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What's the Social Insurance Allowance in China?

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The government of China has improved the well-being of employees in the country by passing multiple employee protection laws. One of these laws is the Social Insurance Law. The Social Insurance Law promotes the interests of employees by improving the social security system in the country.

All companies in China have to adhere to this law when dealing with local or foreign talent. This social allowance grants employees 5 mandatory insurance schemes: the Pension Fund, Medical Insurance, Industry Injury Insurance, Unemployment Insurance and Maternity Insurance, along with a Housing Fund for Chinese employees.

This law has been promulgated by the central government but is implemented and administered by local governments in different parts of the country.

All the different components of the law are explained in detail below.



Employees receive a pension after retirement, based on the accumulation of funds in their pension funds. Generally, employees need to contribute to the fund for at least 15 years before they’re eligible for a pension. Retirement ages are 60 for men and 55 for women in white-collar jobs. Exact pension amounts vary according to the nature of the job and the state in which the company is located.

Medical Insurance

Medical insurance amounts in China are paid by both, employees and employers. These monthly payments accumulate in the insurance fund and this fund then reimburses the medical costs of employees.
Depending on the nature of the treatment availed, the fund covers the treatment cost either partially or fully. It should be noted that only government-approved medical institutions are covered with this insurance.

Unemployment Insurance

Unemployment insurance allows an unemployed employee to receive unemployment benefits for up to 24 months. However, that’s only if the said employee has made donations to the Unemployment Insurance Fund for at least 12 months.

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Injury Insurance

Also paid on a monthly basis, injury insurance covers the treatment costs for work-related injuries. It also grants employees allowances based on the weather conditions they’re working in. Payments to the injury insurance fund are deducted from the employee’s monthly wage.

Maternity Insurance

A woman needs to contribute to the maternity insurance fund for at least 3 months in order to be eligible for payments during maternity leave. Maternity leave payments are then based on the average earning level of the employee. Maternity insurance benefits aren’t limited to women; men can benefit from them as well. However, the benefits only apply if the childbirth is in accordance with China’s Family Planning Policy.

Housing Fund

The purpose of the housing fund is to make sure that employees save for their housing needs. Payments to the fund are made by both, employees and employers. The ratio of these payments varies from state to state.
In Beijing, for example, employers and employees have to contribute 12% of the average salary. The general rule is that this contribution cannot be less than 5% of the company’s average salary.

These are the 6 mandatory social security allowances in China. There are other funds like the Supplementary Housing Fund and Commercial Health Insurance that improve the general well-being of employees, but are not mandatory.

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You need to follow this law if you’re a local investor or have entered the Chinese business through a WFOE, representative office or through a joint venture. Not adhering to this law by not contributing to social allowance and housing fund can land your company in hot water. You need professional services to make sure that your company doesn’t transgress the law in any way. And this is where Business China has got you covered.

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