China’s Social Security System is a complex framework, posing challenges for both employers and employees in one of the world’s most populous nations. This guide delves into the intricacies of China’s Social Security System, shedding light on employer liabilities and benefit entitlements. Whether you’re a foreigner working in China or a local seeking clarity on the system, this comprehensive resource offers valuable insights into the workings of China’s Social Security System. Let’s delve into the details!
In this article, we want to answer one of the common questions that we receive from our users:
Does China have a social security system?
And the answer is yes. China’s social security includes different parts that employers have to consider when they want to hire staff in the country.
Having your own business in China does not automatically entitle you to hire staff. There are a set of rules and laws that every employer in China has to abide by while considering the recruitment of local or foreign employees. If you hire employees for your company in China, certain responsibilities must be undertaken and confirmed for employee welfare.
China’s Social Security System consists of 5 mandatory insurance schemes (pension fund, medical insurance, industrial injury insurance, unemployment insurance, and maternity insurance) + a housing fund (only applicable to Chinese employees).
New regulations on social security system in Beijing(2023):
1. Starting from July 2023, the upper limit for the monthly contribution base for the 2023 Enterprise Employee Basic Pension Insurance, Unemployment Insurance, Work Injury Insurance, and Basic Medical Insurance for Employees (including maternity) in this city is set at 33,891 yuan, and the lower limit for the monthly contribution base is 6,326 yuan.
2. Starting from July 2023, individuals who participate in social insurance as individuals and make contributions at social insurance agencies such as the Municipal and District Human Resources Public Service Centers, as well as those who make social insurance contributions at community service centers in various streets (townships), can choose their contribution base within the range between the lower and upper limits of the Enterprise Employee Basic Pension Insurance contribution base. Those who fail to complete the declaration procedures on time will have their 2023 social insurance contribution base determined based on their previous year’s contribution base. If it is lower than the lower limit for employee pension insurance contributions and unemployment insurance contributions, the lower limit will be used as the contribution base.
(1) If calculated based on the upper limit of the monthly contribution base for Employee Basic Pension Insurance and Unemployment Insurance, which is 33,891 yuan, individuals participating in social insurance will contribute 6,778.2 yuan for Employee Basic Pension Insurance and 338.91 yuan for Unemployment Insurance per month.
(2) If calculated based on the lower limit of the monthly contribution base for Employee Basic Pension Insurance and Unemployment Insurance, which is 6,326 yuan, individuals participating in social insurance will contribute 1,265.2 yuan for Employee Basic Pension Insurance and 63.26 yuan for Unemployment Insurance per month.
3. Starting from July 2023, individuals who participate in social insurance as individuals and make contributions at social insurance agencies such as the Municipal and District Human Resources Public Service Centers, as well as those who make social insurance contributions at community service centers in various streets (townships), will contribute 553.56 yuan for Employee Basic Medical Insurance per month.
4. Starting from July 2023, the upper limit for the monthly contribution base for the 2023 Basic Pension Insurance for Government and Public Institution Employees in this city is set at 33,891 yuan, and the lower limit for the monthly contribution base is 6,778 yuan.
China’s Social Security Contributions
China’s social security law was promulgated by the central government, but its administration and specific details are governed by local authorities. For instance, for each benefit, the employee and employer contributions rates and base differ as per the local jurisdiction and are subject to annual changes and reforms.
What makes the payroll in China quite complex is that the contribution rates for social insurance and housing fund are updated every year and change according to city jurisdiction, for example, Beijing, Shanghai, and Guangzhou have different contribution rates and bases as follows…
Data resource: http://sh.bendibao.com/
The contribution to China’s social security system is mandatory for Chinese employees and their employers as well as foreigners employed in China. It will be considered ILLEGAL if a company does not contribute any social insurance or housing fund for its employees in China. Hence, it is important for a licensed and experienced service provider to handle the employee mandatory benefits administration for your company in China.
…
Introduction to the China Social Security System
Social Security in China consists of 5 mandatory insurance schemes (pension fund, medical insurance, industrial injury insurance, unemployment insurance, and maternity insurance) + a housing fund (only applicable to Chinese employees). Each contribution has been explained in detail below:
Pension Insurance
An individual can receive a pension based on the amount accumulated in his/her individual fund after retirement.
China’s Pension Insurance is an important aspect of the country’s social security system. It provides financial support to retired individuals who have reached the age of 60, as well as to those who are unable to work due to disability or illness. The pension system in China is funded by both employers and employees, with contributions made throughout an individual’s working life.
The basic pension scheme in China is divided into two parts: the enterprise annuity scheme and the social security scheme. The enterprise annuity scheme is a supplementary pension scheme that is voluntary for employers and employees to participate in. The social security scheme, on the other hand, is mandatory and provides basic protection to all eligible individuals.
The social security scheme is further divided into five parts: pension insurance, medical insurance, unemployment insurance, work injury insurance, and maternity insurance. The pension insurance component of the social security system provides a monthly pension to eligible individuals who have contributed to the scheme for a certain number of years. The amount of the pension is based on an individual’s average monthly salary and the number of years they have contributed to the scheme.
