Pay Equity China

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Basic Summary

China recognizes the principle of equal pay for equal work and prohibits discrimination in employment, including on the basis of sex. While there is no national mandate for gender pay gap reporting or public pay transparency for private-sector employers, employers remain responsible under multiple statutes to ensure that compensation practices are fair, non-discriminatory, and compliant with wage payment and labor protection rules.

Total Rewards and Payroll professionals should implement structured pay governance, job evaluation, and internal analytics to identify and correct unjustified pay gaps, document legitimate pay differentiators, and manage risks under China’s labor, women’s rights, and employment promotion laws. Special attention is required for data privacy and cross‑border data transfers under the Personal Information Protection Law when conducting pay equity analyses.

Summary

China’s legal framework prohibits employment discrimination and requires equal pay for equal work, but it does not prescribe a single mandated methodology or require public disclosure of pay gaps at the national level. Employers are expected to prevent discriminatory compensation decisions, pay wages fully and on time, comply with overtime and premium pay obligations, and respect protections for female employees, including during pregnancy, maternity leave, and nursing periods. Enforcement is administrative and judicial: labor security supervision authorities may order rectification and impose fines, and employees can pursue labor arbitration and litigation for wage claims and discrimination.

For pay equity calculations, employers should build a defensible methodology aligned to Chinese laws and international best practices. This includes standardized job architecture, carefully formed comparison groups, full-time equivalent normalization, total cash and total compensation definitions adapted to China’s mandatory social insurance and housing fund regimes, robust documentation of legitimate pay factors, and privacy-by-design controls for employee data. International frameworks such as ILO Convention No. 100 and No. 111 inform expectations around equal remuneration and non-discrimination, and several Chinese localities have strengthened gender equality protections. Cross-border analysis that uses multinational datasets must comply with the Personal Information Protection Law, Data Security Law, and current CAC cross-border transfer rules.

Legal Framework

• Primary national statutes
  • Labor Law of the People’s Republic of China (1994; as amended) — Establishes principles of wage distribution according to work and equal pay for equal work, minimum wage, overtime premiums, and wage payment requirements.
  • Labor Contract Law of the PRC (2007; amended 2012) — Governs labor contracts, prohibits discrimination by contract terms, requires equal pay where labor dispatch is used, and sets remedies for wage violations.
  • Employment Promotion Law of the PRC (2007; amended) — Prohibits employment discrimination (including on grounds such as ethnicity, gender, religious belief, disability), promotes equal employment, and authorizes corrective actions by authorities.
  • Law on the Protection of Women’s Rights and Interests (1992; comprehensively amended 2022, effective 2023) — Strengthens prohibitions on sex-based discrimination, reinforces equal pay for equal work, bans pregnancy/marriage restrictions in recruitment, and enhances enforcement tools, including orders to rectify and administrative penalties.
  • Special Provisions on Labor Protection of Female Employees (2012) — Prohibits reducing pay due to pregnancy, childbirth, or breastfeeding; requires appropriate work arrangements and protections.
  • Labor Dispute Mediation and Arbitration Law (2007) — Provides the primary mechanism for employees to seek relief for wage and discrimination disputes.
  • Regulations on Labor Security Supervision (2004) — Authorizes labor authorities to inspect, order rectification, and impose administrative penalties for wage and labor standard violations.
  • Interim Provisions on Wage Payment (national-level normative rules) — Provide baseline requirements for wage payment, overtime calculation and timing.
  • Minimum Wage Provisions (MOHRSS Order No. 21, 2013) — Set the framework for provincial minimum wages.

• Regulatory bodies
  • Ministry of Human Resources and Social Security (MOHRSS) and local Human Resources and Social Security Bureaus — Wage payment, labor standard enforcement, and labor dispatch compliance.
  • All-China Federation of Trade Unions (ACFTU) and enterprise trade unions — Collective consultation on wages and democratic management oversight.
  • Cyberspace Administration of China (CAC) — Personal information protection and cross-border data transfer compliance impacting pay equity analytics.
  • State Administration of Foreign Exchange (SAFE) — Registration and administration of overseas equity incentive plans for PRC employees.

