The Impact of Social Security and Housing Fund Interruption on Employee

Social security and housing fund in China are the units of social benefits that employers provide employees. They include pension insurance, medical insurance, unemployment insurance, work-related injury insurance, maternity insurance, and housing accumulation fund.

The employer begins to contribute to the social security and housing fund when the employee signs a labor contract with the employer.

But what is the impact on the employee’s welfare if the social security and housing fund payments are interrupted?

Continue to read below to find out!

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The interruption of the social security and housing fund will affect the application for the temporary residence card and the registered permanent residence. It may even affect the school situation of employee’s children. Medical insurance is also suspended, and the employee cannot get the maternity allowance. When the employee buys a house, the loan fund cannot be carried out normally, and also the car license plate purchase cannot be carried out.

In conclusion, the interruption of social security and housing fund has a great impact on employees’ welfare.

The components of social security are pension insurance, medical insurance, unemployment insurance, work-related injury insurance, and maternity insurance.

In the next paragraphs, we will analyze them one by one.

Pension Insurance

When the employee loses the ability to work due to the old age, the government will pay the living expenses after retirement if the employee has continuously contributed to social security for 15 years.

For clarification, the employee can receive a lifelong pension after retiring only if there is a full contribution in 15 years. If there is any interruption of the payment halfway, it can be renewed but this interruption may affect the pension benefit after retirement.  The pension insurance calculation is based on the accumulated months.

Medical Insurance

This is the guarantee for medical treatment and nursing during the period of illness. The medical insurance is surely the most practical and important of all the insurances. If there is an interruption of the payment for social security, medical insurance has a 3 months buffer period.

But if there isn’t any contribution for more than 3 months, then the continuos payment period will be cleared. If medical insurance is interrupted, you cannot enjoy medical insurance treatment. Even if the subsequent repayment is successful, it will take another half a year for the employee to enjoy the treatment again.

After the medical insurance is interrupted in the current month, reimbursement of medical expenses will be stopped from the next month, and employees can only pay for their own medical treatment.

After the balance of the medical insurance card is used up, the excess part is borne by the company, and this part can only be used for outpatient emergency services but not for hospitalization.

Unemployment Insurance

This is the insurance to safeguard the employee’s living expenses, medical treatment, expenses for transferring industry during the unemployed period. The unemployment insurance calculation is based on the accumulated months. Payments can be made after the interruption of social security payments, but if the employee resigns, he/she will not receive any unemployment benefits.

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Industrial Injury Insurance

This is the compensation for wages and incomes after a worker is injured due to work, and temporarily or permanently loses the ability to work. It also acts as medical treatment and nurse measures for taking care of the injured employee.

During the industrial injury insurance interruption period, if the employee is injured, he will take compensation for industrial injury insurance. If injury insurance may not cover, the company shall be liable for compensation. In other words, injury insurance contribution is a protection for the company.

Maternity Insurance

This is the income allowance and safeguards measure for female employees during the birth period. Maternity insurance is generally only available to those who have paid continuously for 12 consecutive months.

If the payment is interrupted, the benefits cannot be enjoyed. Different cities have different policies regarding the application for maternity benefits. We take Shanghai as an example.

The new regulations for the Shanghai maternity insurance benefits application are:

  1. For women employees who have paid maternity insurance premiums for 12 months or 9 months in a row, during the month of childbirth or miscarriage, the childbirth living allowance shall be fully paid by the maternity insurance fund;
  2. If the accumulated period is less than 12 months and the continuous payment is fewer than 9 months, the allowance is paid in proportion to the maternity insurance fund, and the remaining part is paid in advance by the company.

In the month of childbirth, the employee must be paid for social insurance. The termination of maternity insurance will result in employees not being able to receive maternity benefits or affecting the number of maternity benefits received.

Housing Fund

When the housing fund is interrupted, it will affect the application of housing fund loans. The employee can only apply for housing fund loans after paying for 6 months.

Conclusion

Social security and housing fund work like a package. This means that the employer cannot merely pay one or several of them for the employee. The continuous contribution of social security and housing fund is very important for the employee, also because of the impact that an interruption of the payment can have.

We suggest that clients confirm with their employees if they are pregnant or suffering from industrial injury or they have housing loans when they want to transfer employees to a legal entity in China.

How HROne can be beneficial to your business

HROne’s service can handle the complete employee benefits for your company in compliance with the local policies and also can take care of the visa for your company’s expatriate employees. As a non-state-owned consulting firm, HROne can directly hire employees for a company not having a legal entity in China by our specialized Employee Leasing / Talent dispatching services.

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