beijing

Shanghai: first lock the payday and annual contribution-wage basis

Shanghai enterprises should pay wages at least once a month, on the date agreed between the enterprise and employee. They must record wage amount, items, time and employee name in writing, and give the employee a wage statement. Where wages are paid through a bank, a statutory holiday or rest day cannot defer payday. Shanghai's current Measures for Enterprise Wage Payment belong beside the payday and payroll-record gates; they do not replace national tax law.

The Shanghai notice on declaring contribution wages for the 2026 social-insurance year clearly states the period covered, declaration time, full-month wages in the starting month and electronic-tax-bureau route. The declaration from 1 May to 25 June 2026 covers the social-insurance year from July 2026 to June 2027; it is not a fixed payment date for every monthly payslip. A separate Shanghai Tax Service response says automatic-payment debits are generally from the 10th to 15th of each month, and employers normally should pay before the 15th, though public holidays and current announcements may alter this. In practice, place the 2026 social-insurance-year notice and the automatic-payment response beside the annual-base clock and monthly-payment clock respectively. For the Housing Provident Fund, separately open the Shanghai Housing Provident Fund Management Centre's current employer-services entry point to verify rates, caps and remittance status.

Shenzhen: insure employees in the month they start; retain segmented evidence for pay changes and overtime

The Shenzhen Social Insurance Fund Management Bureau's current service guidance separates employer or individual enrolment registration, declaration of contribution-wage bases, amount assessment, monthly declaration and payment to the tax department, and review of individual entitlement records. It makes clear that an employer should arrange employee enrolment in the month an employee starts and pay contributions for that month. Do not use the end of probation as the enrolment start point. Reopen the current entry point through the Shenzhen introduction to enrolment and contribution services.

Shenzhen's 2026 revised employee wage-payment regulations require wages to be paid fully, on time and in money at least once a month. Payroll statements must list normal working hours, overtime, gross items and deductions, and be kept for at least three years. IIT and employee-borne social insurance may be withheld as permitted by law, but other deductions need a legal or regulatory basis, employee consent or a lawful policy basis. Shenzhen's government guide for the Housing Provident Fund states that an employer should complete the relevant registration within 30 days of hiring an employee; the base and deductions must still be checked against the Shenzhen centre's current rules.

Beijing: the annual Housing Provident Fund base follows its own annual clock

Beijing's wage-payment rules require payment at least monthly on the agreed date and, where a statutory holiday or rest day occurs, advance payment as prescribed. Wage records must be kept for at least two years and include payment time, gross pay, deductions, net pay and overtime items. The Beijing Housing Provident Fund Management Centre's 2026 FAQs require employers to complete annual contribution-base declaration after completing June remittance and by 31 July. For 2026–2027, employers may independently set a rate between 5% and 12%, and may authorise retrieval of social-insurance contribution wages during the prescribed window. A successful annual-base declaration, successful July remittance and employee additions or removals in the current month are three different read-back points; one page showing ‘submitted’ cannot replace all three results. See the Beijing Wage Payment Provisions and the Beijing 2026 annual Housing Provident Fund base declaration FAQs separately.

Pay changes, back pay and final wages on termination

A mid-period pay increase first requires an effective date. Then calculate normal wages and overtime separately for the periods before and after that date. The written pay-change document should state the new pay, effective date, whether bonuses or overtime bases are affected, and when social-insurance, Housing Provident Fund and IIT fields switch. Otherwise the payslip, contract, social-insurance base and general ledger may each use a different date.

Back pay and corrections should not directly overwrite the original monthly package. Retain the original payslip, payment and filing receipt, then create a separate correction version describing the incorrect field, employee difference, how IIT and social insurance/Housing Provident Fund will be corrected, when the payment will be made up, who approved it and where the new receipt is stored. A software recalculation can provide a result; it cannot prove that a government system accepted the correction.

Final wages on termination should settle normal pay, overtime, payable bonuses or holiday pay, and lawful deductions by the actual end date of the employment relationship. The Labour Contract Law requires a certificate on dissolution or termination and the handling of personnel-file and social-insurance relationship transfer within the prescribed period. Local wage-payment rules may contain more specific dates for final wages, so review the actual work city. Even if social-insurance cessation, Housing Provident Fund account sealing or IIT base data are still being processed, do not leave due labour remuneration in a ‘to-do’ state.

