Every year millions of people migrate to China in search of work. According to Statista, there were nearly 285.6 million migrant workers in China in 2020. These migrants have played a fundamental role in China’s economic development with their unparalleled contributions. Therefore, the Chinese government has taken numerous steps to provide social security in the country. They recognize the need to protect their rights and make continual efforts to improve their conditions.
Social security for staff in China
China is an enticing spot for businessmen and entrepreneurs. To run a business, however, you first need to abide by a certain set of rules. If a business needs to hire staff, they have to follow China’s social security system, besides other regulations such as tax laws and labor laws. If a company doesn’t contribute to social security or housing funds, they are considered illegal in the country.
The Chinese government gives critical importance to employee benefits in the country. Since the Social Credit of a company represents its credibility and trustworthiness, a corporation that properly contributes to the social security of its employees acquires a substantially greater social credit score. On the contrary, the companies that fail to make the requisite social contributions usually end up with low credit scores and, hence, very little or no credibility in the market.
China's social security system – a brief overview
The central government in China requires all businesses in the country to comply with the Social insurance law. Local jurisdictions administer the implementation of law and help businesses and employees adjust the insurance rates according to the needs and requirements.
Every year, the government updates the contribution rates. These rates, however, differ from region to region, and businesses need to keep themselves informed about the changes to adequately provide employee benefits in their organization.
Constituents of China's Social Security System
The China social security system comprises of the following categories:
occupational injury insurance
In addition to these categories, employers and Chinese employees also need to contribute to housing funds.
Let’s learn about these categories and how they can benefit staff in China.
China is one the ideal places to work in as you don’t need to worry about financial setbacks after retirement. The government ensures that both foreign and local employees receive the necessary funds after retirement.
When an employee serves in the country for a minimum of 15 years, they become eligible for pension insurance. The age criteria, however, depend on the nature of the industry. In most cases, the retirement age for men and women is 55 and 50 years respectively for blue-collar work and 60 and 55 for white-collar work.
The pension benefits may vary according to the local regulations on the company premises.
Occupational injury insurance
An occupational injury fund in China is provided to an employee if they sustain a work-related injury or illness. Employees who work in extreme temperatures also receive compensation. Employees don’t need to contribute for industrial injury benefits — employers, however, have to pay it on a monthly basis.
Work-related insurance pays for the staff, however, employers still have to pay the employee wages for the missed period. The amount of wages paid during this time is less than the actual salary of the employee in question.
In the event of unemployment, the employees can request unemployment benefits. The maximum duration for unemployment benefits is 1 year.
In China, employers must contribute to unemployment funds. In some regions, employers are also required to pay for this fund. Unemployed individuals receive unemployment benefits for 12 to 24 months based on their situation if they contribute to the insurance for 12 months or more.
This insurance is provided to the staff for personal injuries and sickness. Medical insurance covers a part of the treatment costs of the person.
Employers and employees, both need to make payments for medical insurance every month. The medical insurance amount also varies from region to region and once the person has paid the insurance costs for the requisite period, they can apply for the benefits.
According to the social insurance law, it is preferred to pay the funds directly to the hospital (or any other medical service provider. The hospitals, however, should be on the government’s pre-approved list, otherwise the worker will have to pay from their personal account.
During maternity leave, an employee receives funds from the maternity insurance scheme. For maternity insurance, only employers are required to pay on a monthly basis. The amount a woman receives during her maternity leave depends on the average salary provided to all the women in the company.
To acquire maternity benefits, the woman’s employer has to pay for maternity insurance for a minimum of 3 months. In some regions, male employees are also eligible for maternity funds.
The housing fund ensures that an employee has sufficient savings to purchase housing for their residency. For the housing fund, both the employer and employee have to make monthly payments. The amount of these payments depend on the regulations set by the local government, however, the combined rate for the Chinese employer and employee should not be less than 5%.
Foreign employees don’t need to pay for this type of fund. However, in some cities, they can choose to pay housing funds voluntarily.
Social insurance for foreigners
According to the “Interim Measures for the Participation in Social Insurance of Foreigners Employed in China,” foreigners also need to make social insurance payments. But since social security is administered by regional governments, some cities like Shanghai don’t require foreign employees to pay for it.
Besides the mandatory insurance benefits mentioned above, a company can also provide some add-on benefits voluntarily. The most common add-on benefits include;
Some companies allow their employees to acquire commercial insurance by signing a contract. The employee needs to pay for this scheme for the specified period, and then they’ll be able to benefit from the deal if the agreed event occurs. Generally, people sign for disability or illness insurance.
Many people in China often go for commercial insurance, because the government’s medical insurance scheme only pays for government service providers. But, with commercial insurance, employees can also get treatments from private hospitals and clinics.
Supplemental Housing Fund
This benefit allows the employee to acquire additional housing benefits. For supplemental housing funds, the employer and employee need to make equal monthly payments to the employee’s special supplementary account.
China to improve social security benefits for staff
According to China’s 14th Five-Year Plan (2021-2025) released by the Ministry of Human Resources and Social Security, China plans to make further improvements in its social security policies and programs to ensure the utmost security of the employees.
By 2025, China’s old-age insurance is expected to amount to 95%. Besides, the retirement age will be raised and unemployment insurance will be increased to 230 million, whereas, industry injury insurance rate will reach 280 million.
In addition to this, the government is making continuous efforts to conduct training programs for skilled workers and technicians to improve income distribution and establish stable labor relations in the corporate world. Besides, the country also plans to create 50 million urban jobs in the five-year duration to reduce the unemployment rate in the country.
The importance of social security for staff
Let’s discuss why social security holds significant importance in China and how it can benefit staff members.
Social insurance ensures that an employee is protected against illness, disabilities, and injuries. They’re able to handle the treatment and expenses adequately.
If an unfortunate event occurs, or an employee loses their job, they’ll be able to sustain their regular lifestyle until they find a new opportunity.
Women can spend more time at their homes comfortably during maternity leaves.
Employees can purchase a housing property and won’t have to worry about their residence.
Business China offers help for social insurance contribution management
Whether you plan to start a business in China or you want to work here as an employee, it’s very important to understand the social insurance scheme in China.
The social insurance contribution rates in China always keep changing and negligence to the updates can substantially damage your business reputation. We have years of experience in helping employers and employees understand the legal structure of social insurance in China and make contributions accordingly.
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