To operate in China, an enterprise mainly needs to bear two main types of human resources cost, i.e. salary and social security.

1.           Salary

According to the National Bureau of Statistics of China (“NBS”), the average annual salary of urban employees in non-private and private sectors in 2017 reached RMB 74,318 and RMB 45,761 respectively, growing by RMB 6,749 and RMB 2,928 over the previous year, or 10.0% and 6.8%. By the end of 2017, the average monthly salary of migrant workers reached RMB 3,485, an increase of RMB 21 YOY, or 6.4%.

2.           Social Security

Employees in China are entitled to the pension fund, medical insurance, unemployment insurance, employment injury insurance, maternity benefits, as well as the housing fund, among which the pension fund, medical insurance, unemployment insurance and housing fund are jointly contributed by both employers and employees, while the employment injury insurance and maternity benefits are solely borne by employers.Monthly contribution = payment base × ratio of contribution

·           The payment base is the salary of the current month, and the maximum payment base in principle will not exceed three times of the average monthly salary of the current city in the previous year. Since salary level in China is still low, contribution of social security is therefore at a low level.

At present, the ratio of contribution varies across provinces, municipalities and autonomous regions. Specific numbers can be obtained from the local department of human resources and social security. Below is a partial list of the ratio of contribution by enterprises in 2017:

Table  A Partial List of the Ratio of Contribution by Enterprises (2017)

Source: Local Departments of Human Resources and Social Security