Salary structures in China

The attraction of doing business in China always comes back to cost — is it possible to deliver a finished product to your customer at a lower price in China?

In the West, media reports often talk about the lure of cheap labour in China and elsewhere. Labour is a major factor in the final production cost of a product. But there are common mistakes made by Western media and others when looking at labour costs in China, and any surprises could spell the difference between success and failure.

To understand labour costs in China, you must examine these aspects:

1. Actual salaries for various levels of plant workers.

2. Typical bonuses paid to workers.

3. Optional and required benefits, such as insurance, living expenses and more.

4. Variance in salaries by region or province.

Starting at the bottom, typical plant workers at a resin converter can make Chinese yuan (CNY)1,000, or US$125 per month in salary at smaller companies, CNY1,500, or US$187.50 at larger companies. This does not include other benefits, and is before monthly income taxes.

Office workers, such as secretaries and assistants, will make a bit more than plant workers. Office workers typically have at least a high school education and some computer skills, perhaps even some foreign language skills.

Management positions pay considerably more than for workers.

A purchasing manager for a smaller company may make CNY3,000, or US$375 per month; a larger company may pay CNY4,000, or US$500 per month. A smaller company may pay a plant manager CNY2,500, or US$312.50, while he would make up to CNY4,000, or US$500, at a larger facility.

A general manager for a small company could make CNY4,000, or US$500 per month. A larger company’s GM may make CNY5,000, or US$625. Sales managers are primarily paid by commission, although they typically would get some sort of base salary.

In China, bonuses are much more common for the average worker, and are key to retaining workers throughout the year.

Companies looking to do business in China should remember that workers in China will often prefer a larger bonus to larger monthly paychecks. The larger bonus sets the company apart and makes it easier to attract the top workers. Bonuses are typically a month’s pay, although they can be adjusted up or down depending on how the company fared that year. If the company does well but does not pay at least a month’s wages as a bonus, it would likely face higher turnover and considerable grumbling from employees.

So why the emphasis on bonuses rather than salary? That’s because for most workers, some of their basic necessities are paid for by the company. And that leads to yet another major expense for companies.

Housing is often paid for by the company, either as free lodging at a company-owned dormitory or company subsidies to help pay rent. Although not required, many companies will offer a cafeteria to provide workers with a hearty meal during their shift.

In addition, companies are required to offer certain basic benefits, including health insurance, unemployment insurance and retirement insurance (similar to a 401k plan in the United States). Health insurance covers injuries at work and illness, but can be much more limited in its coverage than health care plans in the West. Since the government offers no benefits for those who lose their jobs, unemployment insurance supports workers who are laid off. The retirement insurance is a bit different, with the employer and employee each contributing to an account that is managed by a third party. Health and unemployment insurance premiums are paid solely by the company.

Jerry Fordyce is Editor of China Plastic Review