54 / 127
54
- Human Resources and Payroll in China 2016-2017 (5th Edition)
Housing Fund
The housing fund is administrated separately fromsocial insurance, by the local Housing Fund Bureau.
Just like social insurance, both the employer and employee are obligated to make contributions
to the fund.
The Housing Fund is different from the other social insurance schemes in that there is no social
pool. All payments go towards the individual’s balance. This is why the Housing Fund is governed
by a different bureau.
The Housing Fund is designed to ensure that workers save some money towards buying a home.
The employee can use the money in the fund as a down payment for a house, or to subsequently
pay back the mortgage. Furthermore, banks are often willing to offer lower interest rates if the
employee has accumulated a high enough amount in their housing fund. Upon retirement, the
remaining balance can be withdrawn and used at will.
Some cities allow the funds to go towards rent or renovations as well. Note: Where the amount
exceeds three times the average local salary, the contributions are considered part of the employee’s
taxable income. Some cities limit contributions beyond that level. Be sure to explain this to your
employees.
Contribution Calculations
Monthly contributions to the social security system are determined from a base figure. In most
cities, it is calculated as follows:
Social security base = Previous year’s total income / 12
For new hires, the starting salary may be used as the social security base during the first year. Note
that the base figure for social security contributions is capped at 300 percent of the social average
salary for the location in which the employee pays social security. Any employee earning more
than this amount will therefore actually pay a smaller percentage of their salary in social security
contributions (employers will also have a smaller percentage burden).
The maximum base figures will generally be updated once per year for all employees. This usually
happens in May. Sometimes, the government will also adjust the percentages to be contributed by
employee and company at this time. Note that although the maximum base figures will usually be
updated during the middle of the year, the calculation of each individual employee’s base will be
made based on their average salary during the period from January toDecember of the previous year.