China Law Library

Minimum Wage Rules

CBL’s Introduction

China’s Minimum Wage Rules translated here by CBL into American English set strict obligations for employers, significantly limiting flexibility by mandating regional minimum wage levels that account for detailed economic and social factors. Notably, businesses must regularly adjust wage rates based on regional economic indicators, social contributions, and inflation. International companies operating in China should closely monitor the mandatory wage adjustments and enforcement provisions, as noncompliance can result in substantial financial penalties and enhanced oversight by local labor regulators and unions.

Contents

Minimum Wage Rules

Section 1 The purpose of these Rules is to protect workers’ lawful rights to wages under the Employment Act and applicable State Council rules, and to ensure that workers and their families are able to meet basic living standards.

Section 2 These rules cover businesses, private nonprofit organizations, and family proprietorships with employees (hereinafter referred to as “Employers”) within the People’s Republic of China and the workers with whom they have an employment relationship.

The Rules also cover government bodies, public institutions, non-governmental organizations, and the workers with whom they have an employment contract.

Section 3 For the purposes of these Rules, “minimum wage standards” refers to the lowest rate of wages that Employers are legally required to pay, provided that employees have performed regular work during the working hours mandated by law or a valid employment contract.

“Regular work” in these Rules means all work performed by workers during the working hours mandated by law or a lawful employment contract. Workers taking paid annual leave, home leave, marriage or bereavement leave, maternity leave, family planning leave, or any other leave provided under Chinese law shall be deemed to have performed regular work. This provision also extends to workers who perform civic duties during work hours.

Section 4 County labor regulators, together with their parent agencies, shall oversee employer compliance with these Rules within their jurisdictions.

Labor unions shall also oversee compliance with these Rules and may request enforcement by local labor regulators to address employer wage payment practices in violation of these Rules.

Section 5 Minimum wage standards cover both monthly and hourly minimum wages. Monthly minimum wage standards apply to full-time workers, while hourly minimum wage standards apply to part-time workers.

Section 6 Monthly minimum wage standards shall be determined based on factors including the cost of living for local workers and their dependents, the urban consumer price index, legally mandated worker social security and housing fund contributions, average worker wages, local economic conditions, and employment rates.

Hourly minimum wage standards shall be determined and adjusted based on the monthly minimum wage, legally mandated employer contributions for retirement benefits and health insurance, and the distinctions between part-time and full-time employees, including differences in job stability, working conditions, work intensity, and benefits.

Detailed calculation methods for both monthly and hourly minimum wage standards are provided in the Appendix.

Section 7 Administrative regions within the same province, autonomous region, or home rule city may set different minimum wage standards.

Section 8 Provincial, autonomous region, and home rule city labor regulators shall develop plans for determining and adjusting minimum wage standards together with local labor unions and the China Enterprise Confederation or the China Enterprise Directors Association. These plans shall be submitted to the Ministry of Labor and Social Security and must include the basis for determining and adjusting the minimum wage standards, the proposed rates, the extent of their applicability, and the reasoning. The Department of Labor and Social Security shall seek the opinions of the China Enterprise Confederation or the China Enterprise Directors Association upon receiving a plan.

The Ministry of Labor and Social Security may then recommend revisions to the plan, and the plan will be approved if no revisions are proposed within 14 days.

Section 9 Provincial, autonomous region, and home rule city labor regulatory agencies shall submit minimum wage standards plans to their local governments for approval and publish such plans in the local official gazette and at least one regional newspaper within seven days of approval. Provincial, autonomous region, and home rule city labor regulators shall then report the approved minimum wage standards to the Ministry of Labor and Social Security within ten days of publication.

Section 10 Minimum wage standards shall be adjusted as necessary if any of the factors provided in §6 of these Rules change after the standards are issued. Minimum wage standards must be revised at least once every two years.

Section 11 Employers must inform all organization employees of the minimum wage standards within 10 days of their issuance.

Section 12 Employers shall pay employees who have performed regular work at a rate no lower than the local minimum wage after making the following deductions:

(a) Overtime compensation;

(b) Allowances for working in specific environments or under certain conditions, such as for working mid-shifts, night shifts, in extreme temperatures, underground, or in toxic or otherwise hazardous conditions;

(c) Worker benefits mandated under applicable laws, regulations, and rules.

