The government in China has set up social security systems such as basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance, maternity insurance, etc. to protect the basic rights of citizens. These systems enable participating individuals to obtain assistance from the state (according and subject to certain conditions and procedures) in special circumstances such as when they reach old age, suffer certain illnesses, suffer a work-related injury, become unemployed, undergo maternity, etc. Additionally, employers and employees both participate in a separate housing provident fund system in accordance with the law.
Generally, employers in China contribute social security premiums and housing provident funds for their employees pursuant to the law. Employees themselves also contribute their own social security premiums and housing provident funds pursuant to the law. Employers typically withhold a portion of their employees’ monthly salaries to help them complete their social insurance and housing fund contributions. Expatriate employees hired by Chinese employers are also required to participate in the social security system when they complete the employment formalities required by law.
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However, expatriate employees might be exempt from social security contributions under a treaty or convention. Expatriate employees are not required to participate in the housing fund system. Those with permanent resident status might choose to contribute to the housing funds at their own discretion. Employers and employees are required by law to contribute to their respective social security premiums and housing provident funds and cannot be exempt by special agreement or arrangement.
Healthcare and Insurances
- Basic Pension Insurance – Employers and employees must both contribute basic pension insurance premiums pursuant to national and local law. Where an employee has contributed basic pension insurance for 15 cumulative years and has reached the statutory retirement age, he or she might collect basic pension benefits on a monthly basis. The exact amount of such benefits is determined according to factors such as cumulative contribution period, wage, the average wage of employees in his or her locality, the total amount in pension account, the average life expectancy of the urban population, etc.
- Basic Medical Insurance – Employers and employees both must contribute basic medical insurance premiums pursuant to national and local law. The costs of employees’ prescription drugs, medical treatments, medical services and use of other healthcare facilities for emergencies or rescue operations will be covered by the basic medical insurance fund pursuant to national and local laws, as long as such costs are consistent with basic medical insurance policies and incurred at approved medical institutions.
- Work-related Injury Insurance – Employers are required to contribute work-related injury insurance premiums according to the combined wages of all of their employees and a fee rate determined by the social security agency. Employees do not need to contribute to work related injury insurance. Employees who suffer an accidental injury or contract an occupational illness in the course of work will be entitled to work-related injury insurance benefits if the injury or illness is verified as work related.
- Unemployment Insurance – Employers and employees must both contribute unemployment insurance premiums pursuant to national and local law. An unemployed person who has contributed unemployment insurance premiums for at least one year before becoming unemployed, and has completed unemployment registration, might collect unemployment insurance benefits from the unemployment insurance fund.
- Maternity Insurance – Employers are required to contribute maternity insurance premiums pursuant to national and local law. Employees are not required to make such contributions. The government is now working to combine maternity insurance and basic medical insurance, which reflects the government’s target of lowering employers’ operation cost. This means private businesses in China might not be required to pay maternity insurance for their employees in the future.
- Housing Fund – Employers and employees both must contribute to the housing provident fund pursuant to national and local law. The housing provident fund is used for employees to purchase, construct, renovate or rebuild personal dwellings. National labor legislation gives local governments broad flexibility in implementing labor law, which means exact contribution requirements might vary across different provinces or regions in China.
- Supplementary Commercial Insurance – Apart from the abovementioned mandatory insurances, employers are free to purchase supplementary commercial insurance for their employees at their own discretion. For example, some employers provide a comprehensive health insurance plan (including medical, dental and accidental death and dismemberment) for employees and their dependents. Supplementary Commercial Insurance is optional.
Chinese government also required companies to provide leaves to employees. Below are mandated leave based on employment law.
- Holidays and Annual Leave Holiday Leave:
- Maternity / Paternity Leave
- Sickness Leave
- Disability Leave
The government reduces the employer’s pension insurance contribution rate to lower the cost of private businesses. The Circular of the Ministry of Human Resource and Social Security on Periodically Lowering Social Insurance Premium Rate requests, as of March 2020, to reduce employers’ pension insurance contribution rate by 20 percent to 50 percent, depending on each city, district in China.
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