Shanghai announced average monthly salary of 2021, and what does this number mean to you?

Shanghai last month announced its average monthly salary of RMB 10,338. What does this number mean to you as an employee or a decision maker in a company?

#1 Contribution base ceiling and floor for social insurance and housing fund.

Since July 1, 2021, the social insurance and housing fund base higher limit in Shanghai increased to RMB 31,014 per month, which is calculated at 3 times of the average monthly salary; and the minimum base is RMB 5,975 per month.

How about your contributions after 1st of July?

Let’s look at an example when someone’s monthly salary exceeds the ceiling.

#2 Shanghai registered permanent residence (Hukou)application.

Shanghai has introduced a series of policies to attract talents to settle down in the city. Those with Shanghai Hukou are able to enjoy the same benefits as Shanghainese, which include buying apartments or cars, enjoy medical treatment, and children’s education in Shanghai.

What role does average monthly salary play in Hukou application?

One of the key factors is that applicants’ social insurance base must be 1.3 to 3 times average salary over a certain period of time depending on individual’s qualifications.

The Shanghai government hopes to attract talents by allowing students who return from overseas to apply for Shanghai Hukou.
Returnees who come to Shanghai to work within 2 years after returning to China and have paid social insurance for 6 consecutive months at the average salary (RMB 10,338) can apply for Shanghai Hukou. –

If someone applies for a Shanghai hukou with residence permit, following are the requirements:

#3 Foreign salary commitment Category A or B work permit application

According to the Rules for the Administration of Employment of Foreigners in China, Foreigners must obtain work permits in order to work in China legally. There are various standards to identify if a foreigner falls within Class A or Class B work permit category.

An easy way to identify if a foreigner belongs to Class A category is to check his/her annual salary. A foreigner obtaining a high annual salary of 6 times of the published local average annual salary will be regarded as a Class A candidate (in Shanghai, the current standards are gross annual salary of RMB 600,000 plus annual individual income tax payment in an amount of at least RMB 120,000.

This is expected to be further adjusted after announcing new average monthly salary of RMB 10,338). HR departments need to be aware of this change.

Foreigners can also apply for Class B with an average salary not less than 4 times of the average salary in the previous year.

#4 Severance pay

In most cases, the terminated employee is entitled to severance payment.

An employee shall be paid severance pay based on the number of years worked with the employer at the rate of one month’s wage for each full year worked.

If the monthly salary of an employee is greater than 3 times the average monthly salary in the city where the company is located,the rate for the severance pay shall be 3 times the average monthly l salary for no more than 12 months. Shanghai last month announced its average monthly social salary figure of RMB 10,338, resulting in a severance cap of RMB 31,014.