• Enforcement and penalties
  • Administrative orders to rectify, payment of arrears, and fines for wage and overtime violations under labor supervision rules.
  • Relief for discrimination and rights infringements under the 2022 Women’s Rights law, including orders to correct, compensation, and administrative penalties; serious cases may be publicly disclosed per governing rules.
  • Labor arbitration and court judgments ordering back pay, liquidated damages where applicable, and compensation for discrimination. Non-compliance may impact an entity’s social credit record.

• Recent updates and local developments
  • 2022 amendment to the Women’s Rights law (effective 2023) clarifies and strengthens prohibitions on sex discrimination, including in recruitment and compensation.
  • Several localities (e.g., Shenzhen Special Economic Zone gender equality regulations; updates in Beijing/Shanghai) have issued measures reinforcing equal employment and anti-discrimination; enterprises operating in these jurisdictions should review local rules for enhanced obligations.
  • CAC issued updated cross-border data transfer rules and exemptions (2023–2024) that may affect whether HR/pay data transfers require security assessments or standard contracts; HR transfers for necessary human resources management can be eased in defined scenarios, subject to conditions.

Detailed Data Requirements

Field/Data	Description
Employee identifier	Internal unique ID; avoid using national ID numbers in analytics datasets. Pseudonymize where possible to comply with PIPL minimization.
Legal name (separated from analytic ID)	Stored in secure reference files only; not necessary in analytical datasets used for modeling.
Gender/sex	For pay equity by sex; treat as general personal information under PIPL. Use self-identified field if collected; document source. Do not infer.
Date of birth/age band	Needed for certain benefit eligibility and labor protections. Use age bands in analytics to reduce identifiability.
Nationality and hukou (household registration)	Collect only if necessary for compliance administration. Do not use as a pay factor. May be considered sensitive for discrimination risk; avoid use in modeling variables.
Ethnicity, religion, disability status	Considered sensitive personal information. Do not collect for pay equity analysis unless strictly necessary and lawful with separate consent and clear purpose. Consult counsel before any processing.
Employment type	Regular, labor dispatch, part-time, fixed-term/open-ended; critical because equal pay and dispatch rules apply.
Contracted weekly hours	Basis for FTE calculation (standard system 40 hours/week unless lawfully approved flexible/comprehensive systems apply).
Work schedule system	Standard hours, comprehensive calculation, or flexible hours; impacts overtime rules and FTE normalization.
Hire date and continuous service date	Tenure control variable and legitimate pay factor; captures breaks in service.
Job title (岗位)	Localized job label for internal mapping.
Job family/function	E.g., engineering, sales, operations; required for comparators.
Job level/grade/band (职等/职级)	Core comparator dimension; ensure consistent leveling methodology across sites.
Job evaluation score	If using formal JE (e.g., point-factor), include numeric score; supports equal work determinations.
Work location	City/province and site; necessary due to regional pay markets, minimum wages, and social insurance/housing fund rates.
Base salary (monthly)	Gross monthly wage in RMB before deductions; in China monthly pay is standard. Capture effective date and pay frequency.
Base salary (annualized)	Monthly base x 12 or x 13 if guaranteed 13th month is contractual. Document company policy on 13th month inclusion.
Guaranteed allowances	Regular fixed allowances (e.g., position, seniority, skill) paid monthly; include in fixed cash.
Variable pay plan eligibility	Plan name and terms; document whether commission, bonus, piece-rate, sales incentive.
Variable pay actuals	Bonus/commission payouts by period; for annualized TCC use last fiscal year payouts or on-target opportunity with performance normalization.
Overtime hours and pay	Overtime hours by type (workday, rest day, statutory holiday) and overtime pay; China premium rates: 150%, 200%, 300% respectively.
Shift/night/high-temperature allowances	Monetary amounts; often mandatory or customary; include as cash compensation.
In-kind benefits	Monetary value of meals, transportation, lodging; include where taxable or cash-equivalent; exclude pure reimbursements.
Employer social insurance contributions (五险)	Employer costs for pension, medical, unemployment, work injury, maternity; capture city-specific rates and bases. Include or exclude consistently depending on analytic scope.
Housing fund contribution (一金)	Employer contribution rate and base; city-specific caps apply. Include for total reward cost analyses; for employee-focused pay equity, often excluded if uniformly applied within location.
Equity compensation eligibility	Plan type (RSU, stock options, ESPP), grant date, vesting schedule; SAFE registration details if applicable.
Equity compensation value	Annualized fair value for RSUs (grant-date fair value divided by service period); Black-Scholes or fair value for options; document valuation method and FX conversion rate/date.
Performance ratings and bonuses	Most recent rating, rating scale, and any merit increase; document rating calibration process for legitimacy and bias checks.
Education and qualifications	Highest degree, certifications relevant to role; use as potential legitimate differentiator where demonstrably job-related.
Skills/experience	Years of relevant experience and scarce skill indicators; ensure objective, documented criteria.
Travel status/field work	Where field hardship or travel premiums apply; include premium amounts.
Leave status	Paid/unpaid leave, maternity leave, sick leave; record to ensure proper FTE and pay period proration; pay cannot be reduced unlawfully due to protected leave.
Employment status changes	Promotions, lateral moves, location transfers; include effective dates to align with pay changes.
Pay effective dates	For each component; required to align calculations to the analysis period.
Exclusions flags	Identify employees to exclude (e.g., interns, apprentices under special programs, executives if analyzed separately) with documented rationale.
Data provenance and consent	Legal basis under PIPL (contract necessity, HR management), notices provided, and consents for sensitive data if any.