Employers paying workers on a piece-rate or commission basis must ensure that wages paid to employees for each unit of work are reasonable and no less than the local minimum wage rate.

This rule does not apply to workers who voluntarily fail to perform regular work during the working hours mandated by law or the work hours specified in a lawful employment contract.

Section 13 The labor regulator shall order employers in violation of §11 of these Rules to correct their violations by a specified deadline. Employers in violation of §12 of these Rules shall be ordered to pay workers all wages owed by a specified deadline and may be ordered to pay 1 to 5 times the wages owed as compensatory damages.

Section 14 Disputes between employers and employees over minimum wage rates shall be resolved pursuant to the applicable labor dispute resolution rules.

Section 15 These Rules shall take effect on March 1, 2004. The Business Minimum Wage Rules issued by the Ministry of Labor on November 24, 1993, are repealed on the same date.

 

Appendix: Minimum Wage Calculation Methods

Minimum Wage Calculation Methods

  1. Factors Used To Determine Minimum Wage Standards

Minimum wage standards shall be determined based on factors including the cost of living for local urban residents, required employee social security and housing fund contributions, average worker wages, unemployment rates, and local economic conditions. Minimum wages shall be calculated as follows:

M = f (C, S, A, U, E, a), where:

M represents the minimum wage standard;

C represents the per capita living expenses for local urban residents;

S represents the legally mandated worker social security and housing fund contributions;

A represents the average worker wages;

U represents the unemployment rate;

E represents the local economic conditions;

a represents the adjustment factor.

  1. Standard Minimum Wage Calculation Methods
  2. Proportional Method: This method relies on analyzing urban household income and expenditure data and designating those households with the lowest per capita income as low income households. The average per capita living expenses for these households are then multiplied by the dependency ratio and an adjustment factor is added.
  3. Engel’s Coefficient Method: This method calculates minimum food expenses based on dietary guidelines and dietary reference intakes issued by the China Nutrition Society and the market prices for the standard food items. The resulting minimum food expenses are divided by the Engel’s Coefficient to establish the minimum cost of living, which is then multiplied by the dependency ratio and an adjustment factor is added.

Monthly minimum wage standards calculated using either method may be adjusted as necessary to reflect employee contributions to social security and housing funds, average worker wages, social welfare and unemployment insurance benefits, unemployment rates, and local economic conditions.

Example: the lowest income group in a particular region has monthly living costs of 210 Yuan per capita, a dependency ratio of 1.87, minimum food costs of 127 Yuan, an Engel’s Coefficient of 0.604, and an average wage of 900 Yuan.

  1. Regional monthly minimum wage standard calculated using the proportional method:

Monthly Minimum Wage Standard = 210×1.87+a=393+a (Yuan) (1)

  1. Regional monthly minimum wage standard calculated using Engel’s Coefficient:

Monthly Minimum Wage Standard = 127÷0.604×1.87＋a＝393＋a (Yuan) (2)

The adjustment factor a in methods (1) and (2) primarily reflects local worker contributions to retirement benefits, unemployment insurance, health insurance, and housing funds.

Additionally, international guidelines recommend that the monthly minimum wage for a given area range from 40% to 60% of the regional average monthly salary, which corresponds to approximately 360 to 540 Yuan for the area in the example.

Hourly Minimum Wage Standards = [(monthly minimum wage standard ÷ 20.92 ÷ 8) x (1 + legally required retirement and health insurance employer contributions)] x (1 + adjustment factor)

The adjustment factor is based on differences in job stability, working conditions, job strength level, and benefits for part-time and full-time workers.

Local governments may use either of the above calculation methods when determining hourly and monthly minimum wage standards appropriate for local conditions.

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See CBL’s China Employment & Labor Law FAQ to learn more

This article was translated to American English from the following government publication:

“最低工资规定”

https://www.mohrss.gov.cn/xxgk2020/gzk/gz/202112/t20211228_431587.html

 

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