In Mainland China, payroll is governed primarily by the Labour Law and Labour Contract Law, the Individual Income Tax (IIT) Law, and the Social Insurance Law. Wages are paid monthly, and the employer acts as the withholding agent: each pay run, the employer deducts IIT and the employee's share of social insurance and the housing provident fund from gross pay, then remits everything to the tax bureau and the local social insurance and housing fund bureaus. On top of gross salary, the employer also pays its own — substantially larger — share of social insurance and the housing fund, which can add roughly 30-40% to base salary cost depending on the city.

China taxes the employment income of residents under a progressive scale from 3% to 45%. For residents, wages and salaries are consolidated with labour remuneration, author's remuneration, and royalties into a single category called comprehensive income, which is assessed on an annual (cumulative) basis. Tax is charged only on taxable income — gross income after the standard deduction, social insurance and housing fund contributions, and any special additional deductions.

An individual who is domiciled in China, or who is non-domiciled but stays in China for 183 days or more in a tax year, is generally a tax resident. Residents are taxed on worldwide income (with relief under the six-year rule for non-domiciled residents); non-residents are taxed only on China-sourced income using separate monthly brackets. Employers withhold IIT from every salary payment using the annual comprehensive-income table below.

China's mandatory social security system is commonly known as the "five insurances and one fund" (五险一金). The five insurances are pension, medical, unemployment, work-injury, and maternity; the "one fund" is the Housing Provident Fund. Both employer and employee contribute to most of these (work-injury and maternity are employer-only), calculated as a percentage of the employee's monthly wage.

Crucially, all rates and the contribution base are set city by city and reset each year (usually in July, when the prior-year local average wage is published). The contribution base is the employee's gross monthly salary, subject to a lower floor (typically ~60% of the local average wage) and an upper ceiling (typically ~300% of it); salary above the ceiling does not increase contributions. The illustrative rates below use Shanghai as an example and should not be applied to other cities without checking.

Employers are legally responsible for withholding IIT from each salary payment and remitting it to the tax bureau, along with the monthly social insurance and housing fund contributions to the local bureaus. Residents then settle their final annual liability through an annual reconciliation.

Payroll for foreign (non-Chinese) employees follows the same IIT brackets and, in most cities, the same social insurance obligations, but two special regimes are important to plan around.

Because payroll in Mainland China ties together the tax bureau (IIT withholding and annual reconciliation), the social insurance and housing fund bureaus (city-specific rates and bases), and the Labour Law (wages, overtime, and contracts) — with rates that differ from city to city and reset every year — many companies outsource processing to a local expert or an Employer of Record. A specialist provider can register employees for social insurance and the housing fund, run the monthly cycle, calculate and remit IIT and contributions city by city, and keep the business compliant as rates and thresholds change.