In recent years, China has been facing a demographic shift as its population ages. This has put pressure on the country’s pension system, with concerns about its long-term sustainability. To address these concerns, the Chinese government has introduced reforms to the pension system, such as increasing the retirement age and encouraging more people to participate in the enterprise annuity scheme.
China’s Pension Insurance is an essential component of the country’s social security system, providing financial support to millions of retired and disabled individuals. While there are challenges to its sustainability, the government’s efforts to reform the system are a positive step towards ensuring its continued effectiveness.
In general, individuals need to pay at least 15 years of contributions prior to receiving a pension in China. Some industries have different retirement ages, but mainly men are 55 years old, women are 50 years old (blue-collar work), men are 60 years old, and women are 55 years old (white-collar work). The amount of retirement benefits depends on local regulations. Due to China’s population problems, these ages may soon change.
Medical Insurance
China’s medical insurance system is a crucial part of the country’s social security system. It aims to provide affordable and accessible healthcare to all citizens, regardless of their socio-economic background. The medical insurance system in China is divided into two categories: basic medical insurance and supplementary medical insurance.
The basic medical insurance scheme in China is mandatory and covers most of the essential medical expenses, including hospitalization, outpatient visits, and prescription drugs. It is funded by contributions from both employers and employees, with the government providing additional funding for those who are unable to afford the premiums.
The supplementary medical insurance scheme is optional and provides additional coverage for certain medical expenses, such as dental and vision care, as well as more expensive treatments that may not be fully covered under the basic scheme. It is funded by individuals who choose to enroll in the scheme and pay an additional premium.
In recent years, China has made significant progress in improving its healthcare system, with the government investing in healthcare infrastructure and expanding coverage to more citizens. However, challenges remain, such as unequal access to healthcare services between urban and rural areas and rising healthcare costs.
To address these challenges, the government has implemented various reforms, such as increasing funding for the medical insurance system, promoting the use of generic drugs, and encouraging the development of primary care services. These efforts have helped to improve the accessibility and affordability of healthcare services for many Chinese citizens.
In conclusion, China’s medical insurance system plays a vital role in providing affordable and accessible healthcare to its citizens. While challenges remain, the government’s commitment to improving the system through reforms is a positive step towards ensuring that all citizens have access to the healthcare they need.
Unemployment Insurance
China’s Unemployment Insurance is an important component of the country’s social security system. It provides financial support to individuals who have lost their jobs due to reasons beyond their control, such as company bankruptcy, restructuring, or downsizing. The unemployment insurance scheme in China is funded by both employers and employees, with contributions made throughout an individual’s working life.
The unemployment insurance scheme provides several benefits to eligible individuals, including a monthly allowance and job search assistance. The amount of the allowance is based on an individual’s average salary and the number of years they have contributed to the scheme. The job search assistance includes training, counseling, and job referral services to help individuals find new employment opportunities.
The unemployment insurance system in China has undergone significant reforms in recent years, with the government implementing measures to improve its effectiveness and efficiency. For example, the government has increased the amount of funding for the scheme and expanded its coverage to include more individuals, such as migrant workers and those who work in the informal sector.
However, challenges remain, such as unequal access to benefits between urban and rural areas and the need to better align the unemployment insurance scheme with the overall labor market policies in China.
In conclusion, China’s Unemployment Insurance is an essential component of the country’s social security system, providing financial support and job search assistance to individuals who have lost their jobs. While challenges remain, the government’s commitment to improving the system through reforms is a positive step towards ensuring that all citizens have access to the support they need during times of unemployment.
Work-related Injury Insurance
China’s Work-related Injury Insurance is a key component of the country’s social security system. It provides protection and compensation to employees who suffer work-related injuries or occupational diseases. The insurance scheme is mandatory for all employers in China, and they are required to pay premiums for their employees’ coverage.
The work-related injury insurance system in China provides several benefits to eligible individuals, including medical treatment, disability allowances, and survivor benefits. The amount of the benefits is based on the severity of the injury or illness and the individual’s average salary.
In recent years, China has implemented reforms to the work-related injury insurance system to improve its effectiveness and efficiency. For example, the government has increased the compensation rates for work-related injuries and illnesses and expanded the scope of coverage to include more employees, such as those working in the informal sector.
However, challenges remain, such as ensuring that all employers comply with the insurance requirements and improving the quality of medical treatment for injured workers.
In conclusion, China’s Work-related Injury Insurance is a crucial component of the country’s social security system, providing protection and compensation to employees who suffer work-related injuries or illnesses. While challenges remain, the government’s efforts to improve the system through reforms are a positive step towards ensuring that all employees have access to the support they need during times of work-related injury or illness.
Maternity Insurance
China’s Maternity Insurance is an essential part of the country’s social security system, providing financial support to working women during pregnancy, childbirth, and postpartum recovery. The insurance scheme is mandatory for all employers in China, and they are required to pay premiums for their female employees’ coverage.
