How (and how much) do factory workers get paid in China?

The three most common pay packages for factory workers in China are:

  1. Monthly salary

  2. Base salary +

  3. Piece rate

Monthly salary is calculated and paid as a lump sum regardless of overtime hours or productivity. This is is sometimes referred to as an “exempt” salary in the US, as in, “exempt from overtime rates” or “exempt from production quotas.”

Base salary + guarantees a “non-exempt” worker a monthly (“base”) salary and then pays extra (“+”) based on how many overtime hours are worked and/or by how much a productivity quota has been exceeded.

Piece rate is the traditional form of factory labor compensation. For every piece the worker produces, he or she is paid a fixed amount.

[Chinese labor contract, 2016]

Which types of factory jobs are compensated which way?

Factory work can be usefully split into office work (supervising, selling, organizing, etc.) and production floor labor (cutting, sewing, packing, etc.). Generally speaking, office workers in Chinese factories are paid a fixed, monthly wage and workers on the production floor almost always have some kind of non-exempt, base salary + agreement linked to overtime or productivity. Straight piece rate wages used to be the norm in China, but now most factories guarantee their workers have some form of base wage.

How much do they make?

It’s impossible to generalize. China’s a big country with vast differences in wages, productivity and costs of living. All things being equal, average wages tend to be higher the closer you get to a city center and lower the further west you travel from the China coast. Surprisingly, in the last 10-20 years it is becoming more and more common for floor laborers to earn more than their front office counterparts. Skilled factory labor is growing scarce and the younger generation of Chinese may attach more value to the comfort of working in front of a computer than the extra money they might earn cutting, sewing or packing on a hot production floor.

Inline image 2

[A sewer who earns 3000 RMB/month on a piece rate contract outside Hangzhou]

OK, but how much?

For one specific example, during my anonymous interviews for a Thayer Certified “Safe & Fair” labor audit this March in a cut and sew factory of 15-30 workers outside of Hangzhou (1.5 hour drive from Shanghai), workers told me that their monthly salary averaged 3000 RMB per month ($463). The managers told me that if they paid less the workers would go somewhere else. One worker told me, “The reason I work here is because of the stable salary.”

The workers are paid based on piece rates, but the factory basically guarantees them enough work that they can meet the 3000 RMB threshold by working regular hours of 8 hours a day, 6 days a week.  To give you some perspective on their wages, my report estimated that average monthly living expenses in that town are roughly half their average income (between 1000-2000 RMB ($154-$308). Inline image 1

If you’re wondering how much your workers make, what conditions they work in and how they’re paid, please email joe@thayer-consulting.com.

Thank you,

Joe