Spring Festival — also known as Chinese New Year or Lunar New Year — brings a mix of celebration and operational challenges for businesses in China. While the holiday is a time of joy and cultural significance, it also creates unique disruptions, including temporary shutdowns, heightened employee turnover, and logistical bottlenecks. To navigate this critical period, companies must plan strategically, as China Briefing’s Qian Zhou explains
Spring Festival 2025 will run from 28 January to 4 February, spanning a total of eight days. 26 January (Sunday) and 8 February (Saturday) are designated as work days to compensate for the long Spring Festival break. In a departure from previous years, the holiday has been extended by an additional day, beginning on Chinese New Year’s Eve (除夕).
Overtime payment for hours working during Spring Festival
To ensure the smooth operation of production and sales activities during Spring Festival, many companies need to adjust employee leave schedules and establish duty rosters. When requiring employees to work during the holiday, compliance with overtime payment regulations is critical.
Under Chinese labour laws and regulations, overtime payment rates vary depending on the type of rest days and the working hour system implemented.
Under the standard working hour system, for work performed on an official public holiday (i.e. 28-31 January in the case of Spring Festival), not less than 300% of the normal wage shall be paid; for work on weekend or an adjusted rest day (1-4 February), and where such rest days cannot be postponed and taken at another time, not less than 200% of the normal wage shall be paid.
Under the comprehensive working hour system, for work performed on public holidays (28-31 January), not less than 300% of the normal wage shall be paid. However, no rest day is outlined under this system, so for work performed on those adjusted working days and weekends, no overtime payments are available.
Under the non-fixed work hour system, there are differences in overtime regulations across different regions. For instance, in Beijing, employees under the non-fixed work hour system are not entitled to overtime pay for hours worked on public holidays (28-31 January). However, in Shanghai, these hours are considered overtime, and employers are required to pay compensation of up to 300% of the normal wage.
For adjusted working days on weekends, no overtime payment is due.
Annual bonus and tax implications
In China, many companies will provide employees with a one-time end-of-year bonus before or around Spring Festival. One of the most common ways that companies calculate the bonus amount is the “13th-month bonus” wherein the company pays an additional month’s salary around the CNY holiday. However, companies can implement their own bonus system as they see fit.
Annual bonuses in China are subject to individual income tax (IIT). Currently, IIT on bonuses can be calculated in one of two ways:
- Method 1: Calculated and paid separately on the annual one-time bonus.
- Method 2: Calculated and paid on the annual one-time bonus combined with the employee’s total annual income.
The first method is considered preferential treatment as it may decrease the tax burden for some taxpayers. This method will be applicable until the end of 2027. However, in general, for employees with low basic salaries, it may be more beneficial to combine their annual bonuses with their basic salary to calculate the total IIT (under Method 2) because various deductions could be employed to reduce the tax burden. Meanwhile, for employees with comparatively high basic salaries, Method 1 can potentially reduce the tax burden.
Employee retention during Chinese New Year
Spring Festival is a peak period for employee turnover, as many people consider changing jobs or career paths. This trend is partly driven by employees’ desire to stay in their current positions long enough to receive their annual bonuses. However, the cultural significance of the holiday also plays a role, as Spring Festival symbolises new beginnings, prompting individuals to seek fresh starts. Additionally, higher resignation rates during this time create more opportunities for job seekers. Consequently, the period following the Spring Festival can be particularly stressful for HR teams, who must manage a surge in vacancies.
In 2025, employee retention may become even more challenging. With both employers and employees facing economic difficulties, companies may lean toward offering smaller annual bonuses and more modest salary increases. According to a leading human resources agency, average salary adjustments for 2025 are expected to stand at 4.4%. However, for employees dealing with financial pressures, such as mortgages, childcare, and retirement savings, these increases may not be sufficient. As a result, many professionals may be more inclined to explore new opportunities. The voluntary turnover rate in the first half of 2024 stood at 3.9%, lower than that of the same period of the previous year, which stood at 4.9%.
In situations where financial incentives are limited, companies can implement various long-term strategies to enhance employee satisfaction and loyalty. Key retention strategies include:
- Fostering a positive work environment: Cultivating a supportive and engaging workplace culture helps improve employee morale and loyalty during challenging times.
- Promoting work-life balance: Encouraging a healthy work-life balance can alleviate stress, particularly during periods of economic strain. Companies should carefully manage workloads and set realistic performance expectations to prevent burnout.
- Career development and job stability: Offering employees opportunities for career growth and ensuring job stability are critical to retaining talent. Training and upskilling initiatives not only demonstrate a commitment to employees’ development but also enhance overall productivity.
- Flexible work arrangements: Providing flexible or hybrid work options can significantly reduce stress, especially for employees who benefit from a change in their work environment. Whether through remote work, flexible hours, or compressed work schedules, accommodating individual preferences enhances job satisfaction and reduces stress from rigid work structures.
For example, Ctrip Group has introduced a flexible home-office policy for its customer service staff, allowing eligible employees to work remotely during the Chinese New Year period from January 1 to February 28, 2025. This policy gives employees the option to choose their remote work periods, with up to two months of flexibility. The initiative aims to break the geographical constraints of traditional office settings and helps frontline workers better balance family and work commitments during the holiday season.
Financial and logistical preparations
In addition, proper financial and logistical planning is crucial to ensuring smooth operations and minimizing disruptions during the Spring Festival period.
Sales forecasting and inventory management: Accurate sales forecasts based on historical data and current market trends are essential for predicting demand during Spring Festival and the period immediately following. Businesses should plan and prepare inventory accordingly, taking into account potential production shutdowns and logistic delays due to the holiday. This will help prevent stockouts and ensure that customers’ needs are met even if factories close or shipping services are limited.
Cash flow management: Maintaining adequate liquidity is also critical during the holiday season. Companies should ensure they have sufficient working capital to cover operational expenses, including emergency costs that may arise during the holiday. A review of cash flow projections can help identify potential cash shortages, enabling businesses to secure necessary funds before the break.
Inventory procurement and material reserves: Ahead of the holiday season, businesses should stockpile essential materials and supplies based on expected demand. This includes raw materials, office supplies, and seasonal items such as decorations and promotional goods. Ensuring that necessary resources are in place before the holiday will help businesses operate smoothly, even if supply chains are disrupted.
By taking these key steps in financial and logistical planning, businesses can ensure they are well-prepared for both the operational challenges of Spring Festival and the financial demands of the holiday season. Proper forecasting, inventory management, and preparation for employee needs will contribute to a seamless holiday experience and strong performance in the months following.
This article was first published by Dezan Shira & Associates’ China Briefing