Severance, unfair termination damages and social insurance costs set to rise for many employers

The changes in the local average monthly compensation figures will also cause increases in the maximum and minimum employer contributions for pension, medical, unemployment and occupational injury insurance programmes. Maximum and minimum employee contributions will also increase for these programmes, expect for occupational injury insurance. Maximum and minimum employer and employee contributions for the housing fund programme will also increase.

In related China compensation news, Shanghai increased the minimum monthly salary 3.86% from RMB 2,590 to RMB 2,690 effective 1 July 2023. The minimum hourly wage was increased from RMB 23 to RMB 24 on the same date. These are the first increases in the city since 1 July 2021. Beijing increased the minimum monthly salary 4.31% from RMB 2,320 to RMB 2,420 effective 1 September 2023. The minimum hourly wage was increased from RMB 25.3 to RMB 26.4 on the same date. These are the first increases in the city since 1 August 2021.

A 2004 central government notice requires that minimum compensation figures should be increased at least once every two years. In the past, local governments had been increasing minimum compensation figures once or even twice a year to support national policies to boost incomes and reduce the growing wealth gap in the country. In 2020, some cities put the brakes on rising minimum compensation figures because of economic slowdowns during the Covid-19 period, as well as concern that rising wages were starting to make China uncompetitive as a manufacturing base.

Guangzhou and Shenzhen have not increased minimum compensation figures since 1 December 2021, and 1 January 2022, respectively. These cities are expected to increase their figures later this year to comply with the requirement to adjust the figures at least once every two years.

For further information on this topic please contact Jeffrey Wilson or Serena Shen by email ([email protected] or [email protected]) or phone (+86 10 8519-1300). The JunHe website can be accessed at junhe.com.

This article was previously published by the International Law Office, for more information please go to lexology.com/commentary.