Understanding Annual Bonuses in China

Understanding Annual Bonuses in China
Dec 08, 2020 By Cian Dineen , eChinacities.com

Annual bonuses are kind of a big deal in China. While you may come from a country where bonuses are not common or all that important in most jobs, in China they can make the difference between a modest and an amazing salary. This guide to annual bonuses in China will help you ask the right questions of your employer to ensure you get the biggest payout possible.

annual bonus in China

Bonuses in China can be huge

In the West, a bonus could mean an extra hundred dollars or so from the boss at Christmas, the giving of staff gifts or the organising of an outing after a good financial year. It’s a nice perk, but it’s not something that changes your life and you don’t spend too much time thinking about it. If you get a bonus, great. If you don’t, no big deal.

Annual bonuses in China are something else altogether. It’s not uncommon for workers to receive two or three months’ salary as a bonus, while in some cases an annual salary could even be doubled. As a result, great importance is attached to the annual bonus, especially in certain sectors. Whether or not you get what you expect come Chinese New Year in January or February can be of huge importance.

Bonuses vary from industry to industry

Before you get carried away, however, it’s important to point out that although annual bonuses are more common in China, not everyone will get one. The big bonuses are normally reserved for industries that are more profit-driven, such as internet, tech, and manufacturing. Other industries, such as teaching, are much less likely to pay out bonuses, especially big ones.

The great fixed/performance debate

There are typically two types of annual bonus in China. One where the amount fluctuates depending on how well the company performed in the past year, and one where the amount is fixed, regardless of the company’s fortunes. The latter is often referred to as the 13th month salary as it will likely equate to one month’s wages.

If you have a choice about which one you take, consider the following: Did the company have a good year last year? Does the company have interesting new projects or exciting new products in the pipeline? How’s the economy, both domestically and globally? How are your company’s competitors performing? Are there any trade wars going on?

It’s impossible to predict the future, but if you’re in any doubt about how your company will perform in the coming year, it might be best to play it safe and opt for the 13th month salary.

You might not qualify for a bonus immediately

It can be exciting when you start a new job at a company that promises a big annual bonus, but before you start booking any holidays, it’s important to check the finer details of your deal, in particular, from which point do you qualify for the annual bonus. You may think it’s from the day you start working at the company, but that’s not always the case.

It’s pretty standard that in your first year with a company, your annual bonus will be calculated by dividing the total payout by the months in the year and then multiplying that by the number of months you’ve been in the company. Be aware, however, that you employer may not start the count until you’ve finished your probation period. So if you joined the company in June and passed probation at the end of August, your bonus calculations would only begin in September.

It’s also worth noting that your employer may start to deduct from your annual bonus in the same way if you take extended unpaid leave. It’s best to clarify this before taking any unallocated breaks from work if you’re banking on getting the entirety of your annual bonus.

Stock options may be available

There are companies that offer stock instead of cash for annual bonuses in China. The stock may or may not be valued higher than the cash, and how attractive of a proposal this is will depend a great deal on the kind of company you work for.

No matter how tempting it is to channel your inner stockbroker, make sure you do some research. If you’re determined to take some stock options, look to see if you can hedge your bets and get a mixture of stock and cash. In the current economic climate, even a sure bet can fall through.

Your bonus may be paid in instalments

For the same reason that some Chinese companies pay their employees a third of the way through the month, annual bonuses are often split into two instalments. One payment will be made just before Chinese New Year and the other halfway through the year, usually around Labor Day.

The theory behind this goes like this. If you’re considering leaving your job after Chinese New Year, you may be tempted to stick around for a few more months to get the second instalment of your bonus. But by the time you’ve had the second instalment, you’ve almost worked half of another year. Again, it becomes tempting to stick around for the first instalment of the next annual bonus. And so the cycle continues…

Be prepared for excuses from your company

Just like everything in the Chinese work place, there is an element of gamesmanship to be expected when it comes to the annual bonus. After all, no company will want to pay out more than they have to.

Chinese companies are known to make the most of any excuse to justify reducing annual bonuses. Watch out for recessions, trade wars, and pandemics as surefire excuses for why your bonus isn’t as high as usual. If you see any of these occur during the year (thanks, 2020), brace yourself and reduce your expectations for your bonus.

Dont depend on your bonus

The annual bonus is undoubtedly one of the biggest advantages of working in China. It can represent a huge boost to your annual salary and can feel like winning the lottery if you find yourself working in the right company in the right year.

As alluded to above, however, the bonus is never guaranteed, at least not in the same way as your salary. You can never be 100% sure exactly how big it’ll be each year, no matter what HR tells you when joining. So, whatever you do, don’t rely on your annual bonus. Feel free to make plans for the money, but don’t be dependent on it to clear bills or make essential payments.

Most importantly, get everything in writing

Last but not least, if you do agree on a bonus scheme with your employer, make sure the agreement is down in writing in your contract, both in the Chinese and English versions. It doesn’t guarantee that an employer will not attempt to dodge paying the bonus, but at least it gives you a leg to stand on if you feel you were unfairly ripped off.

Do you get a decent annual bonus at your China job? Tell us about your set up in the comments box below.

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Keywords: annual bonuses in China

4 Comments

All comments are subject to moderation by eChinacities.com staff. Because we wish to encourage healthy and productive dialogue we ask that all comments remain polite, free of profanity or name calling, and relevant to the original post and subsequent discussion. Comments will not be deleted because of the viewpoints they express, only if the mode of expression itself is inappropriate.

1

Guest14874664
comment|79228|1652740

Good luck in actually receiving that bonus.

Dec 31, 2020 08:02 Report Abuse

2

Alashseyi
comment|79158|2013608

Good although i dont know much but i think it is great

Dec 11, 2020 02:59 Report Abuse

3

andybrocks2012
comment|79155|99083

I usually get 1/2 a months salary. see how it goes this year

Dec 10, 2020 09:46 Report Abuse

4

Nikwestside
comment|79153|1655194

Great article, and as far as I can tell, it's accurate.

Dec 08, 2020 23:08 Report Abuse