Step-by-Step Calculation Methodology

1. Data Standardization: Create a single, analysis-ready dataset covering the defined period (e.g., prior fiscal year), ensuring consistent definitions across PRC entities.
   1. Harmonize currency to RMB; for foreign currency elements (e.g., equity in USD), convert using a consistent, documented FX rate (e.g., monthly average from PBOC for the analysis period).
   2. Normalize pay periods to a common annualized basis: monthly base x 12 (or x 13 if a guaranteed 13th-month is contractual and uniformly applied); document any company-specific 13th month practices.
   3. Standardize pay element taxonomy: fixed base, fixed allowances, variable pay (short-term incentive, commission), overtime premiums, in-kind cash-equivalents, employer on-costs (social insurance/housing fund), equity value. Reclassify reimbursements (travel, per diem) as exclusions.
   4. Clean data: remove duplicates, resolve missingness using transparent rules (e.g., exclude records with indeterminate base salary; impute only non-material items with audit trail), and pseudonymize identifiers per PIPL minimization.
2. FTE Adjustments: Express compensation on a 1.0 FTE basis to enable fair comparisons.
   1. Compute FTE = contracted weekly hours / 40 for employees under the standard hours system. For comprehensive/flexible systems with approved schedules, estimate FTE using the employer’s approved equivalent weekly hours or standardize to 1.0 if full-time under the approved system.
   2. Annualize partial-year employment: prorate compensation based on days employed in the analysis period while keeping pay rates (e.g., monthly base) represented on a full-year basis for rate-based comparisons.
   3. For variable pay, use on-target earnings (OTE) prorated to FTE or use actual payout normalized for time-in-role; document choice consistently across the population.
   4. Exclude overtime premiums from base-rate comparisons but include them in total cash comparisons if they are structural to the role; separate analyses help avoid conflating role design with base pay equity.
3. Total Compensation Calculations: Derive comparable measures for analysis and reporting.
   1. Fixed Cash (FC) = Monthly Base x 12 (+ guaranteed 13th month if contractual) + Fixed Allowances.
   2. Total Cash Compensation (TCC) = FC + Variable Pay (commission, bonus) + Overtime Premiums + Cash-Equivalent Allowances (e.g., shift, high-temperature) + In-kind cash equivalents where customary.
   3. Total Direct Compensation (TDC) = TCC + Annualized Equity Value (grant-date fair value amortized: for RSUs, grant FV / vesting years; for options, Black-Scholes FV / vesting years).
   4. Total Reward Cost (Employer) = TDC + Employer Social Insurance + Housing Fund + Statutory/contractual employer-paid insurances; use location-specific rates and statutory bases/caps.
   5. For equity valued in foreign currency, convert at a documented rate (e.g., PBOC monthly average) and disclose valuation date and assumptions. For ESPP discounts, use expected annual discount benefit as part of TDC when material.
4. Comparison Group Formation: Build groups where equal work can reasonably be assessed.
   1. Primary comparator: job level/grade within job family/function and location. Example: Software Engineer II in Shanghai.
   2. Where groups are too small, combine adjacent grades with demonstrated similarity in job evaluation points, or use a regression model across a broader group with grade, function, and location controls.
   3. Separate employees under different work schedule systems if overtime rules materially affect cash compensation; run alternative analyses on base pay rates to avoid structural noise.
   4. Sales roles: use OTE (base + target incentive) as the primary comparator; check actual payout equity separately considering territory potential and quota fairness.
   5. Exclude atypical populations (interns, trainees, executives) to avoid skew, but analyze them in dedicated cohorts; document all exclusions with rationale.
5. Statistical Testing: Apply rigorous methods to quantify and interpret gaps.
   1. Descriptive: compute median and mean gaps by sex within each comparison group for FC, TCC, and TDC. Preferred measure is the median pay ratio (women/men).
