China Salary and Benefits Benchmarking: How Foreign Employers Should Budget

China salary benchmarking is essential for foreign employers, as pay varies widely by region, industry, and role. This article explains what to budget for beyond base salary, including social security, bonuses, fringe benefits, raises, and headcount costs. 

Budgeting for salaries and benefits in China means accounting for a wide range of statutory and voluntary payments that together make up the true cost of hiring an employee. At its baseline, it requires accurate salary benchmarking to set a fair and market-appropriate rate that can both attract quality talent and keep payroll costs under control. Beyond base pay, foreign employers must also plan for statutory social security contributions, bonuses, fringe benefits, promotions, and headcount, and project these costs over the long term. This article outlines how foreign companies should budget for fair and competitive compensation packages in China. 

Salary benchmarking in China 

As salaries vary considerably across the country, national or even regional salary averages cannot be used alone to determine compensation for a given position. Salary benchmarks in China must be assessed against a range of variables, including location, industry, role seniority and skill level, and market competition, among others. 

Regionally, employees in China’s eastern provinces earn about 47.3 percent more on average than in the northeastern provinces, which recorded China’s lowest regional average salary in 2025, according to the National Bureau of Statistics (NBS). Cities such as Beijing, Shanghai, Shenzhen, and Guangzhou commanded the country’s highest salaries.

In terms of industry, finance and tech are the two highest-paying sectors in China, with average annual salaries in finance reaching almost double the national average in 2025.  

The lowest average salary was in agriculture. 

Roles for which there is a high demand or shortage of talent will command much higher premiums. There may also be fierce competition among companies in certain industries for the best talent, and this requires designing attractive compensation packages alongside corporate soft power such as solid employer branding. 

Foreign employers also tend to pay a premium, even for local hires. Data from the NBS shows that salaries of employees at above-scale foreign companies (those with an annual main business income of over RMB 20 million) were paid almost 1.6 times that of the national average, with production and manufacturing personnel paid around 1.2 times the national average and mid-to-senior level managers paid over two times the national average. 

• For a more detailed breakdown of salary benchmarks in China, see our previous article: How Much Should You Pay Your Employees in China? 

What should foreign employers budget for? 

Base salaries 

The base salary in China should generally account for around 65 to 70 percent of the overall compensation package, depending on whether bonuses and other fringe benefits are granted. 

Getting the base pay right at the outset is crucial as it will have considerable downstream effects on social security contributions, salary-based bonuses, and the long-term cost of promoting and retaining employees. Setting a salary benchmark too high can quickly lead to spiralling costs, while too low can jeopardise employee retention. 

Note that companies must withhold individual income tax (IIT) on employees’ base salaries, which includes income from cash bonuses and equity incentive programs. 

Statutory social security contributions 

Companies in China are required to make social security contributions on behalf of each employee on top of an employee’s salary. These are the “Five Social Insurances” (pension, unemployment, medical, work-related injury, and maternity, although maternity has been folded into medical insurance in many places) and the Housing Provident Fund. 

Statutory contributions are based on the employee’s gross salary (including bonuses), with rates for certain contributions varying from city to city. Employers can expect to pay an additional 30 to 40 percent of the gross salary in these mandatory contributions, which must be budgeted into the overall compensation package.  

The minimum contribution base is decided either by the local minimum wage or a certain percentage of the average local wage, depending on the city, while the maximum contribution base is 300 percent of the average local salary. This means higher salaries do not result in more costly contributions after this threshold is reached. 

Statutory social insurance contributions are tax-deductible for both employers and employees. 

For more information on social security contributions, see our portal entry on Social Insurance in China here. 

Bonuses 

Companies in China can offer bonuses to employees as an additional incentive, which can be fixed or performance-based. It is customary to provide a fixed bonus in the form of a 13th-month salary, usually paid out annually prior to the Chinese New Year holiday. As bonuses count toward annual income for both tax and social insurance payment purposes, fixed bonuses mean the actual annual salary will be slightly higher than the base salary, which must be factored into the total salary package.  

While performance-based bonuses may not be paid out as regularly, they should still be accounted for in the total salary package to ensure there is sufficient cash flow to pay them when the agreed-upon performance terms are met. 

