Contents

Generally

Social Security

In Chinese labor law, the social security system is mandatory for all employees and includes retirement, health, unemployment, work injury, and maternity benefits.

The Chinese government administers the social security funds, whose inflows come from contributions assessed as a tax, but is essentially a wealth redistribution system designed to ensure social stability.

Social security is an important part of the overall social welfare policy; if there are shortfalls in funding, the government will subsidize disbursements from its general funds. Employees are only entitled to social security reimbursements if they are property enrolled by their employer.

Learn more about social security obligations in China here.

Social Security Act

The China Social Security Act is a congressional act that governs how individuals will be enrolled in social security and receive benefits. The Act defines participants, contribution ratios, and fund administration, with a goal of protecting the rights of citizens.

The Act provides for retirement benefits, medical insurance, workman’s compensation, unemployment Insurance, and maternity insurance. The Act covers workers, sole proprietors, freelancers, and other workers who do not work full time.

Making contributions into the fund is mandatory for employers; the Act establishes conditions for when beneficiaries are entitled to reimbursement or payment. Funds are administrated by the local government, and may not be used for any other purpose other than their official designation. The funds are audited at the national level.

Social Security Administrative Agency

In Chinese labor law, the social security administrative agency is the government body that is designated to administer the social security program. Currently, the Ministry of Human Resources and Social Security has been designated to carry on this mission nationwide. It supervises its child agencies which are organized as departments of provincial government, which are responsible for operating local branch offices.

Learn more about China’s social security requirements here.

Social Security Benefits

In Chinese labor law, social security benefits are a payment which all full time employees are entitled to receive.

The China Employment Act Section 76 provides that all full-time employees are entitled to benefits for retirement, medical, work injury, unemployment, and maternity. Survivor’s benefits are also covered.  The several social insurance schemes in China aim to achieve the policy goal of providing security to all members of society. China follows the best practices from the International Labor Organization in structuring its social security benefits.

Learn more about China’s social security requirements here.

Social Security Collection Agency

In Chinese labor law, social security contributions must be made to the local social security collection agency. The government regulations allow the labor regulatory agency to collect contributions and also allow the tax office to collect these as well. Initially, the labor office would process contributions, but after this approach led to widespread evasion, the Chinese government recently transferred collection responsibility to the tax administration. Their policy rationale is the tax administration is staffed with skilled auditors, qualified to detect evasion.

Learn more about China’s social security requirements here.

Social Security Filings

In Chinese labor law, a social security filing comprises registering social security contribution related information with the government and receiving a certification that the registration has been processed.

Learn more about social security obligations in China here.

Social Security Fund

In Chinese employment law, the social security fund a governmental fund that employers must make contributions to on behalf of their employees. The fund assets comprise contribution inflows made by employees, subsidies for shortfalls provided by the government, and returns on investment made by the funds.

The social security fund is subdivided into five specific funds: the retirement benefit, health insurance, worker’s compensation, unemployment insurance, and maternity benefit funds. Inflows and outflows for each fund are calculated separately, thus commingling or appropriating funds for other purposes is prohibited.

Learn more about social security obligations in China here.

Social Welfare

In Chinese labor law, social welfare refers to guaranteeing basic livelihood for all people regardless of ability to work, achieved through wealth redistribution. China provides for social welfare through three programs: social security, assistance, and welfare.

Learn more about social security obligations in China here.

Insurance Funds

Disability Benefits

In Chinese employment law, disability benefits refers to a benefit payment that workers may receive if they are not fit for work.

Learn more about social security obligations in China here.

Disability Evaluation

In Chinese labor law, a disability evaluation is applied by a designated agency to assess the degree of work injury or occupational illness to see if the worker is fit to return to work, or should be determined disabled. National standards are applied to evaluated all disability factors to place workers into disability grades. A worker over grade 11 is totally disabled, and at grade 4 is totally fit to work; each grade between those two is a spectrum of disability.

Currently, local government disability evaluation commissions perform the evaluation, and have a deadline of 60-90 days to complete the evaluation depending on the nature of the case. A worker has the right to appeal for a re-evaluation from the commission, and any party may request a re-evaluation after one year to determine if health conditions have changed.

Health Insurance Fund

In Chinese labor law, employers are required to make contributions for each employee to the government health insurance fund, which is used to provide basic medical coverage for individuals. A percentage amount must be contributed by both the employee and employer, into a health insurance fund comprised of two parts, a central fund and individual accounts. The health insurance fund provides direct payment and reimbursements for health insurance needs; contribution to the fund is mandatory and it is operated on a strictly not for profit basis. The fund’s managers are responsible for its financial management system, planning, auditing, and analysis, particularly as to inflows and outflows, and protecting the fund from theft or embezzlement.

