China social security is one of the very important factors when hiring employees in China. It consists of five different types of insurance, plus one mandatory housing fund. The five “insurances” are pension, medical, unemployment, work-related injury, and maternity insurances.
According to the China Social Insurance Law and China social security provisions, we have concluded the Basic principles of China social security system：
Employees who have contributed to pension insurance for more than 15 years can receive a monthly pension when they reach the statutory retirement age under China social security sytem.
Employers and employees are both required to contribute to the pension system. Contributions from employees will be credited to their personal pension account. The employer’s contribution will be deposited in the government’s public account.
The retirement age in China varies according to gender and position. In general, males must retire at the age of 55, while females must retire at the age of 50. However, due to China’s aging population, the government intends to raise the retirement age.
Pension each employee can get monthly is coming from two portion.
Medical insurance is also paid for on a monthly basis under China social security system by both the employee and the employer. The employee’s contribution goes directly to their personal medical account, while 30% of the employer’s contribution goes to the employee’s personal medical account and the remaining 70% goes to the government public account.
Employees can use their medical account funds to pay for medical treatments in hospitals in part or in full, depending on the medications and treatments they receive.
Medical insurance in China only covers treatment accepted and managed by government-approved hospitals; international hospitals, private hospitals, private rooms, and imported medicines are not covered.
Unemployment insurance is one part of the China social security must be paid for by both the employer and the employee regulated in China social security system.
The contribution is fully deposited into the government’s public account and is used to provide a minimum level of support as a benefit to individuals who meet certain criteria and are unemployed.
Individuals can use the government App to apply for benefits on their own. The length of the benefits is determined by how long the employee has contributed to the social security system; the maximum benefits available are 24 months.
In Shanghai, for example, unemployment benefits are RMB 1,895 per month for 1-12 months of unemployment, and RMB 1,516 per month for 13-24 months of unemployment in 2020.
Work-related injury insurance are paid solely by employer. The contribution rate are different from company to company, depends on the work safety, risks of different industries, usually range from 0.5%-2%.
The entire contribution was deposited into the government’s general fund. When your employees suffer a work-related injury or illness, the work-related injury fund pays for their treatment.
Employees are eligible for work-related injury compensation if they can demonstrate that they have a working relationship with their employer and that the injury sustained was caused by their job. Employers must file the application, which must be approved by each local social security authority.
Maternity insurance is contributed by employer only for each employee they hire no matter male or female on the monthly basis. The contribution is paid into the government’s public account and is used to compensate female employees during their maternity leave periods.
Women who have been working and contributing to social security for more than three months are eligible for such compensation. Different cities have different policies and implementation methods.
In Shanghai, for example, the monthly compensation women can receive from the government is equal to their company’s average salary from the previous year. Generally, employers are not required to pay employees’ salaries during their maternity leave; however, if an employee’s salary is higher than the company’s average salary, the company is responsible for paying the difference. In Shanghai employee can apply for such compensation by themselves while in Beijing it shall be applied by employer.
Both employers and employees must make monthly contributions to the Housing Fund, and all housing fund contributions go directly to employees’ housing fund accounts; such funds can be used for housing mortgages when an employee buys a house.
The actual percentage of contribution varies by city or province. In Shanghai, the employer and employee contribution percentages are the same, at 7%. In some cities, the housing fund contribution rate is a range; for example, in Beijing, the range is 5% to 12%. Employers can choose a percentage for the housing fund contribution; however, each company can only have one contribution percentage for all employees, and employees’ contribution percentages must be the same as the employer’s.
Employers may choose to contribute an additional percentage of supplementary housing funds to their employees as an added benefit, as this is not required in China. The contribution percentage must range between 1% and 9%. Both the employer and the employee must contribute the same percentage, and the entire contribution fund is directed to the employees’ housing fund account. When an employer decides to provide supplemental housing funds to their employees, all employees must enroll.
It is very common for foreign companies to provide commercial insurance to their employees in China as supplemental health insurance and mentioned in the labor contract. This is not under the Chins social security system. Typically, commercial insurance is provided by an insurance agency. Employers can select from a variety of plans based on their budget and employee position or level. Some plans, for example, may cover private hospitals, and imported medicines are typically provided to expats or senior management staff. After enrolling in a commercial insurance plan, employees can submit hospital receipts and doctor’s statements to the insurance agency to claim their hospital expenses.
Different cities have different contribution rates and bases for social insurance and housing funds, and such policies will be updated yearly by each city. The latest China social security policies in Shanghai, Beijing, and Shenzhen are listed below.
China is a popular destination for foreign entrepreneurs. Doing business in China is appealing and profitable to the majority of foreign investors. Hiring employees is usually the most pressing concer…
What employers need to know when hiring in China? This article explains the most critical information that employers should have when hiring in China.
Comprehensive guide to help you understand all practices about hiring employees in China to ensure your hiring in Chinese are fully compliance under China Employment Law.