   2. Threshold flagging: flag groups where absolute median gap exceeds 5% or where the pay ratio falls below 0.95, subject to business context.
   3. Regression: estimate log-linear models of pay (e.g., ln(FC) or ln(TCC)) with controls for job grade, function, location, tenure, performance rating, and critical skills. Include sex as a protected variable. Interpret the exponentiated coefficient on sex as an adjusted pay ratio.
   4. Statistical significance: use p<0.05 as a conventional threshold with 95% confidence intervals; also consider practical significance thresholds (e.g., adjusted gap magnitude ≥2–3% depending on comp cycle).
   5. Small samples: for groups with n<20 or very small female/male counts, emphasize descriptive diagnostics and case-by-case review instead of inferential claims. Use non-parametric tests (e.g., Wilcoxon) where distributions are skewed.
   6. Multiple testing: control false discovery (e.g., Benjamini–Hochberg) when scanning many groups; prioritize remediation based on adjusted significance and impact.
6. Gap Analysis: Conclude findings and isolate drivers.
   1. For each flagged group, produce a case list of outliers by standardized residuals from the regression and by distance from the group median. Review personnel files for documented legitimate factors (e.g., certification date, scarce-skill designation).
   2. Distinguish structural vs. idiosyncratic drivers: location market differentials and shift structures are structural; undocumented “red-circle” pay is idiosyncratic and higher risk.
   3. Prepare recommended actions: immediate pay adjustments where no legitimate factor exists; process fixes (e.g., calibration discipline) where systemic patterns recur; timeline and budget for corrections aligned to compensation cycles; and documentation for legal defense.
   4. Produce executive and HR dashboards showing unadjusted and adjusted gaps, headcount coverage, remediation cost, and risk prioritization. Maintain a complete audit trail.

Justifiable Differences

• Legally acceptable pay differentiators (must be job-related, consistently applied, and documented)
  • Performance and contribution differences grounded in calibrated ratings, quota attainment, or objective productivity measures.
  • Seniority/tenure and relevant years of experience, where linked to demonstrated proficiency or progression rules.
  • Education, certifications, and professional qualifications directly required by the job (e.g., licensed engineer, CPA).
  • Job level/grade and job evaluation outcomes; differences aligned with established salary structures and ranges.
  • Geographic location and market pay differentials reflecting documented local labor market conditions and cost structures; must be applied by policy, not ad hoc.
  • Scarce/critical skills premiums supported by market data and internal scarcity evidence.
  • Shift, night, high-temperature, and hazardous-duty allowances required by law or policy for specific working conditions.
  • Overtime and premium pay where earned under lawfully applied work schedules and tracked time.
  • Equity compensation aligned to role eligibility and market norms, using consistent grant guidelines.
• Documentation and burden of proof
  • Maintain written policies for salary ranges, variable pay plans, equity guidelines, and geographic differentials; retain approvals and calibration artifacts.
  • For each exception above range midpoint or special premium, retain a contemporaneous justification memo tied to objective criteria and business need.
  • Ensure recruitment and starting salary decisions include structured offers and, where used, market data citations.
• Non-justifiable differentiators (high legal risk and typically unlawful)
  • Sex/gender, pregnancy status, marital status, plans for marriage/childbearing, breastfeeding status.
  • Ethnicity, religion, disability, or other protected characteristics.
  • Employment form misuse (e.g., paying labor-dispatched workers less than directly hired employees for equal work).
  • Household registration (hukou) or place of birth as a pay basis.
  • Prior salary as the sole rationale for setting lower pay, especially where it perpetuates disparities.
  • Retaliation-related pay actions (e.g., penalizing employees who request accommodations or assert rights).

