【PAYROLL REPORT】Mandatory Employer Burden in China


The employment social liability contributions mentioned as below are now mandatory and subject to various levies depending on the location of work.  

  • Pension (14% - 16% of the contribution base
  • Medical (3% - 10% of the contribution base )
  • Maternity (0.5% -  3% of the contribution base )
  • Work Injury (0.16%  -1.3% of the contribution base )
  • Unemployment insurance (0.5% - 0.8% of the contribution base )
  • Disable Fee(1.6 - % of the contribution base ) 
  • Major Disease (Flat and Fixed at CNY 0-70 each month)
  • Housing Fund (7% -12% of the contribution base)
  • Employer Liability Insurance (0.5% of total income of the month)

Q: Why the contributions shows so much difference in various location. 

According to China's "Social Insurance Law", the proportion of social insurance contributions shall be formulated by the governments of provinces, autonomous regions and municipalities directly under the Central government and reported to The State Council for the record. The law stipulates the procedure for setting the proportion of social insurance contributions and the proportion of distribution. However, for the specific proportion value, the law does not make specific provisions, but according to the national economic development and social needs and other factors to adjust flexibly.

Q:What does contribution base refers to? 

A: For employee new hired, The contribution represents the total contractual monthly all compensation of the employee. 

For employees who joined in previous period, the contribution base refers to the average monthly gross salary of the previous year as their individual contribution base. The calculation of employees' average monthly wages follows the items specified by the National Bureau of Statistics for total wage statistics, including wages, bonuses, allowances, subsidies, and other income.  In the event that  the employee would have been paid variable income, the base of contribution should increase in the following calendar year. 

If the average monthly salary is less than 60% of the city's average salary of the Municipality in the previous year, then 60% of that average salary will be used as the payment base. However, if it exceeds 300% of last year's average salary in this municipality, then 300% of that average salary will be used as a payment base and any excess amount will not be included. 

In general, 60% of Municipality Averaged Salary (Min) ≤ Contractual monthly compensation ≤ Filed averaged Salary in the last calendar year ≤ 300% Municipality Averaged Salary (Cap)

Q: How frequent is the contribution bases reviewed and updated for each employee?

A:  In general, the base of contribution are being reviewed once or twice per year(e.g. January, July), depending on the municipality policy. 

You may expect the various degrees of cost of employer burden increase from the invoice January/February or July/August. The increment might occur later than expected schedule due to lagged policies announced by the authority with retrospective pay or returns.

However, the contribution bases in Guangdong province are being reviewed on monthly basis.

Q: Besides the regular review conducted by "Averaged Salary filing for individual" or "Averaged salary of the Municipality announced, does the monthly employer burden contribution always remain consistent in amount, even during the first or last month of employment or any month with incomplete attendance?

A:  Yes, it does. As the contributions are made on the contractual compensation or filed average monthly salary in the last calendar years, it remains in certain amount unless any local policies changes onto the mandatory contributions or the regular review scheme. 

Q: What does the Social Insurance Adjustment refer to in general?

A: Several factors account for the Social insurance adjustment? The major one are referred to lagged policies announced by the authority with Retrospective pay or returns.

It wouldn't also rule out that the newly hired employee's previous employer failed to cancel or remove the employee from the contribution roster on time, the contribution would be rejected and refund due to the duplicated contribution issue as such. 

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