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Human Resources and Payroll in China 2016-2017 (5th Edition) -
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3.3 Mandatory Social Insurance
Social security in China is a complex and inconsistent issue, as it is organized on a regional level.
The formal social security system only covers urban workers, and partially covers rural workers that
have come to the cities to work (the so-called “floating population”).
In this section, we introduce the various components of the Chinese social security system, some
examples of contributions that need to be made by employees and employers in various cities, and
the conditions under which employees can make claims.
China’s Social Security System is made up of five different kinds of insurance, plus one mandatory
housing fund. The insurances are as follows:
Mandatory Benefit Types
Pension
Pensions for workers in China are financed by contributions from both the employee and the
employer. The portion contributed by the latter is normally higher than that contributed by the
former. As a general rule, the employer’s contribution is usually between 10 percent and 22 percent
of monthly salary. The employee will usually contribute around 8 percent.
Pension contributions made by employees go directly into their“personal”pension accounts, while
those made by the company go into a “social” account. The overall amount of pension that an
individual can draw is based on the overall level of contributions made over their working career.
Once the personal account is empty, the individual’s pension will be 100 percent funded from the
social account. If the individual dies before the amount in the personal account is used up, the
balance remaining in this account may be inherited by their relatives.
An individual in China cannot draw a pension unless they have made contributions for a minimum
of 15 consecutive years. Even if an individual loses their job, it will still be necessary for the employee
to continue making social security contributions, at least at the minimum level stipulated by the
authorities.
In China, the statutory retirement age for men is 60; for white collar female workers, 55; and for blue
collar female workers, 50.
Unemployment Insurance
In most large cities, both the employee and the employer contribute to this fund. The employer
contribution can be as high as two percent of the individual’s monthly salary. If an individual
becomes unemployed, this insurance will pay out a fixed amount every month. Only people who
have continuously paid into the fund for one full year are eligible to receive payments.