By Out2China Team | Reviewed by Janey Fan Write the role brief before the search starts, name the interviewers and the f...
By Out2China Team | Reviewed by Janey Fan Budget for gross salary, employer social insurance and housing fund, recruitment fees, Employer of Record (EOR) fees, your own management time and exchange-rate movement. Salary alone understates the cost. Employer contributions are often estimated as a share of salary. The 27%–33% range is an early budgeting estimate, not a nationwide fixed rate or a quote. Calculate each contribution using its applicable base and local employer rate; the effective percentage of salary may fall outside this range. If you have not chosen a hiring structure yet, start with our guide to hiring China employees from Australia and come back to the template below. Use the gross figure, and confirm early whether a candidate's number is gross or take-home. The employer withholds the employee's own social insurance[1], and the paying entity withholds individual income tax[2]. Both come out of gross salary, so neither is an extra employer cost on top of it. Salary ranges for the same job title differ by city, experience and language needs. Include any bonus or allowance written into the employment terms. Our article on the role brief and interviews covers how to set the range. The 27% to 33% range is only good for an early estimate. The real figure depends on the employer rates in the city of enrolment and on the contribution base, and the housing fund rate has some room for choice. The base may also differ from salary. Cities usually publish a floor and a ceiling, so at high or low salaries the effective percentage can fall outside the range. As a formula: Total employer contributions = Σ (the applicable base for each item × its employer rate). A single base multiplied by the sum of rates is valid only when the bases are the same. Recalculate when the government updates the base or rates. Our China employment cost calculator gives an estimate by city. Before signing, check it against current local rules and the provider's calculation. A quote should separate what the provider earns from what it passes on to employees or third parties. If both sit inside one total, you cannot tell what the service costs or check later invoices. Compare recruitment and EOR fees separately too, because one pays for finding the person and the other for employing and paying them. When monthly invoices arrive, check them line by line against the quote and ask which base and rates were used for contributions. It rarely produces an invoice, but it uses real resources, so give it its own line in your internal budget. During hiring, it covers confirming the role, reviewing candidates, interviewing and deciding. After the person starts, it covers induction, handover, regular check-ins and reviewing work. Pre-start training is usually led by the client, with the provider assisting. Estimate monthly hours and multiply by the manager's internal hourly cost. Add equipment, software accounts and data access. If the tasks are hard to hand over or the weekly output is hard to check, management time can rise sharply, so allow some margin for a first hire. If salary is agreed in RMB and your budget is in AUD, the AUD cost moves even when the RMB amount stays the same. The Reserve Bank of Australia lists daily AUD/RMB rates[3]. Pick a reference date, then run the budget at a higher and a lower rate of your own choosing. The contract should also state the invoice currency and how the conversion rate is set. Plan for departures as well. PRC law lists the situations in which the employer must pay economic compensation. It is generally based on length of service: one month's salary per full year; a remaining period of six months to less than one year counts as one year; a remaining period of under six months earns half a month's salary; and a cap applies to high earners[4]. Whether it applies depends on why the employment ends, so a contingency line is sensible at budget stage. Also check the notice and offboarding terms in the service agreement. The amount columns are blank so you can fill them in for each role. You can add everything up for internal decisions, but keep the categories separate when reviewing a quote. One-off fees count once, and bonuses are added separately according to their conditions. Do not stack the same exchange-rate gap twice in your scenarios, and do not add any deposit to the fee total. To convert, let q be the RMB per 1 AUD, so the AUD amount = the RMB amount ÷ q, using the rate that applies to each period. Do not multiply an amount that is already annualised by 12 again. A salary-only comparison leaves out employer contributions, recruitment and employment costs, and it says nothing about ramp-up time or output. The answer varies by role, so do not assume either side is cheaper. Whether Super applies to a China employee cannot be decided from work location alone. See our guide to hiring China employees from Australia and ask your Australian accountant to review your arrangement. The 27%–33% range is an early budgeting estimate, not a nationwide fixed rate or a quote. Calculate each contribution using its applicable base and local employer rate; the effective percentage of salary may fall outside this range. Gross. The employee's own social insurance and income tax are withheld from gross salary, so using take-home understates the cost. Check the quote. A clear quote lists the EOR fee separately from salary, social insurance and housing fund, and you can ask the provider to explain each line. No. It depends on the role, city, salary, fees, management effort and output, so compare the full cost line by line. Use the China employment cost calculator to estimate employer costs by city, then send us the role, city and salary range. The Out2China team has worked in China HR since 1997. You can use our recruitment services and EOR services separately. Under our standard arrangement, our licensed Chinese company is the contract employer; some projects use a local partner, and the actual employer is confirmed before onboarding. Contact Out2China or call our Australian number, 1300 741 668. More at out2china.com. This article is general information only and is not legal, tax or financial advice. Please consult a qualified professional about your situation.What makes up the cost of a remote employee in China?
Cost item How it is usually worked out When it arises Gross salary Monthly salary in the employment terms Monthly Employer social insurance and housing fund Each item's applicable base multiplied by its employer rate Monthly Recruitment fee Set by the service agreement Usually one-off EOR fee, plus onboarding and offboarding charges Set by the service agreement Monthly or one-off Management time Internal hours multiplied by internal hourly cost During hiring and employment Exchange-rate difference Change in the AUD value of RMB amounts Ongoing How should you set the gross salary?
Why can't you apply one fixed percentage for employer contributions?
How do you separate recruitment and EOR fees from pass-through costs?
Category Common items Questions to ask Provider fees Recruitment fee, EOR fee, one-off onboarding and offboarding fees Per person or per role? When payable? Does the fee move with salary? Pass-through costs Salary, employer social insurance and housing fund, insurance, taxes itemised in the quote, bank and currency conversion charges Charged at actual cost? Any markup? Is a breakdown available? Cash held Any deposit stated in the contract Refundable? On what conditions? Should management time count as a cost?
How do you budget for exchange rates and departures?
A budget template you can copy
Category Item How to fill in Monthly (RMB) First year (AUD) Pass-through Gross monthly salary, bonus, allowances Sample monthly salary ¥X Pass-through Employer social insurance and housing fund Each item's base × its employer rate Pass-through Insurance (if any) Per policy Pass-through Taxes itemised in the quote (if any) Ask the provider to list each one Pass-through Bank and conversion charges Estimate from actual charges Provider fee Recruitment fee Per contract, one-off Provider fee EOR fee Enter the agreed monthly fee; for year one multiply by the actual number of service months (12 only for a full year) Provider fee Onboarding and offboarding fees Per contract, one-off Internal Hiring, training and management time Hours × hourly cost Internal Equipment and software Actual Contingency Exchange-rate movement Test with your own range Contingency Economic compensation Estimate by situation Cash held Deposit (if any) Show separately, not as a cost Why does comparing salaries alone mislead?
Item Role in China Role in Australia Salary Gross monthly salary Gross salary Employer statutory contributions Social insurance and housing fund. The 27%–33% range is an early budgeting estimate, not a nationwide fixed rate or a quote. Calculate each contribution using its applicable base and local employer rate; the effective percentage of salary may fall outside this range. Super at the current 12% of qualifying earnings[5]; ask your accountant about other items Recruitment and employment Recruitment fee, plus EOR fee or China entity running costs Job board or agency costs, plus your own payroll and HR effort Management Time difference, language, remote handover On-site or local remote management Output Ramp-up, quality, rework Ramp-up, quality, rework FAQ
How much are employer contributions in China? Should I budget on gross or take-home salary? Does an EOR fee include salary and social insurance? Is a China employee always cheaper than a local hire in Australia? Next step
Sources
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