The new Social Insurance Law in the People’s Republic of China came into effect on the 1st of July, 2011. Not only does this law provide a basic framework for social insurance to every employee in the country but it also dictates that all Chinese employees must opt in for a Housing Fund.
Today, we’ll be taking a closer look at the five different types of insurances that all Chinese employees must opt in for and we’ll also discuss the advantages of purchasing a housing accumulation fund.
The Five Types of Insurances:
The five types of social insurances that all employees in the country must opt in for include the likes of,
1. Pension: This social insurance ensures that the employee has a revenue stream even after they’ve retired.
Medical Insurance: This social insurance ensures that the employee can look after themselves and their loved ones in case of illnesses.
Unemployment Insurance: This social insurance ensures that a Chinese national has a revenue stream when between jobs (or unemployed).
Work Related Injury Insurance: This social insurance ensures that a Chinese employee is covered should an accident at work injure them.
Maternity Insurance: This social insurance ensures that a Chinese employee has the financial ability to pay the hospital bills of the birth of their child.
At this point, you might be thinking that these social insurance laws cover all the most important aspects of life so what’s the need for an additional fund? Countless people also subscribe to this school of thought without realizing that an extremely important need is not accounted for. We’re, of course, talking about housing – a fundamental right of every individual.
The Pros of Purchasing Housing Accumulation Fund:
It’s extremely short sighted to think that the housing accumulation fund is a needless expense. Still not convinced? Allow us to elaborate! Here’s how you stand to benefit from purchasing a housing accumulation fund.
i. Benefits for Employees
The housing accumulation fund benefits the employee more than the employer! When compared to the average personal housing loan, the housing provident fund is more easily manageable, completely withdrawable, and can be edited accordingly if your terms of employment change (e.g. if you get a raise at work).
ii. Lower Interest Rate
Another reason why we’re such strong advocates of opting in for a housing accumulation fund is the fact that it has a lower interest rate than the average personal loan. For example, for the first five years, the average interest rate is a 2.75% as compared to the average interest of 3.50% for a personal house loan.
iii. A Withdrawable Fund
Unlike personal housing loans, the housing accumulation fund is withdrawable which means that you can always apply for a loan repayment a few months down the line. That being said, in order to successfully apply for a loan repayment the deposit must be normal, reputable, and not over due.
iv. Lower Down Payment
The best thing about a housing accumulation fund is that it has a lower down payment as compared to other (personal) housing loans. In fact, according to the current laws pertaining to housing accumulation fund, the minimum down payment is as low as 20%!
It’s because of these reasons and countless others that we highly recommend opting in for a housing accumulation fund. If your employees in China want to apply for a housing accumulation fund but you don’t know how to comply, the Business China team would love to help!
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and can help you create plans that will be mutually beneficial to your firm and your employees! Apart from social insurance laws, we provide other important services
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