Minimum wages have been increasing in China and the rise is set to continue throughout 2024.
China’s minimum wage system is decentralized, with each province and municipality setting its own minimum wage standards based on local economic conditions, cost of living, and other factors. This approach allows for flexibility in addressing regional disparities while ensuring that workers receive a minimum level of compensation irrespective of their geographical location.
Since February 19, 2024, Shanghai is paying the highest monthly minimum wage among all the provinces, at RMB 2,690 (US$370) per month. While Beijing leads with the highest hourly minimum wage, currently set at RMB 26.4 (US$3.7) per hour. Another 21 regions in China have set their monthly minimum wages at above RMB 2,000 (US$275).
Increased minimum wages can cause challenges for businesses, especially small and medium-sized enterprises (SMEs), by increasing labor costs and reducing profit margins. Some businesses may resort to cost-cutting measures, such as layoffs or automation, to cope with higher wage costs, which could impact employment levels and overall productivity.
In the lower pay bracket, the minimum wage in Jilin and Xinjiang is a bit higher at RMB 1,540 per month compared to RMB 1,450 in Heilongjiang.
The implementation of minimum wage policies in China is not without challenges and controversies. Discrepancies in wage enforcement, informal employment practices, and regional disparities in wage levels pose challenges to ensuring equitable compensation for all workers. Moreover, debates persist regarding the optimal balance between wage increases and their potential impact on employment and inflation.
It’s important to understand that the minimum wage is simply the fundamental pay that employers are required to give their employees. This amount doesn’t cover additional payments like overtime, night shift allowances, summer high-temperature allowances, special working environment allowances, or subsidies for meals, transportation, and housing.
In China, minimum wage standards often incorporate social insurance premiums and housing fund contributions, which are deducted from employees’ salaries in most regions. This means that in some cases, employees may end up with a lower take-home pay than the stated minimum wage. However, there are exceptions to this rule. For instance, in regions like Shanghai, local regulations explicitly state that minimum wage standards do not include social insurance premiums and housing fund contributions.
Wages during probation periods.
During the probation period, minimum wage regulations typically still apply, ensuring that employees receive at least the minimum wage set by local authorities. However, there may be variations in how this is implemented across different regions and industries.
According to Article 20 of the Labor Contract Law, it’s stated that during the probation period, a worker’s wage should not fall below the lowest wage for the same job in the employer’s organization, or 80 percent of the agreed wage in the labor contract. Additionally, it should not be less than the minimum wage set by the local government.
In some cases, employers may offer a lower wage during the probation period, citing the need to assess the employee’s performance and suitability for the position. However, this lower wage must still meet or exceed the minimum wage requirements mandated by law.
