Starting a business is all about people. Get these wrong, and you’ll not only lose trust – you may also face serious financial penalties. Let’s break it down.
1. Probation period pay can’t be too low
Q: Can I pay only half the salary during probation?
A: No.
The law requires: probation pay must be at least 80% of the lowest salary for the same position or 80% of the agreed salary in the contract, and in no case below the local minimum wage.
2. Annual leave – full pay as normal
Q: Can I deduct pay when an employee takes annual leave?
A: No.
Annual leave is a statutory right. Employees must receive the same pay as if they were working normally – no reduction.
3. Sick leave pay can be reduced, but only so much
Q: An employee takes sick leave – can I pay just a few hundred yuan?
A: There’s a floor.
Sick leave pay may be lower than the local minimum wage, but cannot fall below 80% of that minimum wage.
4. Part‑time (non‑full‑time) workers – monthly pay is not allowed
Q: Can I pay my hourly workers at the end of each month?
A: No.
The law says: pay cycles for part‑time workers cannot exceed 15 days. You must pay at least every half month.
Also, the hourly rate must meet or exceed the local minimum hourly wage.
5. Medical suspension period (work injury) – full pay required
Q: During recovery from a work injury, can I pay only the base salary?
A: No – that’s illegal.
During the medical suspension period, the employee’s original salary and benefits remain unchanged. You must pay the full amount (including performance pay, allowances, etc.) every month – not just base pay.
6. You must provide a pay slip
Q: Can I just transfer the salary without giving a pay slip?
A: No.
Employers must give each employee a personal salary statement each pay period, showing the amount, deductions, etc. These records must be kept for at least two years.
Also, wages must be paid in legal currency – not in goods, vouchers, or in‑kind substitutes.
7. Never “convert” social insurance contributions into extra pay
Q: Can I offer to give the employee the social insurance money as cash so they can “pay it themselves”?
A: Absolutely not – it’s illegal.
Paying social insurance is a legal obligation of the employer. It cannot be waived or changed by any agreement. You must actually contribute to the employee’s social insurance (pension, medical, unemployment, work injury, maternity). Paying the money directly to the employee is illegal – they can report you, and you’ll face back payments plus fines.
8. Payday falls on a holiday – pay before the holiday
Q: If the 10th (our payday) is a Spring Festival holiday, can we pay after the holiday?
A: No.
If payday lands on a public holiday or rest day, you must pay on the nearest working day before – you cannot delay.
9. Overtime pay – how to calculate
– Weekday overtime (after normal hours) – at least 1.5× the normal hourly rate
– Weekend/rest day overtime (without compensatory leave) – at least 2×
– Public holiday overtime (e.g., Spring Festival, National Day) – at least 3×
> Note: Even if you give compensatory time off later for public holiday overtime, you still must pay the 3× rate. (This is why many companies keep base salaries low.)
10. When must final wages be paid after resignation?
A: Generally, wages must be paid in full at the time of termination. Local rules vary, but most require payment within 5‑15 days after the employee leaves. If you delay, the employee can apply for labor arbitration.
11. Does the minimum wage include the employee’s share of social insurance and housing fund?
A: Rules vary by city, but in most places no.
In cities like Beijing and Shanghai, the minimum wage does not include the employee’s personal contributions for social insurance and housing fund – the employer must pay those on top.
12. Can I skip social insurance during probation?
A: No.
Once an employment relationship begins (from day one), you must pay social insurance. There is no “insurance‑free” probation period.
13. How soon must a written contract be signed? What if it’s not signed?
A: Within one month of the start date.
Consequences:
– From month 2 to month 12 (i.e., more than one month but less than one year without a contract) – you must pay double wages for each month without a contract.
– After one full year without a contract – the law deems an open‑ended (no‑fixed‑term) contract to exist.
The “double wages” are calculated based on gross (pre‑tax) salary, not just base pay.
Also, “the employee refused to sign” is not automatically a defense – you bear the burden of proof and must provide clear, valid evidence of refusal. Otherwise, you will lose.
Final word for new business owners
Proactive compliance is always cheaper than passive penalties.
Take an employee with a monthly salary of 8,000 RMB. If you fail to sign a contract and get arbitrated, the double wages for up to 11 months = 88,000 RMB per employee. For five employees, that’s 440,000 RMB. That money could have built a solid HR compliance system for your business.
> If you’re about to start a company and want to avoid employment risks, feel free to reach out. I can help you analyze the issues and design a compliance plan.
Let me know if you’d like a shorter version for a slide deck or a quick-reference checklist.