The maternity insurance scheme in China provides several benefits to eligible individuals, including medical treatment during pregnancy and childbirth, maternity leave, and a maternity allowance. The amount of the allowance is based on an individual’s average salary and the number of years they have contributed to the scheme.
In recent years, China has implemented reforms to the maternity insurance system to improve its effectiveness and efficiency. For example, the government has increased the duration of maternity leave and expanded the scope of coverage to include more individuals, such as unmarried women and adoptive mothers.
However, challenges remain, such as ensuring that all employers comply with the insurance requirements and providing adequate support to women during the postpartum period.
In conclusion, China’s Maternity Insurance is a crucial component of the country’s social security system, providing financial support and medical care to women during pregnancy, childbirth, and postpartum recovery. While challenges remain, the government’s efforts to improve the system through reforms are a positive step towards ensuring that all women have access to the support they need during this important time in their lives.
Housing Fund
In order to ensure that employees save to purchase housing, housing fund in China is paid by employers and their employees, which is often with social insurance. Housing Fund Management Regulations (Housing Provident Fund Management Regulations) the rate of contribution of employees and employers in the country depends on the local government, and it should not be less than 5% of the average salary of the company. For example, the contribution rate of both employer and employee is 12% in Beijing. In Shanghai, the contribution rate of employer and employee is both 7%.
How to pay your employee benefits
Companies have the option to simplify the process by outsourcing their social benefits contributions to expert service providers, such as HROne, which specializes in payroll and benefits services. Our Payroll & Benefits service allows companies to seamlessly manage their employees’ benefits, income taxes and salaries ensuring full compliance with Chinese laws and regulations while also freeing up internal resources to focus on core business operations.
Add-on benefits that employers can consider offering their employees
There are several extra benefits that are not mandatory for employees and can be treated as a kind of additional benefit. The most commonly utilized benefits have been explained as follows:
Commercial / Supplemental Health Insurance
Commercial insurance refers to the form of insurance for the purpose of making profits through the operation of insurance contracts, which are operated by specialized insurance companies. The commercial insurance relationship is a contractual relationship voluntarily signed by the parties. The insurer pays insurance premiums to the insurance company according to the contract. The insurance company is liable for compensating insurance premiums according to the contractually agreed accidents like property damage or caused by its occurrence, or when the insured dies, suffers disability, sickness or reaches an agreed age or period, the insurance company should pay the insurance premium.
The difference between commercial insurance and social insurance is that commercial insurance is a non-mandatory and more of a commercial offering. Insurance business operators pursue profits for independent accounting, self-management, and self-financing. The purpose is to provide people with basic livelihood protection.
Supplemental Housing Fund
The supplemental housing fund refers to the company’s willingness to provide an additional amount of funds to the employees after they have paid up the statutory housing fund. The employees themselves must also pay the reserve funds in the same proportion and deposit them into the employee’s supplementary housing fund account, which belongs to the company’s employees. Paying the housing fund is mandatory, and the payment of supplementary housing fund is voluntary.
Clients can choose to use China Benefits Administration in combination with our HROne Payroll Services or engage HROne Agency as a stand-alone service – providing your organization several benefits.
Do foreigners pay social insurance in China?
Foreigners in China have been required to contribute to the social insurance by the regulation “Interim Measures for the Participation in Social Insurance of Foreigners Employed in China“, released in 2011.
However, because social security is administered at the regional level, there are a variety of regulations between cities. Cities like Beijing, Tianjin, Shenzhen, and Nanjing, for example, treat international employees the same as domestic employees, requiring them to pay social insurance contributions.
On the other side, Shanghai does not require foreigners to contribute social security.
Summary on employer liability in China
Chinese labor laws mandate that employers play a significant role in providing social security benefits to their employees, both local and foreign. Here are key elements of employer liability:
- Contributions: Employers are obligated to contribute to various social security funds on behalf of their employees. These funds include pensions, medical insurance, unemployment insurance, work-related injury insurance, and maternity insurance.
- Pension Contributions: Employers must contribute to the basic pension fund, which supports retirement benefits. The exact contribution rates vary by location, with some cities offering incentives to attract businesses.
- Healthcare Coverage: Employers are responsible for enrolling employees in the local medical insurance system and covering a portion of the premiums. The government also makes contributions to this fund.
- Work-Related Injury and Maternity Insurance: Employers must contribute to these insurance schemes to provide coverage in case of workplace accidents or maternity-related expenses.
- Compliance: Failure to meet these obligations can result in fines, penalties, or legal actions. It’s crucial for employers to stay informed about the specific requirements in their region, as these regulations can vary.
- Foreign Employees: Employers hiring foreign workers in China must also ensure that they are appropriately covered under the social security system, which may involve coordination with immigration authorities.
Understanding and adhering to employer liability in China’s social security system is essential for businesses operating in the country. Compliance not only ensures legal standing but also contributes to employee well-being and overall labor stability.