Fringe benefits 

Many companies offer a range of fringe benefits to employees on a voluntary basis. These may include private health insurance, dental insurance, transport and meal allowances, and training and development programs, among others.

Common fringe benefits extended to foreign employees include home leave allowances, children’s education, language classes, relocation expenses, and housing rental, many of which are also eligible for certain IIT exemptions. If hiring foreign employees, the costs of visas, work permits, and associated agency fees should also be budgeted for. 

Fringe benefits can be a cost-effective way of attracting and retaining quality talent; however, major benefits, such as coverage of children’s education and private health insurance, can significantly add to the overall compensation packages and are generally only provided on a discretionary basis by large companies to a small number of employees. Companies should therefore budget fringe benefits as a separate line, either as a fixed allowance per eligible employee or capped at a percentage of base salary. 

Promotions and raises 

Companies should budget for promotions and salary increases to ensure they can continue to meet an employee’s expectations in the long term. These can be structured as annual raises or promotions linked to individual or company performance, scheduled based on years of service and set salary bands, or provided on a discretionary basis. If necessary, one-off bonuses can also be provided in lieu of a salary increase to prevent permanently raising the base salary.

To budget for promotions and raises, companies should project headcount costs over several years based on assumed merit and promotion rates, rather than only the cost of the first-year offer, to ensure a sustainable payroll strategy. 

Headcount 

Overall headcount is also an important factor in determining how much each role can be compensated within a fixed compensation budget. If more staff are required for a project or several roles must be filled at once, base salaries may need to be adjusted downward, since the same budget is spread across more hires. However, this must be balanced against market rates to maintain competitiveness and prevent high turnover. 

How to budget for new hires and promotions 

Benchmark against current local market data 

As the base salary will make up the bulk of the compensation package and the cost of long-term employment, companies need to benchmark it carefully against current market data for the specific role, industry, and city, and bear in mind the long-term costs of employing someone at this rate.

Foreign companies can refer to salary benchmarks from published salary reports, such as the NBS’ annual salary data for private and public enterprises, as well as domestic recruitment platforms, such as 51job and BOSS Zhipin, which publish detailed annual salary reports. Where employees have previously been hired for similar roles, companies should also refer to internal benchmarks, both to ensure salary consistency across hires and to assess whether they are still competitive against current market rates. 

A useful resource for determining the competitiveness of a given profession, role, or skill is the catalogues of in-demand or urgently needed talent, which are released periodically by municipal governments. Salary benchmarks may need to be adjusted upward for these positions. 

Budget the total cost

It is crucial to factor in all of the different costs of hiring an employee when budgeting for a new hire. A budget for a basic salary package must be able to cover the base salary and statutory social security payments, as well as other possible costs associated with hiring, such as onboarding and training costs, equipment, recruitment agency fees, legal fees for drafting hiring contracts, and visa and work permit costs for foreign hires. 

More competitive salary packages should also include bonuses, fringe benefits, and any planned promotions, as well as long-term costs of retaining the employee. 

Project costs over three to five years 

Payroll is a long-term business cost and must be treated as such. Salary budgeting should therefore look at the cost of a given position over the period the company needs or hopes to keep a position staffed. 

It is advisable to project the costs of hiring an employee over at least three to five years, factoring in future cost increases such as promotions and raises, and annual bonuses, as well as potential price increases of fringe benefits such as education fees, private health insurance premiums and housing rents, as well as external changes like inflation, rising local minimum wages, and annual adjustments to social insurance contribution bases and rates. 

Set salary bands and keep a contingency reserve 

Setting internal salary bands can help to ensure that pay for each grade stays consistent, predictable, and within budget, preventing pay from drifting above or below market.  

Companies should also consider maintaining a payroll contingency reserve (for example, 5 to 10 percent of the payroll budget) to cover unexpected costs such as market-driven raises, social insurance changes, and urgent replacement hires. 

How Dezan Shira & Associate can help 

Budgeting for a new hire in China means weighing city-level salary benchmarks, social insurance contributions, tax treatment, and long-term cost increases. Dezan Shira & Associates’ HR and payroll professionals help foreign companies benchmark compensation against current market data, structure compliant salary packages, and forecast the full cost of employment over time. We also support recruitment, payroll processing, and IIT and social insurance compliance, so you can build your team in China with confidence in your numbers. Contact us to discuss your China hiring plans.