Three fictional scenarios: put the rules into the close calendar

Each scenario below is an expressly fictional teaching example. It is not a client case and does not promise any filing outcome.

Ordinary resident employee in Shanghai: no exceptional changes that month

A fictional Shanghai foreign-invested enterprise freezes one ordinary resident employee's contractual pay, attendance, approved overtime and additional-special-deduction information at month-end. Finance first calculates gross pay, then separates employee social insurance, Housing Provident Fund and resident cumulative-withholding IIT, generates the payslip and pays it on the contractual payday. It then completes the social-insurance payment through Shanghai's tax channel, makes the withholding return during the next-month IIT filing window, and finally reconciles the bank receipt, IIT receipt, social-insurance and Housing Provident Fund evidence, and general ledger line by line. If Shanghai changes the current social-insurance debit date by notice, the contribution clock changes; the payday for wages already due does not.

Shenzhen employee: mid-month pay rise with overtime

A fictional Shenzhen company confirms a pay rise with an employee in writing on the 16th of the month, effective from the 17th. The employee has approved overtime on the 20th and on a statutory holiday. At close, calculate separately at the old wage from the 1st to 16th and the new wage from the 17th to month-end, then check the overtime base under Shenzhen's applicable wage-payment rules. The payroll statement lists normal hours, overtime, deductions and net pay. Social-insurance enrolment still follows Shenzhen's rule for the month the employee starts. Changes in contribution wages or Housing Provident Fund bases caused by the pay rise enter the local correction or next-period adjustment queue; do not use ‘the system has not refreshed’ to erase gross wages due for the month.

Foreign or non-resident-status employee in Beijing: pay due wages first, review tax and permits in parallel

A fictional Beijing business has a foreign project manager whose days in China are close to the residence-status threshold. Part of the remuneration is paid by an offshore related party, and work-permit materials also need updating. The business cannot apply resident or non-resident tax rates based on nationality, or treat a tax treaty, the six-year rule or work-permit status as an HR checkbox. It should retain days of residence, onshore and offshore payments, employer relationship and permit materials in the close package for review by tax and foreign-related permit professionals. The payslip first deals with confirmed, due labour remuneration; tax differences, filing method and permit changes go separately to the exception queue. You may reopen both the Beijing entry point for non-resident individual IIT self-filing and MOFCOM's Guide to Working and Living in China for Foreign Businesspeople (2026 edition), but neither is an approval or tax conclusion for a particular employee.

Reconciliation checklist, service boundary and next step

Evidence that the monthly close is complete is a closed chain: employee master data and changes have versions; attendance, overtime and leave have approvals; gross pay reconciles to total gross pay on payslips; employee social insurance, Housing Provident Fund and IIT deductions have a basis; net pay reconciles to actual bank payment; employer-funded items enter the correct general ledger; IIT, social insurance and Housing Provident Fund each have current-period filing or payment evidence; and corrections, back pay and termination settlements have separate explanations. Retain error numbers, screenshots or receipt locations for any interface error, but do not describe a status not read back from an authority as a successful filing.

This article provides a document-organisation and process framework, not advice on tax, labour law, social insurance, Housing Provident Fund, tax treaties, immigration or work permits. To form an entity and plan employment-launch materials in China, see the China company registration guide. MANPRPOWER LIMITED's service boundary is company-registration coordination, document preparation and support from qualified partner institutions. It helps organise the entity, actual work city, roles, documents and questions into a communicable scope; it does not replace authority filings or approvals, case-specific advice from lawyers or tax advisers, or guarantee formation, filing, permits, make-up contributions or wage-dispute outcomes.

For the next monthly close, first create a one-page ‘nine-step payroll close board.’ Put the contractual payday, IIT filing and payment date, and local social-insurance and Housing Provident Fund deadline at the top; retain the exception queue and receipt locations at the bottom. Once the seven payroll fields are not confused, the three clocks are not mixed and every difference has an owner, overseas founders, finance teams and HR can move from ‘what did the software calculate?’ to ‘why was each amount paid this way, and what was completed in which official system, and when?’