Learn more about China’s social security requirements here.

Housing Fund

In Chinese social security law, the housing fund is a long-term social security fund that all employers pay into on behalf of their employees.

Contributions are made based on a percentage of the worker’s income, and may be used for purchase, remodel, or renovation of a home, and can be fully disbursed on the worker’s retirement from the labor force.

Learn more about China’s social security requirements here.

Maternity Benefit Fund

In Chinese labor law, the maternity benefit fund is paid into by employers as part of social security; it provides maternity benefits to women employees for a period of temporary absence from work, which pays for medical care and quality of life needs. The maternity benefit payment amounts are determined on the basis of social security fund inflows and therefore are essentially determined by the economy’s performance, thus are rudimentary compared to countries in Europe.

Medical Insurance Benefits

In Chinese employment law, medical insurance benefits are disbursements made as part of an employer’s enrollment in a medical insurance plan, for example the national social security plan. Designated hospitals with a social security provider agreement are usually preferred. Medical insurance benefits typically include authorized medicines, examinations, treatment, and hospitalization. Small medical costs are usually paid out of pocket, with the social security fund used for major expenses. Coverage for dependent relatives is much more limited, with fewer treatment options and a 50% co-pay in most cases.

Unemployment Insurance

In Chinese employment law, unemployment insurance is a mandatory social security benefit employers provide to employees, which is used to provide financial support to workers who have lost their jobs in order to meet their basic cost of living needs, while they look for work or retrain for another vocation.

The unemployment insurance fund is one of the government operated social security funds. Unemployment insurance is a universal benefit that covers both public and private sector workers in every region and industry.

Enrollment in unemployment insurance is mandatory for all employees under the law of China, and failure to make contributions exposes the employer to regulatory and legal liability. Employers, employees, and government each play a role in the administration of unemployment insurance, and employers have an obligation to make contributions and on termination notify the employee of their right to obtain benefits.

Learn more about social security obligations in China here.

Workers’ Compensation Benefits

See full article here.

Workers’ Compensation Contributions

In Chinese employment law, workers’ compensation contributions must be made by the employer in accordance with local social security regulations for each employee. The national Workers’ Compensation Administrative Regulations requires that local governments collect worker’s compensation contributions approximately equal to their expenditures. That is, the outflows from the local government workers’ compensation fund determines how much they are entitled to require. The national government establishes guidelines for rates for each industry to be applied by local governments, which it bases on work injury statistics.

In Beijing, the labor regulatory ministry, which is currently the Ministry of Human Resources and Social Security, will hold meetings with ministries for finance, health, and safety to establish different rates and grades for each industry, which are then submitted to the State Council for approval. The local government labor department will apply the central government guidelines to local data about how much workers’ compensation contributions are being spent per year and what the rate of injury is to then calculate the social security contribution to be applied to each industry. The reason China gives each industry a different rate based on their own injury rates, is to financially incentivize each industry to reduce work injury.

Setting higher rates for dangerous industries ensures that these businesses are making workers’ contributions sufficient to account for the outflows from the local government’s workers’ compensation fund. Industry in China has also been responsive, adopting improved safety technology, closer supervision, and worker protection, to reduce their overall workers’ compensation contributions liability. Concurrently, industries that have a strong safety track record will be deterred from attempting to cut costs by reducing safety measures, as the national government will quickly set a higher contribution ratio for their industry.

Learn more about Chinese social security contributions here.

Workers’ Compensation Fund

In Chinese labor law, the workers’ compensation fund is a social security fund that employers must pay into, so that injured workers may receive financial assistance.

The workers’ compensation fund is run by the government and contributions are made by the employers; funds may only be used for workers’ compensation disbursements. Workers’ compensation contributions are mandatory, and failure to pay can result in fines, and employers are liable to make up workers’ compensation payments if they fail to correctly enroll a worker who is later injured.

The funds operate as a mutual insurance scheme; therefore an individual employer’s mandatory contribution ratio will not change if they did not have any workplace injuries or conversely had many injuries. Under the law, the social security collection agency in the local government is not empowered to make adjustments.

The central government sets fixed rates for the entire industry but on an industry, and not for individual employers. Moreover, there is no fluctuating rate mechanism in the workers’ compensation contributions ratios, rather the local government’s social security department will report inflows and outflow statistics to both the local and central government, which will be used to determine future rate adjustments.

Special liability can occur if using an employer of record service to hire workers, which we cover more in an article here.