The Chinese government 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. 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. However, expatriate employees may be exempt from social security contributions under a treaty or convention. Expatriate employees are not required to participate in the housing fund system. However, those with permanent resident status may 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
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. Employees are not required to make such contributions. Maternity insurance benefits cover the medical costs for childbirth and provide a maternity allowance. 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.
In the beginning of each year, the State Council will announce a holiday schedule which indicates 11 national holidays, including 1 day of New Year Holiday, 3 days of Chinese New Year, 1 day of Tomb Sweeping Day, 1 day of Labor Day, 1 day of Dragon Boat Day, 1 day of Mid-Autumn Day, and 3 days of National Day.
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 20 cumulative years are entitled to ten days of annual leave. Employees who have worked for more than 20 cumulative years are entitled to 15 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. This encashment should total 300% (100% has been included in the monthly salary and therefore only 200% needs to be additionally paid) of an employee’s daily normal salary for each accrued but untaken day of annual leave.
Maternity / Paternity Leave
On December 27, 2015, the PRC Standing Committee of the National People’s Congress issued the new Population and Family Planning Law of the People’s Republic of China (the “Law”) which formally abandons China’s decades-long one-child policy and allows all couples to have two children. According to the Law, late marriage and late birth are no longer encouraged, and maternity leave may be extended by local rules.
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 leave 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.
Disability could be caused by non-work-related injury or 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. Where the work-related injury is severe or the circumstance is exceptional, after being assessed by the local work capability assessment committee, the said suspension period could be extended by 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 decides to reduce 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 that from May 1, 2016, if employers’ pension insurance contribution rate in any province (city, district) is greater than 20%, it shall be reduced to 20%, and if the said rate is 20% and the cumulative balance of the pension insurance fund could afford at least nine months’ payment in any province (city, district), it may periodically be reduced to 19% in two years’ term.