Reporting Requirements

• There is no national requirement for private-sector employers to publish gender pay gap reports or submit pay equity analyses.
• Employers must comply with wage payment and overtime reporting during inspections by Human Resources and Social Security bureaus and provide relevant payroll records upon request.
• Trade union and employee representative bodies may request information during collective wage consultations under the Regulations on Collective Contracts; enterprises should be prepared to share salary structure principles, ranges, and adjustment mechanisms in that forum, consistent with confidentiality requirements.
• State-owned enterprises may have additional disclosure obligations regarding executive compensation under SASAC rules; these are not general pay equity reports.
• Internal governance best practices
  • Establish an annual internal pay equity review aligned with the compensation cycle (merit and bonus planning).
  • Provide management and union/employee representative councils with summary findings and remediation plans where appropriate, without disclosing personal data beyond necessity.
• Employee disclosure
  • China does not mandate disclosure of comparators’ pay to employees. Provide individualized explanations upon request and inform employees of their rights to seek labor arbitration if they believe discrimination has occurred.

Example Employee Statement

• Template response to an employee pay equity inquiry
  • Thank you for your request regarding your compensation. Your current pay consists of base salary, allowances, variable incentive eligibility, and employer-paid social insurance and housing fund contributions. Your pay is set within our salary range for your job level and location, taking into account your responsibilities, performance, skills, and experience.
  • Our company applies the principle of equal pay for equal work and prohibits discrimination, including on the basis of sex, pregnancy, marital status, ethnicity, religion, or disability. We regularly review pay data to identify and correct unintended differences.
  • If you would like to verify specific elements of your compensation or the salary range for your position and location, we can provide that information. To protect privacy, we do not disclose other employees’ compensation.
  • If you believe a pay decision does not reflect your role or contributions, please share any information you would like us to consider. You also have the right to raise concerns through our HR process, your trade union/employee representatives, or by seeking labor mediation/arbitration as permitted by law.

Remediation Framework

• Investigation procedures
  • Confirm the comparison group and time period; verify data accuracy and that all relevant, lawful factors were considered.
  • Conduct a documented case review for each flagged employee. Remove illegitimate variables (e.g., sex) from decision criteria; confirm performance documentation and market alignment.
• Correction timelines
  • Implement corrections as soon as administratively feasible, preferably in the next payroll cycle or aligned to the annual merit cycle if delay does not perpetuate unlawful disparity. Prioritize larger and unambiguously unjustified gaps.
• Retroactive payment
  • Where an unlawful underpayment is identified, consider making retroactive adjustments for the applicable lookback consistent with internal policy and legal advice. Employees may seek arrears via labor arbitration; timely voluntary correction reduces exposure.
• Ongoing monitoring
  • Track post-adjustment outcomes; ensure no adverse impact on bonuses, equity, or future increases. Audit hiring offers and promotion adjustments for consistency.
  • Commit to periodic independent reviews (e.g., annually) and management reporting.
• Appeals and documentation
  • Provide employees with a channel to request reconsideration. Maintain a written record of analysis, decisions, and approvals to support compliance and potential regulator inquiries.

