Shanghai Revises Minimum Wage and Social Insurance Contribution Rates

By Dezan Shira & Associates

Editor: Alexander Chipman Koty

The Shanghai Municipal Bureau of Human Resources & Social Security recently released its annual minimum wage adjustments for 2017, as well as the associated changes to employee benefits. The adjustments, which came into effect on April 1, affect minimum wages, medical insurance, social insurance, pensions, and other forms of employee compensation.

Minimum wage increase

The Shanghai government raised the city’s minimum monthly wage by five percent, from RMB 2,190 ($318) to RMB 2,300 ($334), and the minimum hourly wage from RMB 19 ($2.76) to RMB 20 ($2.90).

The five percent increase is the lowest since minimum wage hikes in Shanghai were frozen in 2009 as a response to the global financial crisis. The minimum monthly wage increased by 8.4 percent in 2016, and 11 percent in 2015.

Shanghai still has the highest minimum monthly wage in China.

Rapid wage growth is often cited as a key reason for China’s slowing economic growth, as labor costs are outpacing productivity gains. Many regional governments have consequently put the brakes on minimum wage increases to maintain their competitiveness with other Asian countries. For example, Guangdong province froze minimum wage hikes in 2013 and 2014, and after raising minimum wages by an average of 19 percent in 2015, froze increases in 2016 and 2017.

Social insurance payment limits revised

The maximum medical insurance fund payment limit was revised in accordance with the wage hike, increasing from RMB 420,000 ($60,987) to RMB 460,000 ($66,795).

The upper and lower limits of the social insurance contribution base were also increased, with the lower limit raised to RMB 3,902 ($567) and the upper limit to RMB 19,512 ($2,833). Limits are based on the average monthly wage of employees in Shanghai: the lower limit is 60 percent of the average wage; the upper is 300 percent.

The Shanghai municipal government announced in early April that the average monthly salary in 2016 was RMB 6,504, a 9.5 percent increase year-on-year, while the average annual salary was RMB 78,045. In 2015, the average monthly salary in Shanghai was RMB 5,939, or 71,268 per year.

More HR reforms expected

Shanghai has recently released a slew of other HR reforms, including granting residency to foreign domestic workers, launching an online work permit registration system for foreigners, and giving foreigners in the Shanghai Free Trade Zone easier access to green cards.

The city is aiming to boost its capacity to attract and retain foreign talent, and to deepen reforms in the Shanghai Free Trade Zone. Businesses in Shanghai should monitor reforms that may affect HR and payroll to ensure compliance.

About the Author: Dezan Shira & Associates is a full service practice in China, providing business intelligence, due diligence, legal, tax, IT, HR, payroll, and advisory services throughout the China and Asian region. For assistance with China business issues or investments into China, please contact us at [email protected] or visit us at www.dezshira.com.