1. Establish a genuine overpayment
Compare the employment contract, approved salary changes, bonus or commission terms, attendance, payroll calculations, payslips and bank receipts for the same period. Separate a duplicate payment from a disputed entitlement. A properly earned bonus, an approved allowance or pay for statutory leave does not become an overpayment simply because a manager later disagrees with it.
Identify the China employer, actual payer, recipient, payment dates and the calculation error. A group company paying on another entity’s behalf may require further analysis of who can claim repayment. Prepare a reconciliation showing what was due, what was paid and why the difference lacks a legal basis; preserve the original records rather than replacing the payroll history.
2. Check the legal basis and the recipient’s position
Article 985 of the PRC Civil Code allows the person suffering loss to seek restitution of a benefit obtained without legal basis. Its exceptions cover payments to perform a moral obligation, repayment before a debt falls due, and repayment made with knowledge that no payment obligation exists. An employer should establish a real mistake, not simply relabel a deliberate payment as an error.
Article 986 requires both that the recipient did not know and should not have known of the missing legal basis, and that the benefit no longer exists, for its exemption from restitution to apply. Saying “the money has been spent” is not automatically enough. Under Article 987, a recipient who knew or should have known may be required to return the benefit and compensate loss according to law. Preserve evidence of knowledge and any claimed loss; do not promise automatic interest or full recovery.
3. Reconcile gross pay, net receipts and repayment
Send a clear calculation and invite the employee to explain any disputed item. Distinguish gross payroll entries, the cash actually received, tax withheld and social-insurance contributions. Coordinate any required correction with payroll and tax advisers. Do not demand an unexplained gross amount while also recovering the same tax or contribution component elsewhere; the employee’s net bank receipt alone may also be insufficient to resolve every accounting issue.
If the amount is agreed, document the affected period, calculation, repayment recipient, instalments if any, and how corrected payslips and tax records will be handled. Use a verified company account and issue a repayment receipt. Separate the repayment arrangement from ordinary wages and unrelated claims. A signed agreement does not remove mandatory wage protections or establish that every proposed payroll deduction is lawful.
4. Do not treat the 20% rule as general deduction authority
Article 30 of the PRC Labor Contract Law requires timely and full payment of remuneration. Article 15 of the Interim Provisions on Wage Payment prohibits unlawful wage deductions and lists permitted withholding categories. Article 16 concerns economic loss caused by the employee personally and recovery under the employment contract, with a monthly 20% ceiling and a local minimum-wage floor. Those conditions do not automatically cover an employer’s own payroll error.
Civil Code Article 568 also makes set-off conditional and excludes debts that cannot be set off because of their nature, agreement or law. Before reducing a later salary or final payroll, review the debt, the applicable local wage rules and the proposed mechanism. Where the basis remains disputed, continuing to pay wages lawfully while pursuing recovery separately avoids creating an additional wage-payment dispute. Refusal to admit a disputed debt is not itself an automatic dismissal ground.
5. Preserve evidence and choose the correct claim route
Whether the dispute concerns performance of the employment contract or a separate civil restitution claim affects the procedure and limitation analysis. Articles 2 and 5 of the PRC Labor Dispute Mediation and Arbitration Law govern covered employment disputes and the arbitration route. Review the underlying facts and local jurisdiction practice before filing; calling the demand “unjust enrichment” does not by itself bypass labor arbitration.
For covered labor disputes, Article 27 generally provides a 1-year arbitration limitation; Civil Code Article 188 generally provides 3 years for civil claims, subject to special rules. Each has its own starting-point, suspension and interruption rules. The special Article 27 treatment of employees’ unpaid-wage claims during employment should not be assumed to protect an employer’s overpayment claim. Prepare the reconciliation, originals, employee response and delivery records promptly, and have the route and deadline checked before waiting for another payroll cycle.
Legal sources
Official sources · Checked 2026-11-02. Translations are for reference and are not official legal texts.
- PRC Civil Code ↗
Articles 188–197, 568–569 and 985–988: limitation, set-off and unjust enrichment.
- PRC Labor Contract Law (2012 amendment) ↗
Articles 30, 38–39 and 85: wage payment and associated employment risks.
- Interim Provisions on Wage Payment, Lao Bu Fa [1994] No. 489 (Shanghai HRSS republication) ↗
Articles 6, 15–16 and 19; read together with applicable local wage rules.
- PRC Labor Dispute Mediation and Arbitration Law ↗
Articles 2, 5–6 and 27: scope, procedure, evidence and limitation.
General information about mainland China. The facts, applicable dates and local rules require individual review.
Partner, Beijing ChangAn Law Firm
China-qualified since 2019 · Beijing & Shenzhen
Review a payroll overpayment before making deductions
Start with the China employing entity, work city, payment dates, disputed amount and next payroll date. After a conflict and scope check, agree a secure way to share the calculation, payslips, payment evidence and correspondence.
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