Compliance Calendar

• Q1: Close prior-year payroll data; complete initial pay equity refresh using finalized bonuses; align findings with annual merit and promotion cycles.
• Q2: Implement adjustments; update salary structures with latest market data; brief union/employee representatives where applicable in collective consultations.
• Q3: Mid-year hiring and promotion audit; review equity grant guidelines before annual grant windows; re-check hot spots after significant organizational changes.
• Q4: Pre-year-end spot checks; plan for next-year methodology updates, including changes to social insurance/housing fund caps and local minimum wages; refresh PIPL data inventories and cross-border transfer filings if applicable.

GDPR and Data Management

• China’s Personal Information Protection Law (PIPL) is the controlling privacy regime for HR data. Processing for HR management is generally permitted where necessary to conclude or perform labor-related contracts or fulfill employment management policies and collective contracts, provided employees are informed via clear privacy notices. Sensitive personal information (e.g., biometric data, religious belief, specific identity, medical information) requires specific purpose, strict necessity, and separate consent; avoid collecting ethnicity, religion, or health status for pay equity unless legally required and approved by counsel.
• The Data Security Law (DSL) and Cybersecurity Law (CSL) impose data classification, security obligations, and localization requirements for critical information infrastructure operators. Maintain data maps for payroll and compensation datasets, classify personal information, and implement access controls, encryption at rest/in transit, and audit logging.
• Cross-border data transfers of HR/pay data must comply with current CAC rules. Depending on data volume and sensitivity, organizations may need a government security assessment, conclude and file the CAC Standard Contract for Cross-Border Transfer of Personal Information, obtain certification, or may qualify for exemptions (e.g., necessary HR transfers under labor policies and collective contracts with limited volumes). Reassess annually as thresholds and exemptions are updated.
• Employee rights under PIPL include the right to know, decide, access, copy, correct, and delete personal information under defined conditions. Establish processes for employees to request access to their own compensation data; do not disclose other employees’ information.
• Data minimization and retention: collect only fields necessary for pay equity analysis; pseudonymize identifiers; retain analytic datasets only as long as needed for the stated purpose and legal retention of payroll records. Maintain separate secure key files for identity mapping when needed.
• Vendor management: where external analytics platforms or consultants are engaged, execute data processing agreements with clear obligations for security, subcontractor controls, breach notification, and cross-border compliance. Conduct security due diligence and, where applicable, file or adopt the CAC Standard Contract.
• Security requirements: implement role-based access to compensation datasets; enforce multi-factor authentication; encrypt exports; prevent unauthorized downloads; maintain incident response plans. Train HR/Comp staff annually on PIPL and data handling.

Useful Resources

• National People’s Congress (NPC) — Official laws and amendments: http://www.npc.gov.cn
• Ministry of Human Resources and Social Security (MOHRSS) — Labor standards, wage and overtime guidance, minimum wage framework: http://www.mohrss.gov.cn
• Cyberspace Administration of China (CAC) — Personal information protection and cross-border transfer guidance and filing portals: http://www.cac.gov.cn
• All-China Federation of Trade Unions (ACFTU) — Collective consultation and democratic management resources: https://www.acftu.org
• State Administration of Foreign Exchange (SAFE) — Equity incentive plan registration guidance (overseas listed companies, Circular 7): http://www.safe.gov.cn
• International Labour Organization (ILO) — Conventions on Equal Remuneration (No. 100) and Discrimination (No. 111): https://www.ilo.org
• Local Human Resources and Social Security Bureaus — City/province-specific social insurance and housing fund rates, minimum wages, and enforcement contacts; consult the official site for each operating location.
• Submission portals: there is currently no national portal for pay equity reporting for private-sector employers; wage-related inspections and submissions occur through local HRSS bureaus as directed during supervision.

Important Disclaimer: This guide is based on information available as of August 2025 and is subject to change. The content provided does not constitute legal advice and is for informational purposes only. Total Rewards professionals should seek qualified legal counsel and local employment law expertise before making decisions or taking actions based on this guidance. Laws and regulations vary by jurisdiction and can change frequently. Always consult with local legal experts and relevant government agencies for the most current requirements.