China Compensation Benchmark: A Survey of Salary, Taxes & Benefits

Last time we took a look at some of the best practices for hiring staff in China your factory should be following, and in my final blog today I want to share a a survey of salaries, taxes and benefits for Shenzhen, Guangdong and Hunan to give you a bit of an inside look at compensation benchmarks in China.

The following blog is based on excerpts from the whitepaper entitled “Foreign Manufacturer’s Ultimate Guide to Hiring, Training, Managing & Firing Staff in China” which can be downloaded in its entirety right here!

China Compensation Structures

Let’s cut to the chase, at the end of the day, salary plays a big role in employee happiness. It’s not just the amount of salary, but also the perception that they are being paid a fair wage is important to staff in China.

So an employer needs to monitor the labor market to make sure the salaries offered to candidates are suitable to attract the level of talent desired. The costs of housing, annual inflation rates and even the nations GDP all impact staff salary expectations. While inflation and GDP figures are fairly easy to find and monitor in China, wages/housing/spending power varies greatly from area to area within China.

To help with your benchmarking, this blog post offers the following:

Typical Compensation Structure for the 6 Typical Employees in Shenzhen
Pros/Cons of various locations in S. China from corporate and employee perspectives

Typical Compensation Structure for the 6 Typical Employees in Shenzhen

Pros/Cons of various locations in S. China from corporate and employee perspectives

For your reference, here is a study our team conducted to help make decision about where to locate our new assembly center when our long-term lease in the Buji district of Shenzhen was up for negotiation in 2015.

Other location in current district (Buji) of Shenzhen	Other district in Shenzhen (LongGang District)	Oher city in Guangdong Province (Dongguan City)	Other city in Guangdong Province (Huizhou City)	Other city in other Province (Hunan Province, Hengyang City)	Remarks
1. Paper-work: Cost / time / workload to adjust our business licenses and other key documents if the WFOE is moved (low vs medium vs high)	low	medium	high	high	high
2A. Rents (Estimated % change)	0%	0%	-30%	-30%	-86%
2B. Rental Trends. What is the estimated annual increase for each location using the historic increases over past 5 years to estimate the next 5 years?	11%	11%	10%	12%	below 7%
3A. Labor Rates (Estimated % change)	0%	0%	-26%	-33%	-44%
3B. Labor Rate Trends. What is the estimated annual increase for each location using the historic increases over past 5 years to estimate the next 5 years?	11.40%	11.40%	8.59%	9.60%	11.77%	Hard to predict the future as Gov’t can change the minimum wage levels on short notice. As the economy is slowing down, we are hoping the min wage increases will not be as drastic in the next few years. This is a national rather than regional issue.
4. Utility Costs (Estimate of % change for power and water)	0%	0%	0%	0%	0%	Utilities are roughly the same across all industrialized parts of S. China.
5. Ease of recruiting factory workers	about the same, perhaps a bit easier to recruit if we have easier transportation and living conditions.	about the same, perhaps a bit easier to recruit if we have easier transportation and living conditions.	a bit easier	a bit easier	easier	For this line item we are referring to workers on a production line. Outside of SZ it gets harder to find technical skills, experienced managers and/or English skills.
6. Ease of recruiting skilled office workers and managers	easy	easy	a bit harder	a bit harder	much harder	For this line item we are referring to workers on a production line. Outside of SZ it gets harder to find technical skills, experienced managers and/or English skills.
7. Landlord Relations	depends on location	depends on location	depends on location	depends on location	depends on location
8. Tax incentives from local government	0%	0%	0%	0%	should be available, however need to further check with local government	Tax incentives unlikely to play a major role in the decision making process for our industry and any tax incentives that are offered usually expire within a few years.
9. Estimated cost per square meter to buy (rather than rent) factory space: How has this # changed over past 5 years and what is the estimate for future based on past 5 years?	6000-8000 Yuan /sqm Going up 20% each year	6000-8000 Yuan /sqm Going up 20% each year	4000-5000 Yuan /sqm Going up 15% each year	3000-3500 Yuan /sqm Going up 15% each year	1000-2000 Yuan /sqm Going up 8-10% each year
10. Environment (quality of life, access to transport, food, shopping…) for employees	it depends on which industrial park chosen, some are good, some are not good.	it depends on which industrial park chosen, some are good, some are not good.	it depends on which industrial park chosen, some are good, some are not good.	it depends on which industrial park chosen, some are good, some are not good.	it depends on which industrial park chosen, some are good, some are not good.	There is large variation among options in any given area.
11. Cost of Living	Very High	High	Medium	Medium-Low	Low

That concludes post no. 8 out of 8 in my ‘hiring in China’ series. I sincerely hope that you found this series of value and please feel free to share your thoughts if there is anything else that you’d like to add to this post, or if you have any questions please reach out to me by leaving me a comment below.