Tax and Social Security Contributions for Your Employees in China
- Individual income tax
- Social security contributions (social insurance and housing fund)
- Conditions and benefits of social security contribution in China
- Medical insurance
- Unemployment insurance
- Work-related injury insurance
- Maternity insurance
Individual income tax
Social security contributions (social insurance + housing fund)
China’s social security law was promulgated by the central government but its administration and specific details are governed by local authorities. For example, employer and employee contribution rates and caps for each benefit vary according to local jurisdiction and are subject to annual changes and reforms. The contribution to China’s social security system is mandatory for Chinese employees and their employers as well as foreigners employed in China. Welfare Contributions 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). The following explains the contributions in Shanghai in 2015, the rates vary from city to city: Pension Insurance Employer contribution: 21%, Employee contribution: 8%
Employer contribution: 11%, Employee contribution: 2%
Employer contribution: 1.5%, Employee contribution: 0.5%
Employer contribution: 0.5%, Employee contribution: Not required
Employer contribution: 1%, Employee contribution: Not required
Employer contribution: 7%, Employee contribution: 7% (Equal contribution by both)
Conditions and benefits of social security contributions in China
For each of the social insurance, there are benefits, certain conditions and possible hitches for foreigners in China which we will cover in the following section.
Normally, it is essential for people to contribute to pension insurance for a minimum of 15 consecutive years before they claim their pension. The retirement age for employees is different for some industries but on an average, the age is 50 years for women and 55 years for men (if it is manual labor) or 55 years for women and 60 years for men (if it is professional labor). The retirement benefits are influenced by local protocols. When an expatriate employee leaves China before the age of receiving a pension, his / her individual pension account will be reserved. If later, the expatriate again returns to China for further employment, the payment period will be calculated on a cumulative basis. The expatriate can submit a written application, upon which, the social insurance agency can pay the expatriate, the amount accumulated in his individual pension account in one lump sum and terminate the pension relationship. in case of the expatriate’s death, the amount accumulated in the individual pension account can be inherited. The prerequisite of this regulation is that expatriate must leave China only with good intent or for a good purpose.
Medical insurance contributions are required to be made every month by both employers and employees. The insurance fund will perform disbursement of medical expenses to selected hospitals that perform the medical treatment. Patients do not need to pay the fees for medical treatment anymore and wait for the reimbursement.
Unemployment insurance fund contributions are made only by employers Nevertheless, employees in specific local jurisdictions are required to make additional contributions to unemployment insurance fund Generally, unemployed people are eligible to get unemployment benefits for maximum 12 – .. 24 months if unemployment insurance has been contributed by their employers for minimum 12 months.
Work-related injury insurance
Work-related Injury Insurance fund contributions are made only by employers every month. The contribution amount may vary in some specific jurisdictions according to the industry. Normally, the insurance covers all work-related injuries and occupational illnesses.
Maternity insurance contributions are made by employers every month. The monthly contribution to the insurance fund for women employees during their maternity leave is dependent on the average monthly salary of the woman employee. It means that a woman employee could get more salary during her maternity leave if she works at a company where other women receive a higher salary than her. To be eligible for these benefits, the female employee’s employer must make maternity fund contributions every month for at least 3 months and the applicable medical treatment must be in compliance with China’s birth control policy.
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. We can directly hire employees for a company not having a legal entity in China by our specialized Employee Leasing / Talent dispatching services.
The information contained in this article is valid on June 30th, 2016. For updated information, please contact us via email at email@example.com.