China’s labor law also requires that the average wage standard of a FIE increases progressively, in line with the economic development of the enterprise. A decision concerning wages is made by the FIE’s board of directors, which must take into consideration the enterprise’s productivity rate, economic results, the consumer price index and wage guidelines for the region.
The labor market situation has changed in recent years, meaning employers have to care about labor protection, or else they will lose the competition for workers. This is the primary reason for rising wages and improved working conditions in recent years – market competition. To sustain regional economic growth, local governments tend to compete for attracting migration workers by investing in the construction of a friendly environment for migrants, including strict implementation of the minimum wage policy.
In China, minimum wage (MW) refers to the lowest remuneration paid to employees by employers on condition that the employees have provided regular working hours within legislative requirements or working time regulated by labor contracts. Some items, like overtime pay, legal allowance and legal benefits, should be deducted and can not be counted as part of wages when calculating MW. Generally, there are no limits on age, gender, job or industry for the application of the MW system in China. Employers shall pay probationers no less than the local MW rate. Migrant workers are explicitly included as well.
Labor officials from various cities consider the situations of their respective regions, decide upon the minimum wage level for their cities, and then review the system once every one or two years.
Overtime wage premiums of 150% of normal wages are required for working extended hours on normal business days, premiums of 200% of normal wages if required to work on rest days when no alternative rest days are arranged, and 300% of normal wages if employees are required to work on legal holidays. Employers shall pay workers on time and in full in accordance with the stipulations of the labor contract and state regulations. If the employer has not paid wages or has not paid in full, employees may go to the local people's court and apply for a payment order in accordance with the law.
Piece-rate worker payment is widely used in China. Wages may be calculated on a working hour basis as well as on a per piece basis. Wages paid calculated on a per piece basis may not be lower than the official monthly, weekly, daily or hourly minimum wage. Establishing a productivity-based bonus on top of a monthly or hourly wage system can be a good alternative to calculating and paying basic wages by piece-rate.
The law says little about employee welfare in China. Currently there are two nationwide forms of welfare—one is social insurance and the other is public housing funds, designed to assist employees with purchasing housing. China's law provides for five main forms of social insurance including unemployment, workers compensation, old age, maternity and medical insurance. Each form of insurance is funded through contributions from the employer, the employee or both.