In China, it is common practice for salaries to be discussed and negotiated on a net-pay basis (net of Individual Income Tax – IIT, but before employee social security contributions), especially for:
- skilled local employees
- office and white-collar positions
- locally hired expatriates
- hires through platforms like 51job, Lagou, Boss Zhipin, etc.
This is a deep-rooted HR practice, as employees focus on the amount they “take home” each month.
✔ However: be careful—there are two types of “net salary” in China
1️⃣ Net salary before employee social security deductions
This is the most common meaning.
The employer still withholds:
- the employee’s social security contributions
- Individual Income Tax (IIT)
➡️ The actual take-home amount is slightly lower than the negotiated “net.”
2️⃣ Net salary after all deductions (fully net salary)
Less common, but often used for:
- expatriates
- highly skilled hires
- special negotiation packages
➡️ In this case, the employer must gross up the salary to guarantee a fixed net—greatly increasing the employer’s total cost.
Why do Chinese employees negotiate based on net salary?
- The tax system is complex (progressive IIT, deductions, allowances).
- Social security contributions vary by city, making calculations difficult.
- Local HR culture emphasizes take-home pay.
- Many job postings show salaries as “after-tax salary” (税后工资).
Foreign companies must be careful
Negotiating a salary on a net basis means:
the employer must calculate the corresponding gross salary,
taking into account social security + IIT,
which can increase the employer’s total cost by 30% to 60%, depending on the city.
A “net salary” often becomes a much higher employer cost.
✔ Conclusion
Yes, in China, it is very common to negotiate salaries on a net-pay basis,
but employers must:
- clarify which type of net is being discussed,
- calculate the exact gross salary,
- and factor in local social security contributions.
For any information, please contact our team to info@opkofinance.com.
