The Chinese government has advanced the nation’s social security systems to include the basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance 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 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. The employer’s obligation to contribute to social security premiums and housing provident funds, cannot be exempted by mutual agreement with employees.
Healthcare and Insurances
Employers and employees must both contribute basic pension insurance premiums pursuant to national and local law. Employers and employees both must contribute basic medical insurance premiums pursuant to national and local law. 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. Employers and employees must both contribute unemployment insurance premiums pursuant to national and local law. Employers are required to contribute maternity insurance premiums pursuant to national and local law. Maternity insurance benefits cover the medical costs for childbirth and provide a maternity allowance. Most cities in China have combined the maternity insurance with the basic medical insurance for unified collection. 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. Apart from the abovementioned mandatory insurances, employers are free to purchase supplementary commercial insurance for their employees at their own discretion.
Holidays and Annual Leave
In the beginning of each year, the State Council will announce a holiday schedule which indicates 11 national holidays, including 1 day for the New Year Holiday, 3 days for the Chinese New Year, 1 day for Tomb Sweeping Day, 1 day for Labour Day, 1 day for Dragon Boat Day, 1 day for Mid-Autumn Day and 3 days of leave for National Day.
According to the Regulations on Paid Annual Leave of Employees, employees who have worked between one and ten cumulative years are entitled to five days of annual leave. Employees who have worked between ten and twenty cumulative years are entitled to ten days of annual leave. Employees who have worked for more than twenty cumulative years are entitled to fifteen days of annual leave. If the employer fails to arrange annual leave for employees due to business reasons, the employer must pay an encashment to employees for such accrued, but untaken annual leave. The encashment value should total 300% of an employee’s daily normal salary for each accrued, but untaken day of annual leave (100% has been included in the monthly salary and therefore only 200% shall be paid additionally).
Maternity and Parental Leave
On 27 December 2015, the National People’s Congress issued the new Population and Family Planning Law of the People’s Republic of China (the “Family Planning Law”) which formally abandoned China’s decades-long one-child policy and allows all couples to have two children. Late marriage and late childbearing are no longer encouraged under the Family Planning Law, and maternity leave may be extended by local rules.
Sickness and Disability Leave
During an employee’s sick leave period, his or her salary will be determined and paid based on the standard of sick pay and sick benefits during the medical treatment period according to state laws and local regulations. If an employee suffers from a non-work-related illness or injury and needs to stop working as a result of medical treatment, a medical treatment period between 3 and 24 months will be granted according to local regulations in the place where the employee works, and based on the employee’s years of service with the current employer and all previous employers (e.g. the employee’s entire employment history). If an employee cannot perform his or her original work or other work arranged by the employer after his or her statutory medical treatment period expires, the employer has the right to terminate the employment contract and pay severance upon giving the employee a 30-days’ advance written notice or one month’s payment in lieu of notice. In addition, subject to local regulations in different cities, the employer may pay medical treatment subsidies equivalent to 6 to 12 months of his or her salary based on the seriousness of his or her sickness.
Disability could be caused by a non-work-related injury or a work-related injury. If the employee’s disability is caused by a non-work-related injury, the employee could enjoy the same benefits (sick pay, medical leave and medical treatment subsidies) as in the event of illness. If an employee needs to suspend his or her work in order to receive medical treatment for a work-related injury or an occupational disease, his or her original wage and welfare benefits shall remain unchanged during the suspension period. The suspension period is generally no longer than 12 months.
Pensions: Mandatory and Typically Provided
Currently in China, mandatory and typically provided pensions only include the basic pension insurance. Recently, the government decided to reduce the employer’s pension insurance contribution rate to lower the cost of private businesses. Starting from 1 May 2019, if the employer’s contribution rate for the basic pension insurance in any province (city, district) is higher than 16%, it can be reduced to 16%.
Other Required or Typically Provided Benefits
Marriage leave is stipulated by the local population and family planning regulation and its length ranges from 3 to 30 days, in different cities of China. When a member of the employee’s immediate family (parents, spouse or children) passes away, the employee may be given 1 to 3 days of compassionate leave with the approval of the employer, under specific circumstances. Pursuant to the PRC Labour Law, marriage leave and compassionate leave shall both be considered as paid leaves.