Payroll in China 2026: IIT, social insurance and housing fund

In China the employer withholds individual income tax (IIT) every month using the cumulative method and deducts the employee's social insurance and housing fund contributions, 10.5% for social insurance in Shanghai and Beijing. On top of salary the employer pays social insurance of 25.7% to 28.2% there, plus its housing fund share. Each city sets its own rates.

Payroll in China at a glance

Social insurance and the housing fund

China's social insurance has a national framework, but the rates, the contribution base and its ceiling are set locally. The State Council's 2019 plan to cut social insurance rates allowed provinces to lower the employer's basic pension rate to 16% from 1 May 2019, and maternity insurance is now part of medical insurance. The two largest payroll cities show how the local rules look in 2026:

Rates as of 30 June 2026. Contributions are charged on the employee's contribution base, which follows the salary between a local floor and ceiling. The base is normally capped at 300% of the local average salary of the previous year: in Shanghai the monthly ceiling is CNY 37,302; Beijing uses separate ceilings of CNY 27,549 for pension, CNY 31,170 for medical and CNY 41,112 for unemployment insurance.

Unemployment insurance. The Ministry of Human Resources and Social Security, the Ministry of Finance and the State Taxation Administration extended the temporarily reduced unemployment insurance rate of 1% in total to 31 December 2025. Check your city's notice for the rate it applies in 2026.

Housing provident fund. Employer and employee also contribute to the housing provident fund, at rates set by the local fund centre. The employee's housing fund contributions, like their social insurance contributions, are deducted before IIT (Article 6 of the Individual Income Tax Law).

Individual income tax on salaries

Wages are part of a resident's comprehensive income, together with remuneration for services, author's remuneration and royalties. The annual taxable amount is income minus a basic deduction of CNY 60,000, the special deductions (the employee's pension, medical and unemployment insurance and housing fund contributions), the special additional deductions and other deductions allowed by law.

The employer does not tax each month on its own. Under the State Taxation Administration's Announcement No. 61 of 2018, it applies the annual rate table to the year-to-date figures:

• cumulative taxable income = cumulative income − cumulative exempt income − CNY 5,000 × months employed with this employer this year − cumulative special deductions − cumulative special additional deductions − other deductions
• tax this month = cumulative taxable income × rate − quick deduction − tax relief − tax already withheld this year

If the result is negative, nothing is refunded during the year; the difference is settled in the annual reconciliation.

Because the brackets are annual, an employee with a steady salary pays a little more IIT in the later months of the year, once cumulative income crosses a threshold.

Special additional deductions

Employees declare these to the employer (or claim them in the annual reconciliation):

The amounts for children's education, infant care and elderly support were raised by the State Council from 1 January 2023 (Guo Fa [2023] No. 13).

Minimum wage and local rules

China has no single national minimum wage. Each province and municipality sets its own monthly and hourly minimum wages, which can differ between areas of the same province. Check the current rate with the human resources and social security bureau of the city where the employee works, and remember that the minimum wage is also the floor for your pay scales, not only for new hires.

The same applies to social insurance: the rates in the table above are Shanghai's and Beijing's, the contribution base floor and ceiling change every year when the local average wage is published, and the work-injury rate depends on your industry class.

Monthly payroll calendar and filings

1. 1Every pay day: calculate the cumulative IIT, deduct the employee's social insurance and housing fund contributions and pay the net salary.
2. 2By the 15th of the following month: pay the IIT withheld to the treasury and file the withholding return (Article 14 of the Individual Income Tax Law).
3. 3Every month: pay social insurance and housing fund contributions on each employee's base, following the local schedule.
4. 4Once a year, when the local average wage is published: update each employee's contribution base and your city's floor and ceiling.
5. 5Within two months after the year end: give each employee their income and withheld IIT for the year; employees can also ask for it during the year.
6. 61 March to 30 June: employees who are owed a refund, or who owe more tax, file the annual reconciliation for the previous year.

Keep each employee's year-to-date income, contributions and declared deductions per employer, since the cumulative method depends on them and an employee who changes job starts again with the new employer.

Worked example: CNY 10,000 a month in Shanghai

A single employee in Shanghai earns CNY 10,000 a month, has no special additional deductions and works the whole year for the same employer. The employer is in the lowest work-injury class (0.2%). The housing provident fund is left out because its rate is chosen within local limits; it would lower both the net pay and the taxable income.

From January to September cumulative taxable income stays under CNY 36,000, so the IIT is CNY 118.50 a month. In October it reaches CNY 39,500: the tax due to date is 39,500 × 10% − 2,520 = CNY 1,430, minus the CNY 1,066.50 already withheld, so October's IIT is CNY 363.50. In November and December it is CNY 395.00 a month, and December's net pay falls to CNY 8,555.00. The year's IIT is CNY 2,220, which equals the annual calculation of 47,400 × 10% − 2,520, so nothing is left to settle in the reconciliation.

Common mistakes

1. 1Taxing each month in isolation. The withholding is cumulative: apply the annual table to year-to-date income and subtract what you have already withheld.
2. 2Using another city's rates or base. Pension, medical, work-injury and housing fund rates and the base ceiling are local; an employee in Beijing is not calculated like one in Shanghai.
3. 3Forgetting to update contribution bases when the new local average wage is published.
4. 4Ignoring the employee's declared deductions, such as children's education or rent, so too much IIT is withheld.
5. 5Missing the 15th for the IIT payment and withholding return.
6. 6Assuming last year's unemployment rate still applies. The national reduced rate was extended to the end of 2025; follow your city's notice for 2026.

How Clientlly helps

Clientlly does not ship a built-in payroll profile for China. An administrator enters the rates once in the payroll tax settings: the income-tax bands, the personal allowance, the employee and employer contribution rates for your city and the minimum wage. Clientlly then calculates gross to net and the employer contributions and produces payslips. Because China withholds IIT cumulatively and each employee declares different deductions, check the monthly tax against the cumulative calculation above, especially in the month an employee crosses a bracket.

Around payroll, Clientlly handles leave requests and approvals with a shared leave calendar, attendance and overtime tracking with attendance and time tracking, and the HR documents you keep for each employee. See all human resources features, or compare plans on the pricing page.